Interview with Dr Panayiotis Agisilaou, Managing Director of Trojan Economics
Originally published by StockWatch on 13 July 2026. Interview by Alexandros Chronidis.
In an exclusive interview with StockWatch, Trojan Economics Managing Director Dr Panayiotis Agisilaou explores the unique hurdles facing the Cypriot economy. He advocates a modern overhaul of competition policy, moving away from slow, reactive rules toward flexible, ex-ante (preventive) tools designed for small-market structures.
Dr Agisilaou explains that although the small size of the Cypriot market affects the functioning of competition, it is not, in itself, a sufficient explanation for high prices or the weaknesses observed in certain sectors. Market design, barriers to entry, regulatory distortions and market concentration are equally important.
The interview examines the challenges facing key sectors of the Cypriot economy, including electricity, banking and healthcare.
Particular emphasis is placed on the electricity market, while the interview also considers the consequences of increasing concentration in banking and the importance of effective merger control in a small economy such as Cyprus.
Dr Agisilaou further explains why strengthening competition requires not only effective enforcement of the rules, but also strong institutions, coordination among public authorities and appropriate incentives for new market entry and for markets to operate in the interests of consumers and the wider economy.
The Interview
Markets now operate in real time, while institutions often rely on procedures designed for a different era. Is the current system for protecting competition adequate?
The current system for protecting competition is largely functional. However, it cannot always respond successfully to the speed and complexity of modern markets.
The gap between the speed of markets and the speed of institutional intervention has become structural. Markets, particularly digital markets, develop in real time, whereas competition law enforcement has traditionally relied on ex post intervention. This creates a time lag during which distortions of competition may become entrenched before the authorities intervene.
The issue, however, concerns not only the speed of the institutional response but also the enforcement tools available. We are already witnessing a clear shift towards more preventive, ex ante forms of market regulation.
The Digital Markets Act and the Digital Services Act are characteristic examples. They seek to regulate the conduct of major digital platforms before that conduct creates or entrenches distortions that may subsequently become irreversible.
The objective should therefore not be to replace the existing framework, but to adapt and reinforce it through more targeted, preventive and flexible policy tools.
Europe applies strict competition rules, while other economies operate through extensive State subsidies. Does the European Union ultimately restrict the strategic flexibility of its own businesses?
The European Union operates within an institutional framework designed to safeguard competition in the internal market. Global competition, however, is not conducted under a common set of rules.
When European businesses compete against State-subsidised corporate groups from third countries, such as China, the competitive conditions are no longer equal.
This does not mean that the European Union should abandon its competition model. On the contrary, that model may need to be supplemented with new instruments that account for contemporary geoeconomic realities.
Initiatives such as the Foreign Subsidies Regulation and the framework for screening foreign direct investment move in this direction. They seek to address distortions within the internal market arising from the practices of third countries.
At the same time, industrial-policy proposals such as the Industrial Accelerator Act reflect the need to strengthen Europe’s productive base and its strategic competitiveness in critical sectors of the economy.
Do you see Europe gradually moving away from a “liberal” conception of competition and towards a more interventionist, almost geopolitical model of economic policy?
Yes. There is a gradual but clear shift.
For several decades, European Union policy was based on the principle that open markets, competition and limited State intervention promote economic prosperity.
Today, however, the European Union must respond to new challenges arising from geopolitical instability, dependence on third countries in critical sectors and raw materials, subsidies granted outside Europe and intensifying global competition.
As a result, competition policy can no longer operate in isolation. It must function as part of a broader industrial and strategic policy framework.
This does not mean abandoning competition. It means adapting competition policy to new geoeconomic and geopolitical conditions.
The European Union is seeking to reduce its dependence on third countries in critical sectors such as energy and industry. Can this objective coexist with a strict competition framework?
The European Union’s effort to reduce its dependence on third countries in critical sectors is not incompatible with competition.
For decades, the European approach was based on the idea that open and unrestricted competition produces optimal outcomes. Today, however, that model is being tested by geopolitical and geoeconomic developments.
Dependence on third countries for critical inputs and supply chains, subsidies granted outside the European Union and strategic investment in key sectors have created an environment in which competition cannot be considered separately from geoeconomics and geopolitics.
Viewed in this context, the European Union is not required to relax its rules. It must apply them in a more targeted and strategic manner, taking into account the broader competitive conditions developing globally.
Let us turn to competition in Cyprus. How does the small size of the Cypriot market affect the functioning of competition and the formation of prices?
The small size of the Cypriot market primarily affects competition through constraints on business growth and the market’s structural characteristics.
In a small economy, achieving economies of scale and scope is more difficult. This can result in higher unit production and operating costs.
Even within the European Union’s internal market, where institutional barriers to cross-border trade have been removed, benefiting from a larger market is not automatic.
