articles | 19 February 2015

Cyprus will fulfil bailout conditions

Cyprus will overcome the current foreclosure impasse and fulfil bailout terms agreed with international creditors during the financing period, economists said recently to the press.

The financing period of Cyprus’ programme, agreed two years ago, expires in March next year, before the next parliamentary elections scheduled for May 2016.

“I am optimistic for Cyprus as it has demonstrated in recent months that it wants to be a good student, like it was before EU accession, and we are doing this now with the implementation of the programme,” economist Stavros Agrotis said.

He added that this was particularly important at the moment “as foreigners unfortunately compare us with Greece, not only under the current government but also previous ones”.

On January 25, a snap poll in Greece brought the leftist Syriza under Alexis Tsipras to power for the first time. Tsipras vowed to ditch austerity, which was part of the terms of the country’s €240bn bailout, and to negotiate a reduction of Greek debt which exceeds 175% of the economy.

His government failed to convince international creditors to provide the country with a six-month bridge financing, which would give the leftist government time to carry out a bundle of unspecified reforms.

Tsipras’ election victory encouraged opposition Cypriot parties to demand a renegotiation of the bailout terms. Bambos Papageorgiou, a member of communist AKEL said on January 28 that Tsipras’ election signalled the “defeat of the notion that economies can be remedied with brutal fiscal measures, and initiated a debate in Europe which could also benefit Cyprus.”

The chairman of centre-right DIKO, Nicolas Papadopoulos, asked the government to renegotiate Cyprus’ €10bn bailout deal agreed with the troika of the European Commission, the European Central Bank and the International Monetary Fund.

Economist Agrotis said that political complications could potentially lead to delays in meeting certain “individual” points of the bailout agreement consisting of an economic and financial reform programme in time.

“It is possible to have some delays in the implementation of the programme because of the elections,” he said, adding that the troika “could give us more time to complete the programme even after elections”.

The troika already froze Cyprus’ financing following a December 18 parliament vote which suspended an unpopular law aimed at speeding up foreclosure procedures, which otherwise might take up to ten years.

On January 29 – days after Tsipras’ victory – opposition lawmakers in Cyprus extended the suspension from the initial January 30 deadline to March 2, citing the government’s delay in submitting the draft legislation on insolvencies, which, they say, will provide a safety net to debtors.

Agrotis said he expected the foreclosures’ limbo would be over in the near future after the government submitted the final insolvency draft bill.

Financial advisor Demetris Taxitaris said that the opposition parties were not entirely to blame for the current delays in the implementation of Cyprus’s reform programme.

“The government has not completed its part,” said Taxitaris, managing director of the Nicosia-based Symmetria Financial Services, in reference to the delay into submitting the insolvency draft legislation.

“The parliament’s role has not been tested yet, as not all draft bills have been submitted to parliament,” he said. “It all depends on what you will do when the time comes to do something”.

Another economist with ties to centre-right DIKO, the party which abandoned the government coalition a year ago citing disagreements over the handling of the Cyprus problem by president Nicos Anastasiades, said that Cypruswas not at risk of not meeting its obligations agreed with international creditors.

“Political alliances necessary to pass reforms required by the programme will be formed” to give a majority in the parliament, the economist said, on condition of anonymity as he expressed his private opinion. “This doesn’t imply that a blank cheque will be issued to the government”.

Conservative DISY, Anastasiades’ party, which has 20 deputies in the 56-seat house, needs support from at least nine other lawmakers in order to pass laws.

While DIKO has eight deputies, DISY was able to count in previous votes on EVROKO, a party that has one deputy in the House.

The economist added that while DIKO’s chairman, widely considered a personal rival of Anastasiades, is in favour of privatisations, he still has to take into account union bosses sitting in the party’s bodies.

“One should not expect blind obedience from DIKO and that it will vote in favour of anything and everything,” the economist said. “There will be hard negotiations” ahead of any parliament vote.

According to the bailout terms, Cyprus has to raise €1.4bn from the sale of state-owned enterprises, including the Cyprus Telecommunications Authority and the Electricity Authority of Cyprus, and the privatisation of the operations of the port of Limassol. A year ago, DIKO agreed to vote in favour of the privatisation law, after the bill was amended to satisfy workers’ concerns.

Source: Cyprus Mail

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