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Our view: Proposed bill would shield strategic debtors

Sometimes we despair about the colossal irresponsibility displayed by the elected representatives of the people in the legislature. In the pursuit of personal popularity, they are prepared to wreck the Cyprus economy and cause chaos. What makes this behaviour even more difficult to comprehend is that the economic meltdown took place only five years ago and its effects are still felt today.

Some deputies, however, have decided to make a difficult situation worse by drafting a bill that provides that mortgages given prior to the September 2014 foreclosures law should be exempt from foreclosure proceedings. In other words, people who took out mortgages before 2014, which is the overwhelming majority of borrowers, would not have to repay their loans to the bank because the bank would be prohibited by law from repossessing the property.

As if the existing ineffectual law on foreclosures was not bad enough our wise deputies now want to turn it into a dead letter, giving full protection to strategic defaulters. The banks have had enough difficulty reducing NPLs under the existing law but if this bill were approved they would have no way to recover bad debts. The Cooperative Central Bank (CCB), which failed abysmally to reduce it NPLs because it could not foreclose primary residences, needed a €2.5 billion bailout by the state to stay afloat, in addition to €1.7 billion pumped into it some four years ago.

Astonishingly, the bill was tabled by independent deputy Anna Theologou, an economist with a Masters degree in monetary and financial economics, who should understand the catastrophic consequences of her proposal. The co-sponsors of the bill, Giorgos Perdikis and Marinos Sizopoulos, are ruthless populists that understand nothing other than pandering to the public. It is indicative of our society’s malaise and disregard for the law that we have lawmakers that want to enable people not to honour their obligations under the law. Perhaps Theologou, Perdikis and Sizopoulos should be informed that mortgages and bank loans are legal documents which the signatories have to honour in a state with rule of law.

During discussion of this absurd bill at the House finance committee, deputies were warned by officials from the finance ministry and the Central Bank that if the foreclosure system was made even more ineffectual than it is, European institutions would insist that Cyprus banks raised their capital provisions. This would mean another credit squeeze and the banks “following in the footsteps of the CCB.”

But if our wise deputies think they know better than local technocrats perhaps they should also consider the continuous warnings by foreign officials from the Commission, the ECB, the IMF and the ratings agencies, all of whom have been telling us that NPLs must be drastically reduced for the economy to return to normality. They know a little more than Theologou, Perdikis and Sizopoulos about how to manage an economy.

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