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Next tranche on hold until Eurogroup satisfied

Eurogroup chairman Jeroen Dijsselbloem said the urgency of progress was political rather than financial

By George Psyllides

Cyprus will receive the next tranche of financial assistance once its foreclosure and insolvency laws were in line with the terms of the island’s bailout, European officials said on Friday.

Eurogroup Chairman Jeroen Dijsselbloem and EU Commissioner responsible for Economic and Monetary Affairs and the Euro Jyrki Katainen reiterated that legislation passed by opposition parties on Saturday were incompatible with the memorandum of understanding agreed with international lenders.

“We call on all domestic stakeholders to (take) their responsibility and ensure that adequate foreclosure and insolvency legislation is in place as soon as possible, in line with the Memorandum of Understanding,” Dijsselbloem told a news conference after the meeting of finance ministers in Milan.

“Once the troika institutions confirm required prior action has been successfully completed, we can proceed with disbursement of the next tranche,” he said.

Among points of contention were amendments inserted by lawmakers linking adoption of the foreclosures law with an insolvency framework, which is not expected to come into effect before the end of the year.

President Nicos Anastasiades has referred four laws to the Supreme Court, which must decide whether they are in line with the island’s constitution.

He also sent back to parliament two other bills found to be incompatible.

Commissioner Katainen said that Cyprus “is doing a good job in a sense that it is meeting fiscal targets with a comfortable margin”.
He added that structural reforms are advancing and there is progress as regards further recapitalisation of banks.
The Commissioner said that some parts of the foreclosures legislation adopted by parliament were not compatible with the programme’s requirements, adding that they were waiting for the Cypriot authorities to inform them on how they will proceed.
He stressed that the foreclosure reform is very essential since it will enable banks to start providing credit, which can lead to the recovery of the economy.
Managing Director of the European Stability Mechanism, Klaus Reggling, expressed the view that the cash could be allocated in October but pointed out that this depended on prior actions being in place as regards the foreclosures issue.

Finance Minister Harris Georgiades said he had asked the Eurogroup to keep the matter open to give time for final decisions to be taken calmly and rationally.

“I think we now have some room to revisit the matter with seriousness and finalise our decisions collectively,” Georgiades said.

The minister vowed that the effort to reform and consolidate the economy will continue.

“We have come a long way, we have the first tangible results and we must not undermine the prospects that are beginning to form,” he said.

 

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