News Column

Troika to focus on NHS and bad loans

May 5, 2014

By Angelos Anastasiou

MEMBERS OF the troika Cyprus delegation arrived on Monday ready to start the fourth review of the country's adjustment programme on Tuesday morning.

As per the protocol followed in previous visits, during the review's first week the delegates from the European Commission, the European Central Bank and the International Monetary Fund are expected to examine all issues on a technocratic level, while political meetings will be held during the second week, with the discussions poised to conclude on May 16.

Consultations to be held with three parties the Finance Ministry, the Central Bank of Cyprus and the Directorate for European Programmes will look at public finances and macroeconomic developments, issues relating to the financial sector and structural reform.

Health issues are also ranked highly by the Troika, focusing on the roadmap to implementation of the National Health Scheme (NHS), as announced by Health Minister Philippos Patsalis.

Last Friday, the Health Ministry submitted a roadmap for the self-sustainability of public healthcare facilities and implementation of the NHS.

Patsalis deemed the upcoming review "very important" as the troika is eager to ascertain the progress made in the implementation of the NHS and relevant reform.

"Unfortunately, we have fallen behind schedule and we must be honest," he said, but denied any intention of asking for a postponement in implementation.

Patsalis explained that the roadmap recorded "detailed steps that need to be taken, legislation, decrees, regulations and other action relating to the NHS and the reform of public healthcare facilities and the Health Ministry, so that the timeframes for gradual implementation of the NHS in 2015, and its completion in 2016, can be kept."

In the financial sector, where the issue of non-performing loans remains at the forefront, the delegation will evaluate the findings of an audit on the operational readiness of loan settlement units in commercial banks, completed by an external consultancy in mid-March. A similar audit for Cyprus' Co-operative Credit Institutions must be completed by the end of May.

The troika will monitor the progress of the new reform framework governing cases of insolvency for both individuals and companies. The framework must be approved by the Council of Ministers by the end of May and will form the basis for relevant legislation, which will be submitted to the House by December.

The insolvency legislation, in combination with the foreclosure framework, will complete the mediation mechanism along with the 'rent-for-mortgage' scheme, which will create the conditions for more effective loan restructuring with a view to eventual repayment.

Meanwhile, a revised European Commission Spring Forecast for Cyprus yesterday touted tourism and financial services as the main reasons behind the milder-than-expected drop in financial activity and exports.

The original forecast was finalised in early February, after the third quarterly review of the economic adjustment programme by the troika, and will be revisited during the coming fourth review. The new text reflects recent developments, the Commission said.

The report said: "The resilience of the tourism and financial services sector helped blunt the slowdown of economic activity and exports," the report said. Imports decreased more than exports, leading to a net trade gain in growth, the Commission said, noting the further increase in unemployment.

Predictions for 2014 indicate a continued recession, but further blunting of economic activity slowdown. Limited credit, as well as salary cuts leading to a decrease in disposable income, will challenge private demand, while the necessary fiscal reform measures will continue to impact public consumption negatively. The economic contraction is expected to produce a 19 per cent unemployment rate in 2014, the Commission said.

But the report places Cyprus' return to growth in 2015, as private demand is bolstered.

Internal potential risks include an extended period of limited credit and a slower reduction of household debt, which could hinder economic recovery. Externally, Cyprus' trade ties with Russia could damage the island's exporting activity, in the case of escalating tension between Russia and Ukraine.

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Source: Cyprus Mail

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