By Angelos Anastasiou
THE TROIKA Cyprus mission arrived to Cyprus on Monday in order to carry out its fifth progress review of the island’s adjustment programme.
According to the Cyprus News Agency, at 8 am on Tuesday staff teams comprising representatives from the European Central
Bank, the European Commission and the International Monetary Fund, will kick off a series of meetings with ministry officials at the Directorate General for European Programmes.
The mission has been set to meet with Finance Minister Harris Georgiades on Thursday.
At 45 per cent of total loans, or €27.1 billion out of a total €60 billion, non-performing loans (NPLs) pose the single greatest challenge facing Cyprus. According to April data from the Central Bank of Cyprus, NPLs totalled 43 per cent of total loan portfolios in commercial banks and 51.7 per cent at the Co-operative Central Bank.
Against this backdrop, discussions will include the government’s upcoming legal framework on insolvency and property repossession.
The meetings are scheduled to last until July 22, at which point political discussions will commence to finalise the fifth updated memorandum between the mission heads and the finance ministry, scheduled to be concluded by July 25.
Following a banking and fiscal crisis in March 2013, the Eurogroup agreed to a €10 billion bailout loan to Cyprus, which included the winding down of its second largest bank and the conversion of uninsured deposits to equity in the largest lender, necessitating the imposition of restrictions on capital movement to control capital flight. In return, Cyprus agreed to a three-year economic adjustment programme.
After the initial shock and due to strict adherence to the terms of the programme, the economy fared better than expected, drawing positive remarks from the troika after each of the four quarterly progress reports, and allowing the country to borrow €750 million from international bond markets last month after a three-year effective lockout. The move was hailed as the “quickest return to markets by any of the five bailed-out EU countries”.
According to the troika’s progress report last May, the three major challenges facing Cyprus are reducing NPLs, maintaining fiscal viability, and the completion of policy reform.
“Cyprus’ programme remains on track,” the troika had said in an announcement. “Fiscal targets for the first quarter of 2014 were met with a considerable margin, reflecting better than projected revenue performance and prudent budget execution.”