The prop­erty cir­cus show

E DII TO RII A L

Financial Mirror (Cyprus) - - FRONT PAGE -

There is al­ways a list of ex­cuses for not do­ing some­thing in Cyprus; some may have merit, oth­ers not. The point is that the re­flex is al­ways to keep the sta­tus quo, on which the ‘nice lit­tle earner’ cor­rupt prac­tices de­pend.

Apart from all this, what is far more wor­ry­ing is the way the govern­ment is giv­ing se­ri­ous time and at­ten­tion to the id­i­otic no­tion that no one who can­not/will not set­tle their bank debts should be pro­tected from los­ing their pri­mary res­i­dence.

It has al­ways been the case in con­tract law that debtors run the risk of los­ing their col­lat­er­alised as­sets should they fail to hon­our the re­pay­ments. So, why do a lot of Cypri­ots be­lieve that this fun­da­men­tal prin­ci­ple should not ap­ply to them? It is child­ishly naïve in the ex­treme to be­lieve that you can bor­row large sums, not be re­spon­si­ble for re­pay­ing them and not bear a heavy penalty if you fail to re­pay. And why, pray, should any re­spon­si­ble govern­ment even give ten sec­onds’ thought to such lu­nacy? No won­der the Troika is be­ing un­co­op­er­a­tive on this one. Ergo, will the govern­ment fail to ob­tain its next bail-out tranche?

Why have we not yet seen one of the ma­jor de­vel­oper de­fault­ers be­ing liq­ui­dated by one or more banks? Per­haps we are see­ing the prize turkey be­ing basted ready for the oven, with sev­eral dif­fer­ent strands of al­leged fi­nan­cial wrong­do­ing be­ing touted and now a crim­i­nal in­ves­ti­ga­tion into one of them an­nounced. It does rather look like a cer­tain de­vel­oper is be­ing pre­pared for be­ing the sac­ri­fi­cial lamb, or is it goat?

Un­for­tu­nately we can­not turn the clock back to the hal­cyon days when money in Cyprus grew on trees and no-one was called to ac­count for not pay­ing their debts. Peo­ple have to re­alise that if they bor­row money they have an obli­ga­tion to re­pay the lender – or face the con­se­quences (which may in­clude the seizure and sale of their prop­erty).

As for the pri­vati­sa­tion of auc­tions, Cyprus has agreed to this in the Me­moran­dum of Un­der­stand­ing with the Troika – para­graph 1.28:

“The le­gal frame­work in re­la­tion to fore­clo­sures and the forced sales of mort­gaged prop­erty will be amended in con­sul­ta­tion with the EC and the IMF and in­form­ing the ECB and the ESM, and adopted by end-June, with im­me­di­ate ef­fect for all mort­gaged prop­er­ties ex­cept pri­mary res­i­dences (for which pro­vi­sions will en­ter into ef­fec8t by end-De­cem­ber, in line with the adop­tion of the in­sol­vency leg­is­la­tion), to al­low for pri­vate auc­tions to be con­ducted by mort­gage cred­i­tors, with­out in­ter­fer­ence from govern­ment agen­cies.”

The govern­ment could (try) and in­tro­duce a scheme whereby home-own­ers be­come ten­ants pay­ing rent un­til they re­cover with the rent be­ing de­ducted from their out­stand­ing debt.

But there is a prob­lem if the likes of ma­jor de­vel­op­ers set them­selves up as auc­tion­eers as well. Hope­fully, the lu­natics run­ning the asy­lum will recog­nise this po­ten­tial prob­lem and put leg­is­la­tion in place to pre­vent it.

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