Cyprus Mail
Cyprus

Troika begins substantial review process (updated)

The Troika technical team

By Elias Hazou

Successful completion of the seventh review of Cyprus’ economic adjustment programme will pave the way for the disbursement of €500m, to be used in partly paying off €1bn in government debt maturing in November.

The troika mission heads began talks with authorities here on Monday, following contacts on a technocratic level that took place last week.

Early in the morning, the representatives of the lenders met with Finance Minister Harris Georgiades, Reform Commissioner Constantinos Petrides and Privatisations Commissioner Constantinos Herodotou. They were later joined by Central Bank Governor Chrystalla Georghadji.

Also on Monday, the troika heads met with energy minister Giorgos Lakkotrypis.

The discussions with Cypriot officials are to last until Friday, by which time the troika heads will review the Cypriot memorandum of understanding (MoU), draw their conclusions and update it.

At stake during the current review, reports said, is the release by the creditors of €500m, which will go towards repaying €1bn in debt maturing this November. The debt in question – a Euro Medium Term Note – was issued in 2010.

The matters now being reviewed include a number of hot-button issues, like public sector reform – in particular rationalising the way pay rises are given to government employees – privatisation of state assets, and the autonomy of state hospitals, a key component of the national health system (NHS).

On the latter, no concrete developments are expected at this stage, but rather in the autumn, when the government will submit to parliament the relevant legislation.

On privatisations, the troika will be examining the new plans for the port of Larnaca, the recent deal on the port of Limassol, and how the government plans to proceed with denationalising the Cyprus Telecommunications Authority (CyTA).

It’s understood the government has begun drafting legislation for the creation of a “new” CyTA.

Beyond fiscal consolidation – where Cyprus appears to be performing well in terms of reducing its deficits – the lenders are focusing on the financial system, and in particular the high level of non-performing loans held by banks and estimated at €28bn.

The government has prepared new legislation designed to put the squeeze on land developers – among the biggest debtors – to settle their bank obligations by loosening their grip on title deeds.

The government had planned for the title deeds law to be passed before the summer break, but this has now been pushed back to September.

Another matter is the sale of bank loans to third parties, where progress on the government side has been grinding. The Central Bank has drafted legislation which is currently being vetted by the Attorney-general’s office.

According to the Cyprus News Agency, on Wednesday the lenders are set to meet with the board of Hellenic Bank and on Thursday with the leadership of the Cooperative Central Bank.

Following the lenders’ departure on Friday, authorities will begin the process of drafting the 2016 budget, the last budget under the MoU.

To date, €5.8bn has been disbursed to Cyprus through the European Stability Mechanism (ESM) out of €9bn available under the approved programme. The International Monetary Fund meanwhile is to provide €1bn by the end of the programme, March 2016.

 

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