This is due, among other things, to structural disadvantages faced by businesses in smaller economies, including higher energy and transport costs and other cost-related factors.
At the same time, the market’s limited size often prevents many businesses from operating at an economically sustainable scale. This leads to more concentrated market structures. When combined with structural or regulatory barriers to entry, this may significantly weaken competitive pressure.
The size of the market, however, does not by itself explain the outcomes observed. The experience of other small and island economies in the European Union demonstrates that market design, the regulatory framework and the intensity of competition can decisively affect market performance.
In Cyprus, high prices are frequently attributed exclusively to the country’s small market size. Is this sometimes used as a convenient explanation for structural weaknesses or insufficient competition?
Yes. In certain cases, the small size of the market is used as an easy explanation for problems that are not caused exclusively by size.
This does not mean that the size of the Cypriot market is unimportant. As I mentioned, it affects operating costs and frequently limits the number of competitors that can operate sustainably.
Nevertheless, small market size cannot, on its own, explain every instance of high prices or limited competition. Market outcomes are also influenced by barriers to entry, the regulatory framework and the degree of concentration.
The electricity market is a useful example. Although both Cyprus and Malta are small island economies, electricity prices in Malta are among the lowest in the European Union, while those in Cyprus are among the highest.
This demonstrates that market size alone is not sufficient to explain market outcomes.
The critical question, therefore, is not whether a market is small. It is a question of whether the problems observed are genuinely attributable to its small size or to distortions that can be addressed through better market design and more effective competition policies.
Which sectors of the Cypriot economy face the greatest challenges in terms of the effective functioning of competition?
The most significant challenges tend to arise in markets characterised by high concentration, substantial barriers to entry and extensive regulatory intervention.
Sectors with strong vertical linkages and a broad economic footprint are particularly important. Electricity and banking are prominent examples.
These sectors do not affect only their direct participants. Their effects extend throughout the economy, influencing businesses’ operating costs and, ultimately, the prices consumers pay.
Particular attention is also required in markets involving a significant volume or value of transactions, because the consequences of any distortions may be disproportionately large for the economy.
Recent acquisitions in the dairy-products sector are a prime example, given the strategic importance of Halloumi PDO to the Cypriot economy and exports.
The healthcare sector also faces significant challenges. Although the General Healthcare System represented an important reform in terms of citizens’ access to healthcare services, recent years have seen increased acquisition activity and further market concentration.
At the same time, questions remain about whether the objectives regarding service quality and the development of meaningful competition among healthcare providers have been achieved to the expected extent.
The discussion on competition should therefore not be confined to general principles. Targeted intervention is needed to address the specific characteristics of each market. This may involve removing regulatory distortions, facilitating customer mobility or applying stricter merger control in markets that are already highly concentrated.
We referred earlier to the electricity market. What are the main challenges currently facing the electricity market in Cyprus?
Despite the institutional transition towards a competitive model, the electricity market continues to face major challenges.
One of these is the Electricity Authority of Cyprus, which accounts for a very high share of both electricity generation and supply. This significantly affects the dynamics of competition.
The position is even more pronounced in individual market segments, such as balancing and ancillary services, where limited participation can result in monopolistic conditions.
In such an environment, market design and regulatory rules become crucial. Weaknesses or failures in the applicable framework may create opportunities for businesses with substantial market power to exploit their position, thereby affecting the functioning of competition.
Unless these distortions are addressed in a timely manner, the market may begin to diverge from its original design, reinforcing trends towards greater concentration and market models that may favour businesses possessing significant market power.
Could you explain more fully what you mean by “market design”, both in the energy market and in more traditional sectors such as food or banking? Who “designs” an already established market? How is this done, and what tools are available?
When we refer to market design, we do not mean that someone centrally determines prices or commercial decisions.
We are referring to the rules, institutions and incentives that shape the framework within which a market operates.
Who determines this framework depends on the sector concerned. In regulated markets such as electricity and telecommunications, regulators and legislators play an important role through legislation, regulations, regulatory decisions and market rules.
These decisions determine, among other things, the conditions for accessing essential infrastructure, the rules governing participation, the rights and obligations of market participants and the mechanisms through which prices are formed.
Market design, however, is not determined solely by the State or by regulatory authorities. In many cases, it is also shaped by businesses themselves through the structure of their commercial relationships.
Exclusive or selective distribution agreements, supply networks, contractual relationships among producers, suppliers and distributors, and even the organisation of distribution channels can materially influence how competition operates.
In banking, for example, market operations are affected by the regulatory framework, account-switching procedures, access to finance, and barriers to entry for new providers.
In the food sector, the structure of the supply chain, access to distribution networks, and the commercial relationships among producers, wholesalers, and retailers all play important roles.
