Cyprus Mail

Reforms less likely following elections, high NPLs, uncertainty certain, experts say (Updated)

By Stelios Orphanides

THE RESULTS of Sunday’s parliamentary elections, which brought eight parties into the 56-seat House could signal the end of the reform process and the start of a new period of uncertainty for the economy, some economists believe.

Pro-government DISY, which lost two seats and will now have only 18, could have more difficulty forging majorities to pass reform bills by relying too much on DIKO, which kept its nine seats, said economist Symeon Matsis.

“The chance that legislation submitted by the government is passed has decreased substantially,” he said adding that public finances could also, in turn, be affected “in an undesirable way”.

While communist AKEL, which traditionally opposes economic reforms, lost three seats in the new house and now has 16 deputies, the remaining 13 seats were shared by five smaller parties, including the xenophobic ELAM, which made it for the first time into the parliament with two seats.

EDEK, the Citizens’ Alliance and the Solidarity Movement which oppose economic reforms and are in favour of a hard-line in unification talks, won three seats each while the Greens won two.

“We are getting into a period of uncertainty,” former banker Yiannis Telonis said in an interview adding that “with privatisations becoming less likely, this means that we cannot repay part of the government debt and the latter will depend on budget surplus generation to be repaid”.

Economist Michalis Florentiades said that while in the previous parliament it was already difficult to pass reform legislation things have become even more difficult following yesterday’s elections.

“Political uncertainty has increased and we should wait and see what investors will say,” he said. “Things were already very dysfunctional before”.

Telonis added that that he did not expect Cyprus’ sovereign credit rating to increase following the elections which “means that borrowing rates will remain high”.

Slower growth in the absence of reforms would not allow a reduction of non-performing loans, which were considered the Cypriot economy’s number one problem, he said.

“This means that the economy will remain under pressure, especially ahead of repayment which begins 2018-2019,” he said.

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