articles | 14 October 2014

Cyprus must pass foreclosures bill to receive next bailout tranche

International lenders will release the next tranche of financial assistance only once Cyprus puts in place an effective foreclosures framework in line with the terms of its bailout agreement, a senior EU official said recently.

“Putting these legal provisions in place … is of course essential to make progress with the high level of non performing loans (NPLs) in Cyprus, including large corporate loans, and to return Cyprus to financial health,” Eurogroup President Jeroen Dijsselbloem told a news conference.

The European official was referring to four bills passed by opposition parties that limit the scope of a foreclosures bill aimed at tackling rising NPLs – a prerequisite for the disbursement of the next tranche of financial assistance worth close to €500 million.

President Nicos Anastasiades has referred the bills to the Supreme Court, which will rule on their legitimacy later this month. Rejection of the bills by the Supreme Court would open the way for the assistance and get the island’s bailout obligations back on track.

Cyprus has passed four previous reviews with flying colours but the matter is set to delay completion of the fifth.

Dijsselbloem said an effective framework for private debt restructuring “remains an important pending issue that prevents the conclusion of the review”.

The remainder of the process will be handled by the Eurogroup working group.

State broadcaster CyBC quoted Finance Minister Harris Georgiades as saying that the economy could go on for a few more months without the tranche.

Speaking in Washington DC where he attended the International Monetary Fund summit over the weekend, Georgiades said his interlocutors fully understood that it was inevitable to have some delay and political difficulty in implementing such a demanding reform programme.

“Without this meaning that financing could go on without resolving the problem,” Georgiades said. “But I emphasised that it did not affect the implementation of the programme in general, or the gradual improvement of the economy,” he added.

The minister reiterated that Cyprus could stop relying on troika financing earlier than expected.

“I consider the objective fully feasible,” he said. “From the moment that Cyprus has succeeded in returning to the international markets and all basic indicators, like public debt, and public deficit, exceed the targets, and credibility is restored.”

However, Georgiades emphasised that the effort for reform and consolidation would not stop prematurely.

“On the contrary, the fact that we have the first concrete results, with the recession ending gradually and unemployment falling for the first time in years, it should give us the confidence to continue,” he said.

Source: Cyprus Mail

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