Cyprus Mail

Rejection of SGO sell-off throws next aid tranche into doubt

By Elias Hazou

PARLIAMENT on Thursday failed to adopt a controversial privatisation plan, potentially throwing into disarray an international bailout programme of the island and endangering the next tranche of a €10bn loan.

As hundreds of protesters demonstrated outside parliament, the vote was split evenly, with 25 lawmakers in favour and 25 against, and five abstentions. The bill needed a simply majority to pass. AKEL, EDEK and the Greens voted against.

Approval of a privatisation plan is mandatory under terms of an EU/IMF bailout Cyprus secured in March 2013. Without approval of the legislation, Cyprus is not eligible for a fourth tranche of about €236m in aid next month. The state has already received almost half its bailout amount.

As part of its commitments to pay down debt, Cyprus is expected to privatise three major public utility corporations, raising some €1.4bn by 2018. Those earmarked for sale include the Telecommunications Authority, the Electricity Authority and the Ports Authority.

The Eurogroup was due to green-light the disbursement of the next instalment when it next met on March 5. That is now uncertain.

The deal breaker in parliament was an amendment, brought by DIKO, to the government bill. It sought to secure the status of SGO employees as civil servants even once the SGOs are turned into private concerns.

Under the proposal – inserted to mollify trade unions – current SGO workers would get to keep their salaries and benefits until retirement or promotion, irrespective of whether certain jobs are axed in a privately-owned organisation.

Earlier in the day, the troika of international lenders made it clear that this clause was unacceptable.

In an email sent to the finance minister in the morning, European Commission official Maarten Verwey said the amendment constituted a “material change” to the bailout deal that went “beyond what is applicable.”

Should the privatisation bill pass with DIKO’s alteration tagged to it, the relevant requirement (privatisation of SGOs) “will be assessed as not being met,” Verwey said.

The government spokesman meanwhile was warning of the dangers of altering the privatisation bill beyond recognition.

“There exists a serious prospect that, should our lenders not disburse the [next] instalment, the government will next month, or the month after, be unable to keep paying salaries and pensions,” Christos Stylianides said hours before the plenum convened.

What decided Thursday’s outcome in parliament was the stance of some of the DIKO MPs. Only three of their deputies – including party leader Nicholas Papadopoulos – voted for the bill, whereas the other five chose to abstain.

One more ‘yea’ from DIKO would have enabled the bill to pass.

The DIKO ranks were split after all of their proposed amendments were voted down by ruling DISY.

It was not immediately clear what happens next. Late Thursday the President called a crisis meeting at the Palace. Summoned there were the ministers of finance, foreign affairs, the interior, the under-secretary to the President and the government spokesman.

It was decided to convene an extraordinary session of the cabinet for Friday to discuss how to tackle the issue.

A possible way out might be to convene a new session of the plenum for Monday or Tuesday – just 24 hours short of the March 5 deadline.

That would violate parliamentary regulations, which state that the parliament cannot during the same legislative season vote twice on the same subject if legislation has already been defeated.

This applies to government bills and legislative proposals alike. But given the stakes, the rules may have to be bent.

However, unless DIKO agrees to withdraw their contentious clause, there would be little point in putting a new bill to the vote.

Even if politicians are to somehow pull it off, the fact remains that Cyprus has lost credibility with its international creditors, DISY MP Prodromos Prodromou told the Mail.

“Having received praise and three positive reviews for implementing the bailout programme, we go and ruin everything with this caper,” he said, referring to parliament’s rejection of the bill.

Whether the bailout programme as a whole is disrupted remains to be seen.

But that’s almost a moot point, said Prodromou:

“If the lenders don’t OK the next tranche, as they likely won’t as things stand, we’re bankrupt. The treasury may last for a couple of months. After that the government won’t be able to pay salaries, or will have to pay some but not others. I suspect that the other parties will then come back with their tails tucked between their legs and do the right thing.”

Security around the parliament building was tight on Thursday, as hundreds of protesters gathered to shout down the bill.

There was none of the violence witnessed on Monday, but one man was arrested for insulting a police officer.

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