Cyprus defies euro area trend with significant public debt decrease

Cyprus achieved one of the largest reductions in government debt across the European Union during the third quarter of 2025, according to data released by Eurostat this week.

The general government gross debt to GDP ratio in Cyprus fell by 6.1 percentage points compared with the same period in 2024, marking the third-largest decrease in the entire bloc.

This downward trend in Cyprus occurred as the broader euro area saw its debt-to-GDP ratio increase to 88.5 per cent, up from 88.2 per cent at the end of the second quarter.

In the European Union as a whole, the ratio also climbed slightly from 81.9 per cent to 82.1 per cent during the same three-month window.

Annual comparisons show that while Cyprus, Greece, and Ireland successfully lowered their debt burdens, sixteen other member states registered an increase in their debt to GDP ratio.

The largest annual increases were recorded in Romania at 5.5 percentage points and Poland at 5.0 percentage points, followed by Finland and Bulgaria.

By the end of the third quarter of 2025, the highest debt ratios in the EU were found in Greece at 149.7 per cent and Italy at 137.8 per cent.

Conversely, the lowest ratios were recorded in Estonia at 22.9 per cent and Luxembourg at 27.9 per cent, highlighting a significant fiscal disparity across the continent.

The composition of this debt remains largely uniform across the euro area, with debt securities making up 84.2 per cent of the total.

Loans accounted for 13.3 per cent of the euro area’s debt, while currency and deposits made up a much smaller share at 2.6 per cent.

Government involvement in intergovernmental lending also continues to play a role in the quarterly figures.

This lending, which involves EU member states providing credit to one another, stood at 1.4 per cent of GDP in the euro area and 1.2 per cent in the EU.

In the short term, eleven sember states registered an increase in their debt ratios compared to the second quarter of 2025, while sixteen reported a decrease.

Luxembourg and Bulgaria saw the most significant quarterly rises, whereas Latvia and Greece joined Cyprus in recording notable debt contractions.

Eurostat noted that the government debt to GDP ratio increased in both the euro area and the EU when compared to the third quarter of 2024.

Specifically, the euro area ratio rose from 87.7 per cent to 88.5 per cent over the twelve-month period.

These figures are a key component of government finance statistics, used by the European Commission to monitor the economic health of member states.

The continued reduction in the Cypriot debt ratio reinforces the country’s position among the most improved innovator regions for fiscal management.