Brussels, 28/07/2015 (Agence Europe) - The three 'institutions' (European Commission, ECB and IMF) representing the inter-institutional creditors of Cyprus have reported a positive outcome to their monitoring mission, but stress the urgent need to deal with the issue of non-performing loans in the banking sector.
In a joint declaration, the institutional trio lays down its conclusions from the monitoring mission carried out on the island between 14 and 24 July, on which an agreement with the Cypriot authorities is in place at technical level. If adopted by the Eurogroup and the IMF in September or October, this agreement will officially mark the end of the monitoring mission.
In the joint press release, the 'institutions' state that it will be necessary to speed up the pace of the reforms, but make a point of highlighting the positive results (economic upturn, drop in unemployment) and efforts made (stabilisation of the banking sector, budgetary targets achieved, implementation of the structural reform programme).
The priority treatment of the issue of non-performing loans in the banking sector is a virtually systematic recommendation. Following the adoption by the Cypriot parliament of a regulatory framework for insolvency and property foreclosures, other stages are required, according to the representatives of the island's creditors. The 'institutions' are calling for a swift adoption of the legislation to accelerate the transfer of ownership titles and facilitate loan buybacks. “The Cypriot authorities must also make the efforts necessary effectively to implement the insolvency and foreclosures frameworks”, they stress.
The institutional trio urges the Cypriot government to maintain healthy public finances in order to allow public debt to return to an acceptable level and to channel public expenditure into growth-promoting activities. In its last monitoring report, published one week ago, the Commission predicted that Cypriot debt will start to fall in 2015, from 106% to 98.8% of GDP in 2016 (see EUROPE 11363). The structural reforms, in particular privatisations and the reform of public administration, are also vital, according to Nicosia's creditors. In its report, the Commission expressed concern at the apparent dwindling of political support for the privatisation process. (Elodie Lamer)