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Our View: Government needs to start work on damage limitation plan now

The Supreme Court should come to a decision on the foreclosures bill soon

IN A COUPLE of weeks the Supreme Court should have its ruling ready on the constitutionality of the four foreclosures-related laws that were referred to it by the president. If just one of them is deemed constitutional the country will slip into a new period of instability and uncertainty as the next tranche of financial assistance would not be released and the state would be faced with another crisis.

Eurogroup President Jeroen Dijsselbloem did not mince his words at the news conference he gave after Monday’s meeting of the group. He said an effective framework for debt restructuring “remains an important pending issue that prevents the conclusion of the review.” Cyprus passed the four previous reviews comfortably but the fifth, which would lead to the release of close to €500 million, now depends on the Supreme Court decision.

Finance minister Haris Georgiades said at the weekend that the state could carry on meeting its financial obligations without the assistance for a few more months but he avoided saying what would happen afterwards. This is no consolation because before the state runs out of money there would be a new crisis of confidence with people withdrawing their money from the banks and consumer spending being restricted to the minimum in anticipation of a another economic collapse.

Everyone is hoping it would not come to this and the Supreme Court would declare all four laws unconstitutional, thus offering the political parties, which created the problem with their misguided populist thinking, a face-saving solution. But nobody could safely predict what the judges will decide at the end of this month, which means the worst-case scenario cannot be ruled out. This potentially disastrous development does not appear to have been given any thought, politicians presumably hoping the court will make it go away.

The government will need to consider all its options and be prepared. Perhaps the finance minister should consider engaging in some form of consultations with the parties to explore a face-saving solution. It is absurd to even suggest that a compromise needs to be found to spare the economy the prospect of a certain collapse, but when you have parties that never consider the consequences of their reckless public posturing there is no other choice.

Doing nothing until the announcement of the Supreme Court ruling would be a mistake as it might be difficult to control negative developments then. This is why the government needs to engage in some form of exchange with party leaders if only to establish what their intentions so that it could work out its damage limitation plan.

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