articles | 12 September 2014

Cyprus committed to economic reforms

The government said recently it was doing its best to limit anyfallout from the foreclosures debacle as the Eurogroup meets to discuss the island’s progress in implementing its adjustment programme.

The International Monetary Fund (IMF), a member of the island’s troika of lenders, echoed the European Commission yesterday in saying that the laws passed by parliament were not compatible with the terms of the bailout.

The foreclosures law is “decisive in tackling the high and rising non performing loans, resuming the supply of credit, and Cyprus’ return to viable growth,” deputy IMF spokesman William Murray said. “The current package is not compatible with these objectives and we expect to be briefed by the authorities on how they plan to proceed.”

Cyprus is concerned about today’s Eurogroup meeting and the possibility of any negative references in its report having passed all of its previous troika reviews with flying colours.

“You can understand what consequences a negative reference would have,” Government Spokesman Nicos Christodoulides said, but declined to elaborate lest he was accused of scare mongering.

“The situation is very difficult and what is worse is that it was created unnecessarily,” he said.

Last Saturday MPs passed six bills that limited the scope of the foreclosures legislation – which they also approved – despite being warned that something like that would preclude Cyprus from receiving its next tranche of financial assistance.

President Nicos Anastasiades has said he would send back to parliament two pieces of the legislation found to be incompatible with the terms of the island’s bailout.

Anastasiades is also to refer the four other contentious pieces to the Supreme Court, which will have to decide whether they are constitutional.

But yesterday, main opposition AKEL appeared prepared to inflict more damage on the economy, saying it would try to suspend the application of the foreclosures bill because the president sent the two pieces of legislation back to parliament.

One of the two sent back concerns the right of borrowers to report a bank to the Central Bank governor if they think the lender violates the code on loan restructuring, and the other one gives the Central Bank the authority to step in and stop mass foreclosures.

From the four sent to the Supreme Court, the first allows distressed borrowers with non-performing housing loans up to €350,000 to apply for court-ordered protection against foreclosure, while the second stipulates that foreclosing properties would relieve small borrowers of any further obligation, even if the property’s auctioned value does not cover the outstanding loan.

The third relieves guarantors of any obligations after the property is sold, and the fourth links the foreclosures bill with the insolvency framework.

The government spokesman yesterday wondered what the “real intentions” of certain parties were after AKEL issued its threat.

“The only path to secure the continuation of the recovery course and stabilisation of the economy, as well as ensuring the broader interests of our people, especially vulnerable groups, is the implementation of the support programme and parties know this well. The choice and responsibility is theirs,” Christodoulides said.

Earlier, he told the state broadcaster that the government was trying to minimise the effects of not receiving the next tranche.

“It is a negative development without a doubt and I think no one disagrees,” he said, stressing that Cyprus must get the money as soon as possible.

Cyprus was meant to receive some €485 million – it has so far received €5.1 billion with €4.9 billion to go.

The programme can continue in theory, but the issue will remain pending and it could affect future reviews. Plus, the government would have to raise the money from somewhere and that could mean additional spending cuts.

AKEL dug its heels deeper, accusing the government of engaging in unilateral actions and creating new fait accompli that could not be accepted.

“From the moment the president chose to eliminate the protection net of vulnerable groups and the offsetting measures against the risk of mass and indiscriminate foreclosures, AKEL will seek to restore balance by suspending the foreclosures law,” spokesman Giorgos Loukaides said.

DIKO called on Anastasiades to sign the law linking foreclosures with the implementation of the insolvency framework and prepare legislation regarding the latter as soon as possible.

DISY leader Averof Neophytou highlighted the need to find common ground without blowing up the country’s stability programme.

Neophytou said international lenders stepped in because of “our mistakes. It is respected and understandable to have opposing views in a democracy but we have a huge obligation towards our country, society, and our children, to find solutions and not repeat our mistakes. We must save the country and the economy.”

Source: Cyprus Mail

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