Cyprus Mail
Cyprus

Lakatamia municipality poised to default this month

Interior Minister Socrates Hasikos has agreed for the state grant to be disbursed ahead of schedule

By Elias Hazou

THE MUNICIPALITY of Lakatamia is virtually bust and could be unable to pay employees their June salaries, local reports said.

According to Politis, the municipality’s projected obligations for June come to €900,000, with a revenue stream of just €80,000.

A copy of an internal memo, obtained by the daily, starkly notes that “Lakatamia municipality may have to default in the month of June.”

The mayor has asked Interior Minister Socrates Hasikos for the state grant to be disbursed ahead of schedule. The grant is normally disbursed in July, but the municipality needs it this month.

The minister has agreed to the early cash injection, the paper reports.

But even the grant – €680,000 – would be insufficient to stem the tide of insolvency.

In May, the municipality was unable to cover some €320,000 of its obligations, consisting of contributions to the provident, pension and health care funds, as well as dues to the Nicosia Sewerage Board (€125,000).

These must now be carried forward to June. In addition, the June payroll amounts to €300,000, and the municipality is also due to pay a huge electrical bill.

Altogether, the June payouts come to around €900,000, which the organization cannot afford.

But the cash-flow problem, though the most pressing, is only part of the story, as the municipality is in the red with the banks.

The municipality has reached the limit of its bank overdraft. On May 28, its overdraft came to €2,495,936; the limit is €2.5 million.

The municipality’s financial management committee is expected to convene a crisis meeting this week.

Meanwhile, Phileleftheros reports that the government has completed a bill on reform of local administration.

The bill is currently being vetted by the attorney-general’s office, after which it will sent to parliament.

The government hopes for the legislation to be enacted by the end of the month, before parliament’s summer recess.

Overhaul of local government is a condition stemming from the bailout agreement with international creditors. Cyprus is already behind schedule, but the lenders agreed to grant an extension of a few months.

This is the second draft bill prepared by the government. The first was scrapped after it was roundly rejected by all stakeholders back in October, forcing the interior ministry back to the drawing board.

The overriding aim is to cut municipal costs. A key component of the proposal relates to the consolidation of local administration organization, through the creation of ‘clusters’ consisting of two or more adjacent municipalities or communities.

According to Phileleftheros, a prior proposal for the creation of second-tier bodies of local government, taking powers away from municipalities and giving them to the new bodies – one for every district – has now been discarded.

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