Paphos Municipality is currently under intense scrutiny due to serious accusations from opposition councillors. These councillors allege that critical information concerning a €2.5 million deficit in European Union funding was deliberately withheld. This shortfall pertains to three significant construction projects that were planned. The DIKO municipal group has officially submitted a formal complaint, asserting that the municipality was aware of substantial funding difficulties for approximately 18 months. They claim these issues were not disclosed to the wider council, thereby undermining transparency and potentially leading to considerable additional debt for the city.
The core of this controversy revolves around the mismanagement of co-funding from the Thalia 2021-2027 European programme. This funding had been allocated to two vital urban regeneration initiatives: the development of the Anavargos neighbourhood and the enhancement of the southern commercial district. Reports indicate that these projects were ultimately disqualified from their EU co-funding due to identified shortcomings in accessibility provisions. This disqualification has created a significant funding gap, necessitating a complex financial strategy to avert further losses.
Initially, the municipality had reportedly considered reallocating funds designated for the Historical Documentation Centre. This centre was planned for Kennedy Square and was intended to absorb the shortfall. However, this proposal was deemed unworkable because the centre had already secured its financing through a loan agreement with the European Investment Bank (EIB). Using these EIB funds for the Thalia-disqualified projects would have constituted an unacceptable instance of double funding, violating established financial regulations.
In response to this challenging situation, the municipality decided to redirect the EIB loan. This loan was originally intended for the Historical Documentation Centre but will now cover the costs associated with the Anavargos and southern commercial district regeneration works. This redirection amounts to an estimated €9.3 million. The remaining portion of the EIB loan, approximately €2.5 million, has been earmarked for other municipal projects. These include the establishment of a Natural History Museum and the installation of protective canopies at the local market. The Municipal Council ultimately approved this revised financial arrangement, citing circumstances of force majeure.
The timing of this revelation has intensified the opposition's dissatisfaction. The Paphos Municipal Council plenary was only formally informed of the situation on Monday. This occurred despite the funding issues having been a persistent concern for nearly a year and a half. The DIKO group argues that this extended period of secrecy prevented proper oversight and has burdened the municipality with avoidable financial obligations. The signing of the EIB loan agreement for the Historical Documentation Centre on October 10, 2024, appears to have been a crucial moment in solidifying the proposed redirection of funds.
The consequences of this alleged financial imbroglio are substantial. Beyond the immediate €2.5 million deficit, the municipality now faces an increased debt burden. Questions are being raised about the effectiveness of its financial management and its dedication to open governance. This situation highlights the complex challenges involved in managing large-scale, EU-funded projects. It also underscores the critical need for robust communication and accountability within municipal administration. The ultimate impact on Paphos's development trajectory and its future borrowing capacity is yet to be fully determined.