Nicosia, Cyprus. The interior ministry on Saturday rejected claims by the Union of Municipalities that the government is shifting the cost of local government reform onto residents, saying state funding for municipalities has more than doubled since the reform was introduced.
The union has rejected the proposed mechanism for adjusting the annual state grant and announced measures, while the ministry said the allegations did not reflect the facts.
State funding
The ministry said the state had significantly increased financial support for local authorities and absorbed a substantial share of the costs associated with implementing local government reform.
It said the annual state grant of €117 million, established under the Municipalities Law of 2022, was incorporated into legislation during parliamentary discussions on the reform with the agreement of the Union of Municipalities.
The government also recognised that the grant could not remain fixed indefinitely and should be adjusted to reflect changing economic and fiscal conditions, including inflation, the ministry said.
Proposed adjustment mechanism
The interior ministry said it developed an objective and predictable mechanism for revising the grant in cooperation with the finance ministry and following consultations with the Union of Municipalities.
In addition to the €117 million annual allocation, the government approved €15 million per year for maintenance of primary road networks and €12 million annually to compensate municipalities for lost revenue following changes to development licensing.
The ministry said the €15 million road maintenance allocation was based on a study conducted by the Union of Municipalities and was five times higher than the union’s original estimate of €3 million.
Combined grant
Under the government proposal, the three grants would be merged into a single permanent annual state grant of €144 million, responding to a request from municipalities, the ministry said.
It said the proposed amount represents a 103.4 per cent increase from the previous total annual state grant of €70.8 million.