NOBODY likes to see people having their houses re-possessed by the bank because of failure to repay loans. It is a terrible and humiliating experience, certain to provoke public sympathy as happened in the case of the family of three whose house in Engomi was put up for auction on Thursday by Hellenic Bank. Only in Cyprus, however, could such an issue have been turned into a political cause, crudely exploited by our irresponsible parties, oblivious to the dangers this populism poses to the economy.
With their stance, the parties encouraged the people that turned up at the auction venue to protest against the foreclosure and intimidate possible buyers. Members of the so-called Movement Against Foreclosures were present outside the building, as were representatives of the political parties to voice their objection to what was happening. As is expected at such protests, emotions were running high and rationality was not allowed to infect the slogans and comments by the protesters.
A member of the movement, Evgenia Moiseos, who pledged to protest at every auction, said: “A person’s house is sacred, it is the temple of the family and nobody has the right to violate it… People must realise that we must react collectively as a society at last. All our houses are in danger.” The arch-populist Giorgos Perdikis declared that it is our obligation “not to allow the auctioning of any primary residence,” because “it is intolerable for any of our compatriots to stay without a home in order to benefit the banks.”
Akel and Edek also issued statements, reminding us that they had voted against the foreclosures bill in 2014, the former also censuring President Anastasiades’ untrustworthiness for having pledged that the first residence was protected by the said law. Akel came back with a second announcement on Friday, demanding that the premises of small businesses should also be exempt from foreclosures and that ‘reliable’ borrowers should be protected. Surely, if borrowers were ‘reliable’ there would be no issue with the bank and no need for their protection.
When the parties and pressure groups go on a public crusade, the first thing ignored is the law. All the campaigners for the protection of the first residence showed total disregard for the law and the fact that the auctioning of the house in Engomi was the result of a legal process and that there was a court order for the foreclosure of that property. Should we ignore the law and the courts, because the family home was declared “sacred” by an activist, backed by vote-buying politicians? Will the public and the parties now decide whether a home-owner would honour his signature on a loan contract?
Cyprus must be one of the few countries in the world in which lawmakers oppose the rule of law and advocate the non-enforcement of the law in specific cases. In countries with rule of law, repossession of a property is routine practice, when the owner fails to make loan repayments for a few months – not years, as is the case in Cyprus. The same applies to cases of properties being used as collateral for business loans, because once the lawful contracts are ignored nothing is safe.
In their eagerness to pander to voters, the parties rendered the foreclosures’ law, eventually approved in 2014, as toothless and slow to implement. Even the provision that a property could be auctioned at 80 per cent of its value was absurd. There were no buyers for the Engomi house at 80 per cent of its value and, by the law, the bank would be able to auction it again, at lower price, in six months. None of our populist politicians mention the fact that these delaying and obstructionist tactics have one result – the loan increasing because interest charges keep being added to it.
Worst of all is that this populism puts the whole economy at great risk, because it prevents the banks from reducing the non-performing loans that threaten their viability. The Bank of Cyprus, which has been by far the most successful of the three Cypriot banks in reducing NPLs, announced provisions of half a billion euros for 2017, which is not a good sign. Hellenic Bank and the Cyprus Co-operative Bank are in a less healthy position, raising the possibility of the need for another re-capitalisation.
Top officials at the ECB, the IMF and the European Commission, as well respected economists, warn us of the need of drastically reduce NPLs, at every opportunity, because they are aware of the huge risks to the economy of the failure to do so. It is these warnings we should heed to if we want to build a healthy economy and not the populist nonsense of parties that contributed to the 2013 meltdown. Nobody enjoys seeing banks re-possess people’s houses and properties, but the truth is that preventing them from doing so could cause big and far-reaching problems for our economy. It is not as if we have not been warned of this danger.