By Stelios Orphanides
A sufficient majority appears to be forming in the parliament that will allow the island to avoid a further deterioration of the current banking crisis.
Diko has indicated its willingness to support a bundle of bills to toughen existing foreclosure legislation, the condition set by Brussels to allow the transfer of the Cyprus Cooperative Bank’s operations to Hellenic Bank.
Still, a prominent economist has cast doubt on whether the new reforms, aimed at helping banks reduce their stock in non-performing loans, will be implementable.
“I believe we will support the bills on Friday,” said Diko deputy Angelos Votsis in an interview to state-radio CyBC on Wednesday.
His party, he added, which initially supported reforms required by Cyprus’s bailout terms back in 2013 before resorting to all-out populism in early 2014, was ready to do its “duty” by contributing to financial stability.
The government secured Diko’s support for the bills which include the extension of guarantees to Hellenic Bank against a possible underperformance of acquired assets, tougher laws offering borrowers incentives to pay their loans and punishing those who fail to do so, by accepting amendments to them proposed by the second largest opposition party. It also agreed to changes proposed by Diko on Estia, a scheme designed to help struggling households with mortgaged primary residences.
In a telephone interview, economist Marios Clerides said that his concerns about the chances of success for the new reform push were related to the government’s political will to facilitate the reform of the judicial system, known for dragging its feet.
“Reforming the judicial system requires the allocation of resources and emphasis,” he said. Cypriot politicians are more likely to make resources available for the construction of a road which would benefit a local community than allowing courts to work faster which would have a positive impact on the entire society.
Clerides, who resigned three years ago as chief executive officer at the Co-op over policy disagreements, said that the success of the non-performing loans management body would depend on ensuring that those managing it are not influenced by political parties. The management body will initially manage €7bn in Co-op assets transferred to the state after the completion of the deal with Hellenic.
Government spokesman Prodromos Prodromou said on Tuesday that the cabinet tasked Finance Minister Harris Georgiades to assign the drafting of the body’s operational framework to an independent agency, likely the International Monetary Fund (IMF), to ensure high standards of corporate governance. The body is expected to be staffed with several hundred of the staff currently working for the Co-op, which has traditionally been under the influence of politicians since the early days of the Republic.
Lastly, he said that he considered it important for society to rethink its culture, one in which borrowers who do not pay their loans are presented as victims of the banks.
“The Movement against Foreclosures was demonstrating the other day while depositors were lifting all cash they held in their accounts at the Co-op,” he said.