The Covid-19 pandemic in Cyprus has led to a sharp fall in output but a smaller decline in employment, thanks to a range of government support schemes. The government has increased borrowing but without risking a fiscal crisis. The crisis has already resulted in a long overdue acceleration of digitisation. The government’s recovery plan is driven by the EU’s Recovery and Resilience Facility, which is conditional on a range of reforms to speed up digitisation and the “greening” of the economy. Many of the requirements are reforms that that the minority government has been trying to pass for years. With the EU now using “carrots” rather than “sticks”, there is a greater chance that these long overdue transformations will be implemented.