Interior Minister Constantinos Ioannou has responded to criticism from Union of Cyprus Municipalities acting president and Larnaca Mayor Andreas Vyras, rejecting claims that the government is driving local authorities into financial distress.
In a written statement issued following Monday’s three-hour municipal strike and Vyras’ interview with Politis, Ioannou said state funding for municipalities had increased significantly since the implementation of local government reform.
Grant increased from €70 million to €117 million
Ioannou said the €117 million state grant was agreed between the previous government and the Union of Cyprus Municipalities and included in legislation passed in 2022.
Responding to Vyras’ claim that municipalities had accepted the amount under intense pressure, the minister said he could not comment on the circumstances surrounding the agreement because the legislation predated the current government.
Before the reform, he said, the state grant to the 39 municipalities stood at €70 million and accounted for 22% of their revenue. Its increase to €117 million raised that share to 37%.
“It is reasonable for citizens to ask what new circumstances have made inadequate a state grant that increased from €70 million to €117 million,” Ioannou said.
Funding for the 63 communities
The minister also rejected claims that the 63 communities were incorporated into municipalities at a later stage, saying both their inclusion and the level of funding were covered by the same 2022 legislation.
He added that municipalities inherited not only the communities’ responsibilities but also their revenue and assets.
The state provided an additional €6 million in 2025 and another €6 million in 2026 for projects in those communities, he said.
Ioannou also pointed to permanent additional funding of €12 million to compensate municipalities for revenue lost when responsibility for issuing permits was transferred to the District Local Government Organisations.
According to the minister, the amount was proposed by the municipalities themselves and accepted without reduction, despite the transfer of responsibilities also lowering their operating costs.
A further €15 million was allocated for the maintenance of primary roads. Ioannou said this figure was also based on a study and proposal submitted by the municipalities, while the Public Works Department had previously spent about €3.5 million annually on the same work.
The two allocations, totalling €27 million, will now be permanently incorporated into the state grant.
Grant expected to rise in 2027
Ioannou said the government had acknowledged that rising costs had reduced the grant’s real value and informed the Union of Cyprus Municipalities that it intended to introduce an adjustment formula retroactively from 2024.
Under the government’s plan, the initial €117 million allocation will increase to €125 million. Together with the additional €12 million and €15 million, the base amount used to calculate the grant will rise to €152 million.
With the adjustment formula applied every three years, funding for municipalities is expected to reach €156 million in 2027.
As part of the Green Line revitalisation plan, Nicosia Municipality will also receive an additional €28 million between 2023 and 2027.
Over five years, municipalities are expected to receive approximately €240 million in state contributions for infrastructure projects. Ioannou added that the government had helped address liquidity difficulties by suspending loan instalments for some municipalities over the past two years and refraining from applying a clause allowing deductions from the state grant.
‘State funds are citizens’ money’
Responding to claims that the government was attempting to pass the cost of the reform on to residents, Ioannou said the argument was unfounded.
“Municipalities must finally realise that the money they are demanding from the state is also citizens’ money,” he said.
The minister argued that the current government had identified the distortion created by setting a fixed grant in legislation and proposed an automatic adjustment mechanism with retroactive effect from 2024.
He acknowledged weaknesses in some of the municipal mergers introduced through the reform but said citizens expected improved services, stronger revenue collection and lower expenditure.
Ioannou concluded that the government had addressed several problems linked to the reform and supported municipalities through permanent and one-off funding, as well as its proposal for the automatic adjustment of the state grant.
