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3rd LD Writethru-Roundup: Cyprus puts bail-out program back on track

Xinhua, April 18, 2015 Adjust font size:

NICOSIA, April 18 (Xinhua) –Cyprus's Parliament approved crucial legislation on Saturday hopefully putting back on track its bail-out program after a suspension of almost 7 months.

The legislation setting out the framework for insolvency, which was demanded by international lenders, was passed at an extraordinary weekend session of the 56-seat parliament.

The legislation still needs to be officially endorsed by the Eurogroup and the International Monetary Fund.

Lawmakers passed by a 33 to 23 majority several laws which are intended to compliment the repossessions legislation and provide protection to small loan takers by banning repossession of their primary residence or small business premises by banks.

Lack of the repossessions and insolvency legislation had led the Eurogroup and the IMF in October 2014, to suspend further financial assistance to Cyprus under a 10-billion-euro bailout deal concluded in March 2013.

The Eurogroup canceled a fifth evaluation of Cyprus's progress in applying its adjustment program and the IMF suspended a 86-million-euro tranche of economic assistance.

Center and right-wing lawmakers reached a last-minute deal with a small socialist party to secure the passage of the legislation.

Left-wing AKEL party which opposes to the bail-out austerity program though it had been instrumental in negotiating the bailout memorandum when in government from 2008 to 2013, unsuccessfully tried to scuttle the legislation by invoking procedural rules.

Saturday's 4-hour debate of the bills was a continuation from a session on Friday night, at which the Central Bank warned in a letter to the House of Representatives speaker that failure to approve the legislation would probably lead to another banking crisis.

It said that in the absence of an effective bail-out program the European Central Bank would no further accept the Cypriot government's bonds held by banks as collateral for borrowing.

This would have forced the banks to make use of the Emergency Liquidity Assistance mechanism and possibly be subjected to further stress tests that could lead to the need for further recapitalization.

The combined repossessions and insolvency law are expected to enable banks to proceed with the restructuring of non-performing loans amounting to 27 billion euros, or about 52 percent of their loan portfolios.

The Cypriot government said in a statement by its spokesman that the legislation can prove a milestone for Cyprus to get out of is bailout program and obtain financing its operations from international markets.

Cyprus was shut out of international markets since mid-2011, and was finally forced to seek bailout by its Eurogroup partners in June 2012. Endit