The IMF has urged the authorities in Cyprus to put in place a package on foreclosures that ensures that the process is effective and provides adequate and balanced incentives to work out the troubled loans, IMF Deputy Spokesman William Murray has said, adding that the current package is not compatible with the set goals.
Murray said that on Thursday “an IMF team with representatives of the EU Commission and the ECB visited Nicosia to discuss the fifth review of the programme, back in July.”
“I don’t have an exact board date, we will communicate it to you when we do,” he added, as regards the next meeting of the Fund’s executive to review progress in Cyprus.
The controversial foreclosures bill, a requirement for Cyprus to secure its next trance of €436 mln from the Troika of international lenders, is being vehemently fought by all opposition parties, saying that low-income households, many of whom are now unemployed, would lose the roof over their heads.
On the other hand, passing the bill, in conjunction with a parallel law on insolvencies, would also allow banks to recover some of their non-performing loans that have reached a national average of over 45% of all loan portfolios.
On Wednesday, the European Commission issued a similar warning saying that the foreclosures-related legislation approved by the Cyprus parliament last Saturday was incompatible with the bailout terms.
President Nicos Anastasiades has tried to find a Solomonian solution to the controversy, passing the buck to the national courts to decide if any amendments providing safeguards in the foreclosures bill would be constitutional or if he would have to recall the bills from parliament so as not to upset the Troika.
The IMF’s Murray noted on Thursday that “we have urged the authorities to put in place a package on foreclosures that ensures that the process is effective and provides adequate and balanced incentives to work out the troubled loans.”
“This is essential to deal with high and rising non performing loans and to restart the flow of credit and sustainable growth. The current package is not compatible with these goals and we are looking forward to hearing from the authorities on how they plan to proceed,” he said.
Asked if the next tranche of the loan would be approved, Murray said “we are looking forward to that,” adding however that “we don’t have an exact date for completing the review at the board.”
Cyprus’ international lenders have set the approval of a bill of as a condition for the disbursement of the country’s €10 bln bailout, that was scheduled to be approved by the Euro area Finance Ministers in their next meeting on September 12.
The parliament voted last Saturday the foreclosures bill passing at the same time a series of laws that have been deemed as incompatible with the MOU requirements. This move has been considered a breach of the conditions agreed with the Troika and as a result the disbursement (€350 mln form the ESM and €86 mln from the IMF) of the next tranche will not be discussed.
