2015-01-29

By George Telaveris

The Cyprus bailout programme will remain on ice until March 2 after opposition members of parliament (MPs) voted on Thursday to postpone again the implementation of the foreclosure law initially passed in September.

The fifth review of the programme with the troika of international lenders has been on hold since last September when opposition parties introduced amendments to the legislation required by international lenders.

Although the additional measures were eventually not passed, the fifth review could not be concluded as parliament decided on December 17 to postpone the law’s implementation until January 30.

Thursday’s vote pushes the implementation date back again to March 2.

Cyprus received its last €350 million bailout tranche from the European Support Mechanism (ESM) on December 8, days before the first postponement.

A few days later the International Monetary Fund (IMF) declined to approve its portion of the bailout tranche amounting to some €84m.

The troika has made it clear that until the foreclosure legislation is enforced, Cyprus will not receive any more money from the bailout deal and conclusion of the fifth programme review will remain pending.

Another by-product of the delay is that Cyprus will not yet be able to benefit from the €60bn per month bond-buying programme announced by the European Central Bank (ECB) last week.

The ECB will not buy Cyprus government bonds on the secondary market until the country has a positive evaluation from the troika.

The potential benefit to Cyprus of ECB bond-buying has been estimated at around €120m per month.

Finance Minister Harris Georgiades has repeatedly warned about the damage to credibility being wrought by the delays, a sentiment shared by others.

“Cyprus cannot afford to be inconsistent with what it has agreed to do,” Director of Cyprus International Institute of Marketing, Professor Theodoros Panayotou told The Cyprus Weekly.

“It loses not only time and money but, most importantly, international credibility, which we badly need in order to exit the memorandum sooner, attract foreign investment and borrow from capital markets at lower cost,” he added.

Panayotis wondered if the government was pursuing a strategy of “wait until the last minute to submit controversial legislation in order to force the opposition to vote under the threat of international lenders”.

Warning that Cyprus cannot “cheat” international lenders, he added, “If we don’t like what we agreed to do, we had better tell that straight to our lenders, like (new Prime Minister Alexis) Tsipras does in Greece.”

All opposition parties–Akel, Diko, Edek, Evroko, Citizens’ Alliance and the Greens—voted to postpone the law for the same reason as before, namely that the government had failed to introduce the foreclosure and insolvency legislation at the same time.

Ruling DISY has a minority in the 56-member parliament.

In addition to the foreclosure and insolvency legislation, the government will need to persuade parliament by the summer to approve the privatisation of the Cyprus Telecommunication Authority (Cyta), the dominant telecoms operator, and to introduce the new National Health System. Both reforms have been already vigorously opposed by political parties and trade unions.

“We should not think that we can cheat them to believe that we intend to implement what we agreed to do, if we don’t intend to do so, as we did with the latest instalment. This Cyprus slyness does not work outside Cyprus,” said the professor.

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