By Angelos Anastasiou
ALL parliamentary parties have positioned themselves squarely against the government’s controversial foreclosures bill, which is expected to be approved by the Council of Ministers on Wednesday on its way to the House, where it will be discussed and put to a plenary vote.
The outcome of protracted negotiations with the Troika during its recent fifth progress review of Cyprus’ adjustment programme, the foreclosures bill will allow lenders to liquidate properties used as collateral on defaulting mortgages in private auctions, following all attempts to salvage the delinquent loan through restructuring.
Although primary residences have been excluded from the bill’s scope, Finance Minister Harris Georgiades was swift to clarify that this is merely a temporary arrangement until the end of the year, when the government is scheduled to have drafted and passed insolvency legislation, but will include a ‘safety net’ to offer alternatives to at-risk homeowners.
As part of the necessary reforms aimed at modernising the country’s financial system, the Troika has long insisted on radically overhauling foreclosures legislation. Current procedures allow for legal tangles that translate to foreclosures adjudications to last for more than a decade.
But despite the government’s confidence that the bill is a balanced deal that adequately considers borrowers’ and lenders’ rights that can be voted into law by the House, political parties were quick to jump at the opportunity to criticise the government and warn of their determination to vote against it, even as the bill’s provisions have not yet been unveiled.
Communist AKEL argued that talk of a future safety net for homeowners is no more than a hollow promise since the government could have prepared one long ago, certainly long before carving out a deal with the Troika.
“As AKEL, we will insist on the bill we tabled aiming at protecting primary residences and small business premises,” spokesman Stavros Evagorou said on Tuesday. He was referring to a bill offering protection for two years to defaulting borrowers whose inability to pay is demonstrably a temporary consequence of the country’s economic downturn. The bill was hotly contested by most stakeholders, particularly banks, and eventually defeated at committee level.
Socialist EDEK was unequivocal in dismissing the bill outright, but offered little by way of alternative proposals. “It would constitute complicity to an economic and social crime for us to consent to mass foreclosures in fire sales that would lead to a second haircut – this time of property values,” it said in a statement. “We are obliged to resist such a law.”
Former government-coalition partner DIKO has warned the government that without adequate protection of the primary residence it would not be voting in favour of the bill, and set a number of prerequisites that amount to a renegotiation of the adjustment programme in order to do so.
“We repeat that the government, before asking for the green light from parties on the bill in question, owes a clear answer to these questions,” deputy spokesman Athos Antoniades said. “The Democratic Party will not vote on such a sensitive issue with a gun to its head.”
Even ruling party DISY, as well as ruling coalition partners EVROKO, have joined the bandwagon.
In what could be interpreted as a pre-emptive gesture paving the way for his party’s opposition to the bill, DISY’s leader Averof Neophytou came out last week criticising banks for their role in mounting numbers of non-performing loans. “What we have in Cyprus is less of a banking system and more of a network of collection agencies,” he had said, arguing that banks need to reduce lending rates and extend more credit to help the broader economy recover. Sources cited by daily Politis suggest that the party will only agree to granting banks the weapon of foreclosures “under certain terms and conditions.”
Despite enacting the bill into law has acquired ‘prior action’ status by the Troika, meaning the next tranche of bailout money will not be released until the bill has passed the House, EVROKO leader Demetris Syllouris said the government should ask the Troika for more time to study the effects of mass foreclosures on the broader economy and social cohesion.
Yet despite criticism, the government has thus far presented a united front. Interior Minister Sokratis Hasikos came out in favour of the bill, warning that the House is gearing up for yet another blunder to go with Parliament’s refusal to ratify the initial Eurogroup decision in March 2013, only to be forced into agreeing a much more severe arrangement ten days later, as well as defeating a bill that would rescue the co-operatives by injecting €1.5 billion in capital in September 2013, only to revisit and vote for essentially the same bill later the same day.
“I am certain that the House is responsible enough to realise what may follow if the bill is not passed,” he said. “In its wisdom, it can assess the situation and determine what the best interest of the country dictates.”
But the government knows such gentle urges will probably not suffice to sway dissenting opposition, and plans to place the full force of the Presidency behind the bill in order to highlight its importance.
“It is the President’s intention to inform the public of the bill’s details and all the other provisions,” Georgiades told state TV on Monday, expressing his confidence that the complete picture will eventually convince naysayers.