News Column

Dire outcome if bill fails to pass

August 12, 2014



By George Psyllides

AFTER a second marathon day of discussions at the House on the stalled foreclosures bill with dire warnings given in public and in private to stubborn deputies, DISY chief Averof Neophytou last night hinted at the possibility of finding common ground.

Speaking after a meeting with the ministers of finance and interior, and the Central Bank Governor, Neophytou said they would work hard to meet the island's obligations towards international lenders and at the same time protect primary residencies and small businesses.

There was a way to protect social cohesion and vulnerable groups through the insolvency framework and allay the strong objections of opposition parties which threatened to reject the bill on foreclosures, whose approval is necessary for the release of the next bailout tranche.

The government and the Central Bank issued dire warnings yesterday that rejection of the bill would have serious repercussion on banks and the island's economy.

But Neophytou said he was "cautiously optimistic". "I welcome the political parties' constructive stance," he said on his personal Twitter account.

Neophytou said there were ways to find common ground as he expressed optimism that the goal of averting destabilisation of the adjustment programme should be set above everything else. But at the same time people who need it must be protected, he said.

The DISY chief said everyone was in the same boat and it would take hard work in the next few days to achieve these goals. It followed the second day of discussion of the controversial foreclosures bill, which opposition parties said they would not approve in its current form.

During the discussion, Finance Minister Harris Georgiades and Central Bank Governor Chrystalla Georghadji warned that rejection of the legislation would have negative repercussions for Cyprus.

"We have demonised some issues. Without a healthy banking system we have no economy. The banks may be blamed for a lot of things but that doesn't mean that debtors shouldn't pay their loans," the CBC Governor said.

The Governor said the value of the mortgaged loans in the upcoming stress tests would be zero if the bill was not passed, meaning Cypriot banks would need more capital.

Georghadji told parliamentarians that out of 52.5 billion in loans, 10 billion had homes as collateral and 4.0 billion of those were non-performing.

The finance minister also warned that if Cyprus` sixth bailout tranche was not disbursed in time, "we will face difficulties and consequences beyond our control and planning."

Following Georgiades' statement, Chairman of the Finance Committee and DIKO leader Nicolas Papadopoulos asked the guests and the media to leave the room and the discussion continued behind closed doors.

It is understood that during this time Georgiades gave more details to MPs about the potential repercussions of a rejection.

In his comments after the meeting, Papadopoulos said there must be a protective net for primary residences and small businesses which could not meet their loan obligations.

"We will not win anything if we protect the home of a family if the family loses its business," Papadopoulos said. "It would just be a matter of time before it loses its home."

The government's erstwhile partner said the insolvency framework could act as a safety net for businesses and homes. MPs heard earlier that the law on the financial ombudsman provides that the foreclosure procedure cannot proceed without mediation if a 350,000 loan has a primary residence as collateral.

Papadopoulos said this provision could be included in the foreclosures bill or at least strengthened to prevent repossession as long as the mediation was in progress.

He did insist that the consequences of people losing their homes would be worse than those relating to compliance with the bailout adjustment programme.

"We want to find ways to prevent mass foreclosures," he said.

Papadopoulos said it was now up to the government to decide on how to proceed.

Part of the solution could be a bill to put an end to bank practices such as the unilateral increase of interest rates and forcing borrowers to accept them.

Georghadji told MPs the Central Bank was working on a bill regarding the banks' unfair terms.

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Source: Cyprus Mail


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