Cyprus Mail

Disbursement of next tranche could be delayed (update)

By Angelos Anastasiou
THE next tranche of financial aid to Cyprus could be delayed as its disbursement is not on the agenda of a scheduled Europgroup meeting on Friday, finance minister Harris Georgiades said on Tuesday.
The Eurogroup session was scheduled to decide on the release of a €350 million tranche of financial aid from the EU, while the International Monetary Fund’s contribution – a further €86 million – is to be decided on September 26.
According to Georgiades, the delay has been caused by the contentious provisions of bills voted by the House on Saturday, which overhauled Cyprus’ outdated and ineffectual foreclosures legislation.
Eight bills were found to be compliant with the terms agreed with the Troika during its last progress review of Cyprus’ adjustment programme, but six were deemed subversive to the new foreclosure framework’s objectives.
Amid speculation that President Anastasiades might decide to veto the six bills, triggering a political crisis, the government decided on Monday to refer them to the Attorney General’s office for a constitutionality review.
“The government had warned that the Troika would not accept substantial amendments to the agreed provisions on foreclosures legislation,” Georgiades told state radio on Tuesday. “A possible rejection or amendments that alter the legislation’s philosophy would cause potentially serious problems, upsetting or even interrupting Cyprus’ aid programme.”
The finance minister argued that the rogue bills may translate to Cyprus being found in breach of its contractual obligations.
“The Eurogroup working group will not be convened, and with that there is essentially no way for it to make a positive recommendation to the Eurogroup for the release of the next tranche of aid,” he said. “Cyprus’ progress may be on the agenda for discussion, but the issue of releasing the money will not be discussed.”
Georgiades tried to play down what this development would mean to the public, while warning of its seriousness to the government’s effort toward economic stabilisation and recovery.
“It will mean nothing to people’s day-to-day,” he said. “It will be a very serious development, but not something that should drive our fellow citizens to unnecessary concern.”
Senior Eurozone officials cited by state radio claimed that once the working group receives the final text of the legislation passed by the Cyprus Parliament, it will be able to convene via teleconferencing and make a recommendation to the Eurogroup after studying them.
Late on Monday, a Eurozone official told the Cyprus Mail that the point of no return is Thursday – one day before the Eurogroup session.
“When there is parliamentary approval before Thursday, they can always find a way to get it on the Eurogroup agenda,” the official said.
But regardless of the Eurogroup’s agenda, it is understood that the Troika is sure to oppose some of the laws passed, which limit the effectiveness of the basic foreclosures bill and thus increase banks’ exposure to risk ahead of the European Central Bank’s upcoming stress test. Moreover, withholding the next tranche of aid to Cyprus, while not incurring immediate fiscal issues, is likely to put a serious strain on public finances over the next quarter.
The uncertainty posed by such prospects is not likely to be addressed by a presidential veto. According to Cyprus Bar association chairman Doros Ioannides, although the President may veto any bill, his veto would merely refer the contentious bills back to Parliament, which may then decide to either amend them or insist on their voting into law.
“In such a case, the President may refer the bills to the Supreme Court, but only for issues relating to the constitution or the acquis communautaire,” he said. “Short of such issues, the President would be forced to heed the Parliament’s insistence and sign them into law.”
Against this backdrop, opposition parties continue to push the government to renegotiate terms with the Troika.
“I wish and hope that the government is not looking for ways to subvert the House’s decisions, and that it is not coordinating with the Troika to that end,” communist AKEL’s leader Andros Kyprianou said. “If the government agrees with our view that crisis-stricken vulnerable groups must be protected, there is a way to discuss with our European interlocutors on a political level and promote the House’s decisions.”
Failing that, Kyprianou warned, “the party will not stand idly by, but will find ways to defend the public’s interests.”
DIKO leader Nikolas Papadopoulos attacked the government for fostering a climate of insecurity and hurting confidence in the economy’s prospects, instead of focusing on negotiating the best terms for Cyprus.
“The President must immediately negotiate changes and improvements to Cyprus’ economic adjustment programme,” he said. “Through negotiation, Greece has achieved a discussion on its debt relief, and that is a window of opportunity for Cyprus, as long as the President takes it.”


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