The authorities and policymakers have a broad range of tools at their disposal. These include rules governing access to markets and infrastructure, licensing procedures, transparency obligations, provider-switching rules, market-operating mechanisms and competition-law instruments such as merger control and the prohibition of anticompetitive practices.
In other words, every market is designed to some extent.
The relevant question is not whether market design exists, but whether the rules and incentives governing the market facilitate entry, encourage investment and allow competition to operate effectively for the benefit of consumers and the economy as a whole.
What factors affect competition in the banking sector, and how are they reflected in the costs borne by businesses and consumers?
The Cypriot banking sector has undergone a substantial transformation in recent years. As a result, its concentration level is now significantly higher than the European Union average.
By way of illustration, the three largest banks account for approximately 85% of the Cypriot banking system’s total assets, compared with an average of approximately 40% to 45% across the European Union.
Combined with the characteristics of a small market, the limited availability of alternatives, the absence of well-developed alternative sources of finance, and the practical difficulties customers face when moving from one bank to another, this reduces the intensity of competition.
This is reflected, among other things, in the cost of business finance, the interest rates faced by borrowers, banks’ interest margins and the returns earned by banks on the capital they employ.
Limited competitive pressure may also affect the pace of innovation, digital transformation and the overall quality of the services provided to businesses and consumers.
Could the entry of fintech companies or digital banks materially change the competitive landscape in Cyprus, or do the barriers remain too high?
The entry of fintech companies and digital banks has the potential to strengthen competition, particularly in individual services such as payments, money transfers, deposits and certain forms of finance.
Technology alone, however, is not enough.
An improvement in competitive intensity will depend on whether new market participants can gain access to customers, achieve sufficient scale of operations, and compete on equal terms with traditional banking institutions.
In a small market such as Cyprus, important challenges remain. These include the limited size of the market, the strong position of incumbent banks, the cost of regulatory compliance, and the relatively low rate at which customers switch between banking service providers.
Nevertheless, the experience of other European countries demonstrates that digital providers can create significant competitive pressure even without acquiring a substantial market share.
Their presence may be sufficient to establish a credible alternative in certain services, accelerate innovation, encourage the digital transformation of traditional banks, improve service quality and secure more favourable terms for consumers and businesses.
There is an increasing trend of mergers and acquisitions across several sectors of the Cypriot economy. How do you assess this development from a competition perspective?
Mergers and acquisitions are an important instrument of business strategy and are generally associated with legitimate economic objectives.
Such transactions can create more efficient business structures by achieving economies of scale and scope or through vertical integration. They may facilitate expansion into new markets, increase the diversification of activities and improve investment capacity.
These benefits, however, must be assessed alongside the expected impact of the transaction on market structure and competitive intensity. This is particularly important in small economies, where the effects of concentration are often more pronounced.
For this reason, significant mergers and acquisitions are subject to preventive review, both nationally by the Cyprus Commission for the Protection of Competition and at the European level by the European Commission.
The purpose of merger control is not to restrict business growth. It is to ensure that such growth does not result in a substantial and disproportionate reduction in competition to the detriment of consumer welfare.
If you had to identify a single sector in which a meaningful strengthening of competition would have the greatest effect on the cost of living and the productivity of the economy, which sector would you choose and why?
I would choose the electricity market.
Electricity is a factor of production that affects almost every form of economic activity.
Cyprus has consistently ranked among the European Union countries with the highest electricity costs, particularly for businesses. Higher energy costs are therefore incorporated into the production, transportation and distribution costs of products and services.
This affects both the competitiveness of businesses and the cost of living faced by households.
Energy is also a critical factor in attracting investment, improving productivity and strengthening the overall competitiveness of an economy.
When an economy operates amid high energy costs, the effects ripple through the entire productive system.
For that reason, I believe that a meaningful improvement in the competitive conditions prevailing in the electricity market would have the greatest overall economic impact for Cyprus.
What action should be taken over the coming years to strengthen competition in the Cypriot economy?
Strengthening competition in the Cypriot economy requires a holistic approach that goes beyond the mere application of rules and focuses on fostering a broader competition ecosystem.
Initiatives that strengthen a culture of competition have positive long-term effects on market functioning.
At the same time, measures that enhance predictability, legal certainty and confidence in instruments for detecting or admitting infringements—such as leniency programmes and settlement procedures—are essential for the effective enforcement of competition law.
Institutional interoperability is another critical element. This means effective coordination among regulatory authorities and public bodies, so that interventions are coherent and do not create conflicting incentives.
Other important measures include more targeted merger control, particularly in oligopolistic sectors, the removal of regulatory distortions and the correction of weaknesses in the regulatory framework that affect competition.
This is especially important in sectors with substantial horizontal and vertical linkages, where the effects of market distortions extend throughout the wider economy.
Competition is therefore not strengthened merely by introducing more rules. It requires better market design, strong institutions and confidence in the system.
