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Roundup: Cyprus' creditors say review agreement not possible

Xinhua, February 7, 2015 Adjust font size:

Cyprus' international lenders said on Friday an agreement on the review of the bailed-out euro zone country's economic reform program was not possible due to the lack of framework legislation regulating repossessions.

A positive review is a prerequisite for Cyprus to receive further financial assistance by its creditors.

The European Commission, the European Central Bank and the International Monetary Fund, collectively known as the troika, said in a joint statement that their technocrats will be back in Cyprus when "there will be conditions for a positive conclusion."

They said their technocrats just concluded an informal review of Cyprus' adjustment program but they did not specify when they will be back to finalize it.

"The application of the foreclosure framework and the adoption of a modern insolvency legislation are key program commitments," the troika's statement said.

Cyprus entered a 10-billion-euro (11.3 billion U.S. dollars) assistance program in March 2013, after it had been shut out of international markets since mid-2011. Its adjustment program involved the downsizing of its banking system and a world-first recapitalization of its primary bank by seizing depositors' assets.

The troika said in its statement that adopting a repossessions program "will help reduce the high level of non-performing loans, which is essential to restoring growth and job creation in Cyprus."

The troika had suspended further official evaluation of the Cyprus economy and financial assistance after opposition parties commanding a majority in parliament approved legislation suspending foreclosures on bad loans.

Government and opposition experts are looking for ways to protect the primary residence of debtors against foreclosures.

Finance Minister Harris Georgiades said reaching an agreement on foreclosures is essential for Cyprus so as to utilize the opportunities offered by the European Central Bank's quantitative easing program - the purchase of sovereign debt as a means of pumping fresh money into the economies of individual member countries.

"Cypriot bonds can be included in the ECB's program only if the country acquires positive reviews as bonds are currently below investment grade," Georgiades said.

Sources said the troika technocrats submitted "an interesting proposal" on a crucial bill regulating insolvency as a means of bridging the gap between the government and opposition parties.

The legislation must be passed by the Cypriot parliament and be also endorsed by the troika.

The opposition, which commands a majority in parliament, twice suspended legislation regulating the repossession of properties in a move to pressure the government to provide guarantees that small debtors will not lose their primary residence. Endit