Cyprus bailout on track af­ter fore­clo­sure law gets passed

The China Post - - BUSINESS -

Cyprus’s bailout agenda was back on track Satur­day af­ter par­lia­ment adopted a con­tro­ver­sial and long-de­layed fore­clo­sure and in­sol­vency pack­age as de­manded by the coun­try’s in­ter­na­tional lenders.

A de­lay in pass­ing the in­sol­vency frame­work, seen as a safety net for vul­ner­a­ble groups against prop­erty re­pos­ses­sions, had prompted the op­po­si­tion to sus­pend a fore­clo­sures law passed last year.

But af­ter fi­nal amend­ments were made, rul­ing right- wing Demo­cratic Rally (DISY) se­cured votes from cen­ter- right DIKO and so­cial­ists EDEK to en­sure the mea­sure passed by a vote of 33-23 in the 56-mem­ber house.

In­ter­na­tional lenders are now ex­pected back on the is­land to pro­ceed with the bailout fund­ing process.

The In­ter­na­tional Mon­e­tary Fund re­cently held back 86 mil­lion eu­ros ( US$ 93 mil­lion; NT$2.89 bil­lion) in bailout funds for Cyprus un­til the leg­is­la­tion was adopted.

As a re­sult of the vote, Cyprus will also now be el­i­gi­ble to par­tic­i­pate in the Euro­pean Cen­tral Bank’s 1.1 tril­lion- euro quan­ti­ta­tive eas­ing pro­gram fol­low­ing a pos­i­tive re­view from the lenders.

The with­held money is part of a 10-bil­lion euro pack­age of emer­gency loans that eu­ro­zone mem­ber Cyprus was forced to ne­go­ti­ate to avoid bank­ruptcy in March 2013.

The bill, which cuts the legal process for fore­clos­ing on mort­gages from years to months, has been deeply con­tro­ver­sial ever since it was de­manded by lenders un­der the is­land’s ad­just­ment pro­gram.

Cyprus re­ceived its last dis­burse­ment of cash — 350 mil­lion eu­ros — through the Euro­pean Sta­bil­ity Mech­a­nism in De­cem­ber.

Fear­ing peo­ple could lose their homes, op­po­si­tion MPs de­manded pro­tec­tion mech­a­nisms for pri­mary res­i­dences and third par­ties who guar­an­teed mort­gages, and to en­sure more small busi­nesses would not go un­der.

The lenders said the fore­clo­sures leg­is­la­tion was es­sen­tial if Cyprus is to get to grips with its moun­tain of bad debt.

Cyprus has al­ready car­ried out dras­tic re­forms to its fi­nan­cial sec­tor, wind­ing up its sec­ond largest bank and im­pos­ing a 47.5 per­cent hair­cut on de­posits above 100,000 eu­ros at its big­gest.

It has also im­ple­mented a harsh aus­ter­ity pro­gram that has con­trib­uted to the econ­omy shrink­ing for 14 straight quar­ters.

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