Our View: Let’s hope parties put interests of economy above right to avoid repaying loans

Presenting the 2022 State Budget to the House of Representatives on Thursday, Finance Minister Constantinos Petrides said the drawing of funds from European sources and programmes was a government priority. Cyprus was actively participating in the EU’s Recovery and Resilience Fund, “the main philosophy of which was the support of reforms and investments in order to mitigate the economic and social consequences of the pandemic, but also to make European economies and societies more sustainable, resilient and better prepared to face future challenges.”

Implementing these reforms of structures and procedures should be “a national target,” said Petrides, stressing the need for “cooperation between government and the House of Representatives to back an ambitious reform effort.” The legislature, he told deputies, had a “significant and active role to play in the implementation of these reforms.” He expressed his commitment to “sincere cooperation” with all the parties so that “in a spirit of consensus we could plan and implement policies that are beneficial to the country.”

The minister’s plea was completely ignored. On the same day, party leaders decided to postpone the plenum debate and vote on three bills until January when the legislature re-convenes. This means that the deadline for approval of two of these bills, which was December 31, as agreed with the Recovery Fund, will be missed. For the release of funds, there are specific targets that have to be met by pre-agreed dates and Cyprus, embarrassingly, failed to meet the first deadline, putting at risk €85 million funding tied to the reforms.

This is not the best advertisement for the country that has already built a reputation for unreliability in Brussels. We have been down this path during the assistance programme, when desperately-needed funds were withheld because the political parties decided they would ignore the deadline set by the Troika for approval of a foreclosures bill because they objected to some of the provisions. In the end parties backed down and the funds were released, but then as now, it highlighted the way the legislature could prevent the executive from honouring agreements it had made.

The funds could still be released if the legislature approves the bills by February, when the government has to submit its report to the Commission, but the approval is not enough. The government’s application for payment has to provide documentation that the approval of the bills will achieve the reform targets. The member-state has two months to prepare its documentation – hence the February deadline – and then the Commission will have three months to examine the application and ensure the measures are effective before releasing the funds.

In other words, even if the two bills in question are approved in January, there is no certainty the Commission would consider them effective. The legal framework for staff selection and evaluations in the civil service, approval of which was postponed because Dipa, supposedly, wanted more time to study it, should see no complications as the rest of the parties appeared to support it. What could cause problems is the action plan and tightening of the legal framework for dealing with non-performing loans, which the parties have been reluctant to back because they believe they have to protect people refusing to repay their bank loans.

Debate of this bill, which would strengthen the hand of companies buying loan portfolios and debt administrators, was put off for the second time on Thursday because Diko wanted additional safety clauses to be included in the bill so that the law was not abused by companies, as they would have access to Artemis credit database and the Lands and Surveys Department. The Greens, Elam and Dipa had already made an amendment aimed at preventing debt-purchasing companies from having access to the databases of Artemis and the Lands and Surveys Department.

The parties remain committed to their belief that people refusing to pay their debts must be protected and they could still pass an ineffective law that does not satisfy the Commission. This despite the repeated warnings of the central bank governor about the need to further reduce NPLs on local banks’ books. It seems the parties will never learn from the mistakes of the past and they seem to be under the illusion that they can fool the Commission by approving a law that will be ineffective and deprive companies of the tools needed for recovering bad debts.

We can only hope that common sense will prevail and that the interests of the economy, which needs the €85 million, will override some parties’ absurd commitment to helping individuals avoid repaying their loans. As if it is not bad enough that Cyprus has failed to meet the deadline for reforms agreed with the Commission, it could also be denied funding because its laws are deemed inadequate for achieving the reform targets. Hopefully it will not come to this.