Milan, 12/09/2014 (Agence Europe) - As expected, the eurozone decided on 12 September to freeze payment of the next instalment of aid to Cyprus, whose finance minister arrived at the Eurogroup meeting that day without the required outcomes. The troika of lenders (the European Commission, the European Central Bank and the International Monetary Fund) says that the new Cypriot law on house repossession has been in effect nullified by the raft of amendments tabled in the Cypriot parliament. One such amendment stipulates that for loans of below €350,000, if a foreclosure takes place and there is still an amount due, then this amount of the loan should be written off.
“We are now waiting for the Cypriot authorities to clarify how they intend to proceed, foreclosure reforms are very essential and key in order to enable banks to start providing lending needed to finance economic recovery,” said Jyrki Katainen, EU economic and monetary affairs Commissioner. The head of Eurogroup, Jeroen Dijsselbloem of the Netherlands, called on behalf of the eurozone “on all domestic stakeholders to assume their responsibility and ensure an adequate foreclosure and insolvency mechanism is in place as soon as possible.”
Once the Cypriot authorities have implemented this prior action, the European Stability Mechanism (ESM) will be prepared to disburse the €350 million, possibly at the beginning of October, explained ESM director general Klaus Regling. When leaving Cyprus at the end of July, the troika made recommendations to the country, whose banks are suffering from high levels of non-performing loans that are protected what is felt to be weak legislation. (EL)