NICOSIA: International lenders will withhold the next payment in Cyprus’s ¤10bn bailout unless parliament this week passes a crucial law speeding up foreclosures of non-performing bank loans (NPLs).
Around 45 percent of loans by Cyprus banks are classed as non-performing because borrowers are seriously late with their payments, and under current laws it can take banks 20 years to regain the loan through the courts.
Cyprus’s level of NPLs is the highest in Europe at almost 140 percent of GDP, the International Monetary Fund has said.
The troika of lenders — the IMF, European Commission and European Central Bank — says that unless the new law is passed the NPLs must be classed as non-recoverable and Cyprus banks will fail EU stress tests due in the autumn.
Parliament has several times delayed a vote on the foreclosures bill amid opposition fears it could lead to owner-occupiers being evicted from their homes.
The centre-right government of President Nicos Anastasiades says the bill is targeted at major business borrowers who owe the bulk of the money.
“All countries in the world must have effective legislation,” Christis Hassapis, chairman of largest lender Bank of Cyprus, said last week, the Cyprus Mail daily reported.
“There are many borrowers who strategically do not pay. The legislation will force them to come and pay.” The next ¤436m tranche of bailout money is due in late September, and the troika has said the foreclosures bill must be passed at a session of parliament scheduled for Friday, September 5.
The fate of the draft law remains very uncertain.
MPs from Anastasiades’ ruling DISY party are expected to vote in favour of the bill but it needs the support of allies DIKO, headed by Nicolas Papadopoulos, whose father Tassos was Cyprus president from 2003 to 2008.
Other parties are expected to oppose the bill and Papadopoulos has proposed many amendments.
“We have demonised some issues. Without a healthy banking system we have no economy,” Central Bank governor Chrystalla Georghadji was cited as telling lawmakers.
“The banks may be blamed for a lot of things, but that doesn’t mean that debtors shouldn’t pay their loans.”
Latest figures show Cyprus’s recession-hit economy contracted an estimated 0.3 percent in the second quarter, the 12th successive quarterly decline, with unemployment hovering around 17 percent.
Prices of apartments were down 7.8 percent and houses down 3.9 percent in the second quarter from a year earlier, according to the RICS property index, while in London, to where Cypriots are alleged to have transferred billions of euros, house prices have soared 25 percent in the past year.
AFP
