Crucial vote on business loan bill ‘better late than never’ (Updated)

The House finance committee on Monday formally decided to take a bill on state-backed loans to the plenum for a vote later this week – literally on the eleventh hour before parliament dissolves ahead of the legislative elections.

Speaking after another tense parliamentary session, Finance Minister Constantinos Petrides said he hoped the government bill will pass on Thursday.

Better late than never, he added.

But the bill’s fate on the plenum floor will depend on what amendments opposition parties insert in the interim. Should they tinker with it too much, the government may be forced to withdraw it – for the second time.

In a sign of things to come, Diko has already tabled an amendment that would have the auditor-general supervise the granting of the state-guaranteed loans – something the government vehemently opposes.

Explaining the proposed scheme to MPs, Petrides said it aims to preserve jobs and avert company bankruptcies. It will see up to €1 billion in loans disbursed – coming from the EU’s Recovery and Resilience Facility – which is expected to boost liquidity in the market by €1.4 billion.

Banks will grant the loans according to criteria – the loans will be equal to the sum of the employees’ salaries in a given company, or to 25 per cent of turnover during 2019.

The state will guarantee the loans and, in the event of failure to repay, the liability is split between the state and the bank at 70-30.

The interest rate will be based on the European Central Bank base rate – currently zero.

Loans must be approved by the end of the year. Businesses receiving a loan cannot sack any employee for six months. And any businesses or self-employed person participating in prior assistance schemes, will be ineligible.

For his part, Central Bank of Cyprus governor Constantinos Herodotou said the CBC supports the plan all the way. But it would be up to each individual commercial bank to participate or not.

Auditor-general Odysseas Michaelides cited various risks associated with the proposed scheme – such as the absence of a limit on lending, or the lack of a definition of what constitutes ‘damages’.

The Chamber of Commerce and Industry, as well as the small shopkeepers’ association, also back the plan. But the association of small businesses and self-employed individuals (Symea) is opposed, its reps saying they don’t trust the banks; instead they want the state to give out the loans directly.

Speaking to reporters after the session, the finance minister said the discussion at the committee was “not productive…as some chose to go for petty politics, friction and name-calling”.

Clearly taking a dig at Diko, Petrides added: “They are the same ones who did not vote for the state-backed loans scheme the first time, the same ones who vetoed the budgets – from which we have to date given €1.6 billion to support workers and businesses – and the same ones who try to scupper every government attempt at supporting people during the pandemic.”

The state-backed loan scheme has been a bone of contention between the government and opposition parties since last year when it was first introduced.

Petrides eventually had withdrawn it after weeks of discussions, saying opposition party amendments had rendered it unenforceable.