Paphos Municipality is facing significant scrutiny following accusations from opposition councillors that it deliberately concealed critical information regarding a €2.5 million shortfall in European Union funding for three major construction projects. The DIKO municipal group has formally lodged a complaint, alleging that the municipality has been aware of significant funding challenges for approximately 18 months but failed to disclose these issues to the wider council, thereby compromising transparency and potentially incurring substantial additional debt for the city.
The crux of the controversy lies in the mismanagement of co-funding from the Thalia 2021-2027 European programme, which was allocated to two key urban regeneration initiatives: the Anavargos neighbourhood development and the southern commercial district enhancement. According to sources, these projects were ultimately disqualified from their EU co-funding due to identified deficiencies in accessibility provisions. This disqualification has left a substantial funding gap, necessitating a complex financial manoeuvre to mitigate further losses.
Initially, the municipality had reportedly considered reallocating funds designated for the Historical Documentation Centre, a project slated for Kennedy Square, to cover the shortfall. However, this proposal was deemed untenable as the centre was already secured with financing through a loan agreement with the European Investment Bank (EIB). Utilizing these EIB funds for the Thalia-disqualified projects would have constituted an impermissible instance of double funding, violating established financial regulations.
In response to this quandary, the municipality opted to redirect the EIB loan, originally intended for the Historical Documentation Centre, to 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, is now earmarked for other municipal undertakings, including the development of a Natural History Museum and the installation of canopies at the local market. The Municipal Council ultimately sanctioned this revised financial arrangement, citing circumstances of force majeure.
The timing of this revelation has fuelled the opposition's discontent. The Paphos Municipal Council plenary was only formally apprised of the situation on Monday, despite the funding issues having been a persistent concern for nearly a year and a half. The DIKO group contends that this prolonged period of opacity has prevented proper oversight and has left the municipality burdened 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 pivotal moment in solidifying the proposed redirection of funds.
The implications of this alleged financial imbroglio are significant. Beyond the immediate €2.5 million deficit, the municipality now faces an increased debt burden, and questions are being raised about the efficacy of its financial stewardship and its commitment to open governance. The situation highlights the intricate challenges of managing large-scale, EU-funded projects and underscores the imperative for robust communication and accountability within municipal administration. The ultimate impact on Paphos's development trajectory and its future borrowing capacity remains to be fully assessed.