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Cyprus

Georgiades warns MPs on impeding foreclosures law

By Elias Hazou

Finance Minister Harris Georgiades warned MPs on Tuesday that any move impacting the repossessions law would terminate the disbursement of financial assistance from international lenders that is due by December 15.

Speaking during a joint meeting of the House finance and interior committees, Georgiades said disrupting the disbursement process now meant Cyprus would have to wait until spring next year for the next opportunity.

He urged lawmakers not to make any “moves that will only create a problem for us without any practical gains.”

Georgiades said the government had the funds to pay December’s salaries but further delays in receiving the tranche would deplete the buffer built up in recent months.

“It is not as if the state will collapse from one day to the next, but this reserve will be restricted once those December payments have been made,” the minister said.

“I leave it to MPs to judge what that will do to the government’s negotiating position vis a vis the troika,” he added.

The Eurogroup has agreed to release the next tranche of aid (€350m) but only after the Supreme Court threw out four bills passed by opposition parties limiting the scope of the foreclosures law.

Opposition parties subsequently tabled fresh proposals to suspend enforcement of the foreclosures law, ostensibly to protect those hit by the recession.

AKEL’s bill aims to suspend implementation of the foreclosures law until end of June 2015; the other legislative proposal, tabled by EDEK and co-sponsored by DIKO and the Greens, would suspend the law until the beginning of the year – even though the foreclosures law itself does not come into effect until January 1.

It’s understood the opposition parties are using the bills as leverage to nudge the government into bringing the so-called insolvency framework to parliament as fast as possible.

The insolvency framework will likely be submitted as an omnibus bill comprising six items. Under the terms of the bailout agreement with international lenders, it must be enacted into law by the end of 2014.

The bankruptcy-related package- currently being drafted – is intended as a ‘safety net’ for owners of primary residences and small businesses.

The opposition insists that the foreclosures law cannot enter into force until and unless the insolvency framework is also in place.

Finance committee chairman and DIKO leader Nicholas Papadopoulos, summed up his party’s thinking this way:

“If the banks know that the [foreclosures] law is in effect but at the same time borrowers think that the insolvency framework is not in force, then that boosts the banks’ bargaining position.

“Borrowers will thus be at the mercy of the banks’ threats and blackmail when negotiating the restructuring of loans.”

According to Papadopoulos, the finance minister pledged to MPs that the government will bring the bankruptcy package to parliament by the middle of next month.

In mid-December, the House will be busy voting on the government’s budget for 2015 – leaving precious little time until the end of the year to discuss in committee the insolvency legislation and then forward it to the plenum for a vote.

Speaking to reporters, Papadopoulos said that should the insolvency framework not be ready by the end of the year, “we may need to come up with another postponement of the foreclosures law.”

Earlier this month eurozone finance ministers endorsed in principle the disbursement of the next aid tranche, finding that Nicosia has amended laws on foreclosures and forced sales of mortgaged property in line with a deal with its international creditors.

But the Eurogroup also added that the payout would be recommended “so long as this situation remained unchanged.”

The snag over the foreclosures law – eventually settled by the Supreme Court here – temporarily spun off track Cyprus’ adjustment programme, although the next review by the troika is now expected in January.

 

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