Our View: Extending foreclosures suspensions will harm not aid vulnerable groups

It would have surprised nobody that Akel has submitted a proposal for the suspension of foreclosures until the end of July. There are parliamentary elections in less than three months and the people not repaying their housing loans or loans for professional premises must represent many thousands of votes. Akel also has the excuse of the pandemic and lockdown which has affected many people’s income.

Foreclosures of primary residences and small professional premises have been suspended until the end of March, but with elections looming, it was inevitable the parties would try to extend this. Smaller parties are backing Akel’s proposal on the grounds the government bill that will set up judicial procedures for settling disputes between borrowers and banks, which Edek demanded in order to vote for the 2021 budget, has not been approved yet.

Vulnerable groups had to be protected until the new courts were established, say the parties but is it members of vulnerable groups or strategic defaulters that they are protecting? For the finance ministry, there are 35,000 people classified as vulnerable, its criterion being the means-tested eligibility for the EAC’s discounted electricity rates. These include large families with low income, recipients of the guaranteed minimum income (GMI) and people with serious long-term illnesses such as multiple sclerosis.

Are these the people Akel is protecting? Are people on GMI or low-income, large families likely to have a housing loan for a primary residence valued up to €350,000? There might be some, considering how the co-ops and to a lesser extent the banks, granted housing loans, regardless of the loanee’s ability to repay, but we suspect the big majority of those being ‘protected’ are exploiting the system. And why should a family that cannot repay €250,000 loan be protected, when they could sell their house and buy a property requiring a €100,000 loan? What claim to ownership of a primary residence does someone, who paid five or 10 per cent of its price, have to justify the protection?

Nobody asks any such questions because when populism holds sway, rationality is suspended. The parties have also ignored the devastating effects this populism will have on the economy, about which they have been repeatedly warned by the finance minister and the central bank governor. Suspending foreclosures until the end of July could force banks to make new provisions and require more capital, not to mention the danger of downgrading by the ratings agencies, which would also affect the government’s ability to borrow from the markets.

These warnings have been repeated ad nauseam, but the political parties just ignore them, not realising how much more harm they will cause the vulnerable groups they supposedly want to protect, if there is another banking crisis and economic collapse. This must be made very clear, if the parties are to be stopped from leading us to another crisis.