Finance Minister wants foreclosure freeze defrosted

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Finance Minister Constantinos Petrides has lashed out at the House’s decision to extend a freeze on foreclosures until the end of January, warning of dire economic consequences.

In his latest attempt to end the freeze, after calling on President Nicos Anastasiades to refer the House’s decision, Petrides wants Attorney General George Savvides to intervene.

According to local media sources, in a letter to the Attorney General, the finance minister has expressed his concern that the frequent renewal of the freeze will lead to the measure becoming permanent rather than a temporary fix during a time of hardship.

The latest decision is the fifth in a series of extensions.

The initial freeze on foreclosures dates back to August 2021, which was imposed as borrowers came under pressure from COVID-19 lockdowns.

Last week parliament approved extending the foreclosure freeze until the end of January 2023, evoking the tough financial climate created by the coronavirus pandemic and the Ukraine war.

The freeze means that first homes worth up to €350,000, commercial premises with a maximum value of €750,000 and plots of land worth €100,000 will not be seized.

Petrides argues that the emergency measure has ceased to be temporary, sending out the message to borrowers and banks that the freeze is here to stay.

He noted that the freeze was introduced across the board without considering income criteria, rewarding strategic defaulters at the expense of responsible borrowers.

In particular, Petrides argues that the suspension of the law damages Cyprus’ credibility in the eyes of investors, rating agencies and the EU in a difficult period for the economy.

He believes the positive course for further upgrading the creditworthiness of the Cypriot economy will be called into question, pushing interest rates on government bonds higher and increasing the state budget and the cost on taxpayers.

The government will also be forced to reduce its spending on infrastructure projects to offset increased interest costs.

“The non-implementation of an effective foreclosure framework will lead the banking system to a stricter lending policy for households and businesses.”

Meanwhile, state-owned asset management company Kedipes chair Lambros Papadopoulos said that frequent interventions in the foreclosure framework would negatively affect its ability to generate cash inflows.

“Due to these frequent interventions, cash inflows will be reduced, and the ability to fully repay the state aid will be negatively affected.”