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Cyprus

DIKO refuses to budge on foreclosures bill

People demonstrated outside the Presidential Palace yesterday against the proposed foreclosures bill

By Elias Hazou

THE DIKO party will oppose the foreclosures bill unless it is amended to protect vulnerable borrowers from banks, its leader Nicholas Papadopoulos reiterated yesterday after meeting the President.

“DIKO will not vote for the bill as it stands,” Papadopoulos told reporters outside the Presidential Palace.

President Nicos Anastasiades had summoned the DIKO chief there in a bid to find some common ground to overcome the current impasse over the contentious bill.
Asked what might possibly overturn DIKO’s decision – taken by the party’s executive bureau a day earlier – Papadopoulos said “our concerns must be entertained.”

“To us, the priority lies in restoring a balance in the relationship between banks and borrowers. We want to protect households, small and medium-sized businesses, and that is what our proposals are geared at,” he said.

Papadopoulos censured the scaremongering, as he called it, from the government camp, which has been warning that failure to pass the bill before mid-September may derail the country’s entire bailout programme.

He was understood to be also alluding to remarks by Christoforos Pissarides, head of the national economy council, who a day earlier issued a stark warning that non-enactment of the bill now may plunge the island into a period of crisis and uncertainty reminiscent of March 2013.

Though avoiding the terms ‘haircut’ or ‘bail-in’, Pissarides made it clear that Cypriot banks – with massive non-performing assets on their books – have very few options for raising additional capital. They could certainly not receive support from the state, which is already in the red, he said.

The Nobel laureate explained that, ahead of upcoming EU-wide stress tests, banks here have told the European Central Bank that they require three to four years to execute foreclosures on mortgaged properties. However should the foreclosures bill not pass, the banks would need seven to 10 years – as is currently the case – resulting in a deterioration of their assets and a consequent need to raise more capital to make up the shortfall following the findings of the stress tests.

In such an event, said Pissarides, the decision on how to raise capital for banks would be out of Cypriot hands.

But DIKO’s Papadopoulos brushed such concerns aside, calling on the governor of the Central Bank to “quash the scaremongers and the rumours and to buttress the credibility of the Cypriot banking system.”

Asked whether the banks can pass the stress tests without enactment of the foreclosures legislation, Papadopoulos said that was up to the Central Bank.

Still, the DIKO boss appeared to be leaving a window open, adding that he was looking forward to “the start of a constructive dialogue so that we may find ways of dealing with the problems lying ahead.”

He declined to comment on a proposal reportedly being floated, aimed at resolving the deadlock between the administration and the opposition.

It involves the foreclosures law being passed by the House now, but with a caveat suspending its coming into effect until January 2015, to coincide with legislation regulating personal and corporate insolvency.

The bill as submitted already exempts primary homes from its provisions until January; and Cyprus’ international creditors have given the nod to this. But under the new rumoured proposal mulled by political operators here, all mortgaged properties not just primary homes would be exempt until that date.

It remains to be seen how the troika of lenders react to this latest gambit.

However the latest revised bailout agreement is explicit. The MoU states: “The legal framework on foreclosures and the forced sales of mortgaged property must be adopted by the House prior to the granting of the sixth disbursement of financial assistance.

It adds: “This new legal framework…will have immediate effect for all mortgaged properties except primary residences (for which provisions will enter into effect by January 1, 2015, in line with the adoption of the insolvency legislation). The legal framework will establish a swift foreclosure, which will allow for auctions to be conducted by mortgage creditors, without interference from government agencies.”

Government spokesman Nicos Christodoulides said the latest idea on suspending all the bill’s clauses till January “is not yet on the table.”

“It’s expected that the parties may put this in writing tomorrow [Thursday] at the house finance committee. Without anything concrete, and in writing, the government cannot go to the troika with this,” he told the Cyprus Mail.

Also today, the President will have a one-on-one talk with EDEK leader Yiannakis Omirou early in the morning, followed by a meeting with all party leaders at the Palace at noon.

It’s understood that should the President persuade EDEK, or DIKO, to get on board with the bill, the rest of the dissenting parties might then fall in line, in what has become an exercise in who will blink first.


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