The main challenges facing the EU include sluggish growth, low investment levels, slow technology adaptation, tight labour markets, and over-reliance on conventional energy sources, leading to inflationary pressures and a lack of consensus on fiscal policy direction. Cyprus has satisfactory short- and medium-term economic performance but faces long-term challenges like low productivity, investment, chronic balance of payments deficits, and delays in green and digital transitions. The EU and Cyprus need to accelerate reforms and increase investments, supported by the Resilience and Recovery Fund. The European Commission is assessing the effectiveness of national resilience and recovery programs, with preliminary results showing significant fund absorption but underachievement in reform objectives, partly due to resistance to structural reforms and transitions. Immigration, under the right conditions, is seen as necessary for addressing labour shortages but has led to societal challenges and the rise of populist movements. Other factors contributing to reform resistance include the time it takes for reforms to show results and the sense of insecurity radical changes can cause. Recommended policy approaches include designing comprehensive policies, focusing on transparency and communication, and taking compensatory measures to support vulnerable populations. The EU’s fiscal policy framework needs adaptation to current circumstances to ensure reform success.
