Cyprus Mail

MPs defiant on foreclosures law

By Elias Hazou

AFTER A heated debate in the House, opposition parties on Thursday again decided to throw caution to the wind by suspending for another month the enforcement of a law on foreclosures.

A bill freezing repossessions until March 2 was passed by a vote of 27 in favour from all opposition MPs present. Ruling DISY voted against.

The legislative proposal had been tabled jointly by the EDEK and DIKO parties, and supported by AKEL and the Greens.

On the House floor, DISY leader Averof Neofytou urged the other parties to reconsider, warning of the repercussions on the country, but the pleas fell on deaf ears.

The opposition in turn blamed the government for dragging its feet on completing the insolvency framework – a set of five laws governing bankruptcy.

Until and unless the insolvency package is enacted, they vowed to continue blocking the enforcement of the foreclosures law.

The government wasted no time in airing its disappointment with parliament.

“It is a highly negative development, of no value at all,” government spokesman Nicos Christodoulides told the Mail shortly after the plenary vote.

“We want to stress, however, that the government remains committed to its efforts for economic recovery and reform, and we will strive to ensure that people’s sacrifices do not go to waste.”

It is the second time the House froze the foreclosures law; the first suspension, passed a fortnight ago, was set to expire on January 30.

The President now has 15 days to sign off on the new suspension bill or refuse to and send it back to parliament. But as this back-and-forth has already been played out, it would likely be pointless for the President to refuse to sign, as this would happen in mid-February – already halfway through the suspension.

Asked about this, the spokesman said only that referring the bill back to parliament was “an option.”

Going back to September, the foreclosures saga has derailed the country’s economic adjustment programme. The island’s international creditors – International Monetary Fund, European Central Bank, European Commission –have made it clear that incomplete enforcement of foreclosures legislation means Cyprus is not in compliance with its programme, and therefore no full review of the programme can take place until compliance is restored.

The troika says having effective repossessions legislation is key to banks’ recovering bad debt. Non-performing loans in Cyprus currently account for 48 per cent of all bank credit.

As long as this loose end persists, and Cyprus’ economy does not continue receiving positive reviews, the island cannot borrow from the markets.

It’s understood, for instance, that the government had this month intended to come out with five-year treasury bonds; this is no longer an option.

There’s also a creeping concern in the administration that the Cypriot economy, having last year received praise for sticking to its adjustment programme, might now be downgraded by global rating agencies.

Sources close to the government camp said the anti-troika opposition in Cyprus has been emboldened by the anti-austerity rhetoric of Greece’s new leader Alexis Tsipras.

“In parliament today, opposition MPs couldn’t get enough talking about Tsipras. His name must have come up 800 times,” the source remarked.

In blocking the foreclosures law, the opposition claims it’s protecting homeowners and family-run businesses, who would otherwise be at the mercy of predatory banks.

However, in Cyprus family businesses account for about 85 to 90 per cent of all enterprises, and are virtually indistinguishable from small and medium-sized businesses (SMEs).

The definition of an SME is an enterprise employing up to 250 people.

Ironically, also on Thursday the banks themselves made it clear that they cannot move on mortgaged properties in the absence of the relevant legal regulations.

Unless the regulations are first passed by parliament and published in the government gazette, it won’t be possible to apply the law’s provisions, the Association of Cyprus Banks said in a statement hours before the plenary vote.

The regulations that are to accompany the core foreclosures law have yet to be passed by the House because the government has refrained from tabling them.

Earlier in the day, during a meeting of lawmakers, DISY suggested a compromise: a joint bill sponsored by all the parties exempting only primary residences from repossessions until April 2. The idea was rejected and DISY did not bother tabling it.

DISY sources said that, though their proposal would likewise water down the foreclosures law, at least it was far less draconian than “suspending repossessions, hook, line and sinker.”

Through negotiations, the government might then have persuaded the troika of lenders to go along with this as a goodwill gesture.

Although foreclosures legislation was voted last September, primary residences had been excluded until January 1, 2015, to coincide with the scheduled voting of the insolvency framework. The fifth and last bill of the framework is currently being discussed with the troika.

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