The total fiscal burden arising from state support and the collapse of the Cooperative Movement is projected to reach €2 billion for the 2014–2030 period, according to a special report released by the Audit Office earlier today. The report confirms that repeated state bailouts and asset recovery efforts have left public finances severely strained—and ongoing risks persist for the future.
The total burden spans the 2014–2030 period, covering rescue packages, failed recapitalization attempts, and the unresolved issue of non-performing loans. Of the remaining portfolio, €1.9 billion will consist of loans banks deem unrecoverable.
By March 2026, the Cyprus Asset Management Company (KEDIPES) had recovered €3.009 billion—though 56% of that amount was used to repay state aid, while €826.8 million covered operational costs and asset management expenses. The revised business plan projects a 90% recovery of the €3.54 billion state aid extended in 2018 (in place of full repayment). The revised plan leaves KEDIPES holding €2.4 billion in assets by 2030, primarily bad debt.
KEDIPES asset sales fall short of value
The audit criticizes KEDIPES’s handling of asset sales, servicing contracts, and personnel decisions. For instance, SEDIPES sold its stake in Altamira Cyprus (doValue) for €4.5 million, less than half the €12.2 million its internal valuation had estimated. The audit attributes this outcome to weakened bargaining terms from earlier agreements.
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Even after renegotiating fees in 2020, potential savings hinge on resolving the sale of large loan portfolios, a process still unresolved. Meanwhile, oversight failures were widespread. Between 2018 and 2022, KEDIPES paid €9 million in real estate broker commissions, always at the maximum 5% rate, without linking payments to performance. Properties were sold based on the highest nominal bid rather than net recovery after fees, and tenders were never reopened for better offers.
Payroll bloats despite workforce cuts
While KEDIPES reduced its workforce by 11%, payroll costs rose by 36%. The increase in payroll is attributed primarily to the restoration of salaries and benefits to pre-cut levels, the migration of personnel onto higher pay scales, and the expansion of employer provident fund contributions from 7% to 9%.
Regarding allowances and fringe benefits, the report highlights: the payment of positional allowances (€104k), committee participation allowances (€150k), travel allowances (€160k), corporate mobile phone coverage (€169k), subsidized loan interest rates (minimum 1.3%), and supplementary contributions to health funds beyond the General Healthcare System (GHS/GeSY). The audit noted instances where selected candidates failed to meet service scheme criteria (such as lacking mandatory five-year experience requirements), the absence of qualification recognition verifications from KYSATS, and excessively tailored/restrictive conditions in job postings.
Structural dysfunction was pervasive: nine departments had no staff beneath directors, and four operated with officers but no supervisors. A voluntary redundancy scheme cost €13.3 million but failed to meet headcount reduction targets. The audit also referred a case of potential criminal negligence to police after collateral was allegedly removed on a €540,000 loan without authorization, leaving the balance unsecured.
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Even the buildings housing KEDIPES operations lack final building permits, a violation of local law. The audit’s findings reveal an agency stretched thin and plagued by poor decisions, now facing the challenge of managing a €2.4 billion portfolio of bad loans.
State bailouts fail to save CCB
The Audit Office’s report traces the failure of the Cooperative Movement’s recapitalization efforts back to its earliest stages. The initial state intervention in 2014–2015 injected €1.5 billion into the CCB, though this figure reflects net outlay after recovering €175 million through a special tax on credit institutions. The revised business plan later projected that only 90% of the €3.54 billion state aid extended in 2018 would be recovered, leaving a €340 million shortfall. These repeated injections failed to stabilize the CCB, which ultimately collapsed under the weight of non-performing loans and structural weaknesses.
Among the most damaging oversights was the mishandling of equity divestments in Cooperative Commercial Companies (CCCs). The process, finalized in 2022 after a four-year delay, revealed severe flaws in valuation methods. The Audit Office found that initial assessments from 2015 were never updated before transfers, leading to estimated financial losses of €9 million to €12 million for the CCB and its successor, SEDIPES. Errors included incorrect ownership stake calculations, such as in SOPAZ and SYNERGAS, and the exclusion of non-operational real estate from valuations. In one case, equity participation in SPEAL was completely omitted, further weakening the financial position of state-backed entities.
