House postpones vote on extending foreclosures freeze

Parliament on Thursday decided to postpone a planned vote on a legislative proposal that, if passed, would have extended by three more months a freeze on property foreclosures.

Voting on the bill was postponed by a week, following a proposal made on the House floor by Diko MP Christiana Erotokritou. The motion to postpone passed with 29 MPs in favour, 19 against and one abstention.

The bill provides for a three-month extension on the moratorium on repossessions until January 31, 2023. The bill’s sponsors argue it will serve as relief to debtors amid the continuing financial fallout from the coronavirus pandemic and now from the conflict in Ukraine.

The moratorium would apply to a debtor’s primary residence valued at €350,000 or less, business premises where the business’ annual turnover does not exceed €750,000, and parcels of land with a value of €100,000 or less.

Both the government and the Central Bank have warned against a new freeze on repossessions, saying it would undermine the island’s foreclosures framework and put at risk the country’s sovereign credit rating.

They also cautioned it would encourage strategic defaulters and lead to an increase in the stock of non-performing loans, forcing banks to raise their capital provisions.

Earlier, the government additionally warned such a move could jeopardise the disbursement of the first tranche of €85 million from the EU’s Recovery and Resilience Facility (RRF).

The European Commission is understood to be closely monitoring developments on the issue.