Cyprus Mail

Late night drama as House finally passes MoU bills

By Elias Hazou

After a stop-start session dragging past midnight, the House plenum yesterday enacted a raft of laws necessary for Cyprus to secure the release of the next tranche of bailout money.

Parliament initially passed 12 of the 14 bills related to the bailout deal with international lenders.

But a government bill on arguably the most crucial item of legislation – transferring the supervision of co-operative banks to the Central Bank – was beaten back by the opposition parties.

A second bill – automatically converting convertible bonds into shares, a measure pertinent to the recapitalisation of Hellenic Bank – also failed to pass.

Under the agreement with its international creditors, Cyprus needed to pass all measures relating to the restructuring of the co-operative sector in order to be eligible for the second tranche of financial assistance.

The House plenary, which got underway early in the day, broke at around 9pm. News of the gridlock caused some uneasy moments in the government camp, with Nicosia reportedly getting calls from abroad warning that unless Cyprus stuck to all its commitments, the entire bailout programme could be thrown into disarray.

In a bid to overcome the impasse, the finance minister and the spokesman were urgently dispatched to parliament to hammer out a new deal with party leaders.

Under parliamentary procedure, because the two government bills were defeated they could not be re-tabled as such. It was decided that the plenary session be adjourned at midnight and that a new session be convened with the bills tabled as legislative proposals this time.

The two contentious bills finally passed in a second vote, by 41 votes for and just three against. Remarkably, the text of the legislative proposals was virtually identical to the original government bills.

Reportedly, AKEL waived its objections after being assured by DISY that appointments to cooperative committees would not be done on party criteria.

Opposition to the two government-drafted bills was spearheaded by the AKEL party, which was seeking amendments.

A major point of dispute was a demand by AKEL for inserting a clause into the initial government bill explicitly prohibiting the state from selling its shares in cooperatives to anyone other than the Cooperative Central Bank or licensed co-operative credit institutions.

However, what caused the upset during the first vote was the stance of EDEK; originally the socialist party had intimated they would back the government bills as were, only to pull a U-turn at the last moment.

Also passed yesterday was a scheme providing for compensation of provident fund and pensions deposits in former Laiki Bank.

The compensation plan’s adoption was also a prerequisite for the disbursement of the second tranche of the international rescue package.

Under the plan, the government will commit an amount of up to €299m from the budgets of 2013 and 2014, of which a maximum of €154m can be made available before the second troika review.

Provident funds were affected following a haircut on uninsured deposits of over €100,000 in the island’s two largest banks, Laiki and Bank of Cyprus.

Other items on the plenum’s agenda, in addition to changes to the co-operative sector, included three bills boosting anti-money laundering measures, a 10 per cent penalty on land transfer fees for delays in submitting immovable sales contracts, and a new method of calculating road tax based on vehicle emissions.

The government will be spending around €1.5bn of the €10bn bailout to buy shares in the co-operative movement so the latter can meet its recapitalisation needs.

The move makes the state the exclusive owner of the co-operatives, acquiring 99 per cent of its shares. But under an agreement struck earlier in the week, co-ops will pay the state 10 per cent annually as interest on the capital held by the government, and use the rest of its profits to buy back the shares.

Passage of the co-op measures was extremely time-sensitive, as they need to be first reviewed by the individual legislatures of euro-area nations before they are put to the next meeting of EU finance ministers on September 13.

The Eurogroup is expected to green-light the release of the €1.5bn; inspectors from international lenders recently reported that Cyprus’ economic adjustment programme was on track.

During the day, the drama inside the parliament was replicated outside: hundreds of people gathered to protest against austerity policies implemented by the government and the ‘troika’ of international lenders.

The demonstrators held placards reading “No to the sell-out of co-operative banks” and “Pensioners will not tolerate becoming beggars.”
The demo was organised by AKEL and left-wing unions and organisations.

Senior AKEL lawmakers – including Stavros Evagorou and Yiannis Lamaris – took time to step outside and stoke the crowd, addressing the demonstrators on loudspeakers.

At one point there was reportedly some tension between the demonstrators and reporters covering the event, with the former verbally abusing the latter. The protesters dispersed quietly at nightfall.

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