After scores of Latin American countries recognized Palestinian statehood, Cyprus became the first EU country to follow suit. So far, the recognition has come only in the form of a presidential letter.
The recognition itself is insignificant, and may actually benefit Israel because border negotiations between two states can drag on forever. There is a small chance of an explosive development: as more countries begin to recognize Palestine in its pre-1967 borders, Israel may be pressured to abandon most of Jerusalem and all of the West Bank.
Oddly, Cyprus is on very good terms with Israel. The island state routinely helps us to intercept or sabotage pro-Gazan flotillas, and it allowed IAF to train against its S-300 SAM battery. Considering Cyprus’ bad relations with Turkey, we would not expect a pro-Palestinian stance there. Perhaps due to their sour relations with Turkey, Cyprus feels the need to maintain good relations with other Muslims nations.