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Cyprus making relatively good progress

Although Cyprus is making relatively good progress following the bailout, Troika officials have warned that the repossessions bill has to be approved by January 2015 before new aid is disbursed.

INTERNATIONAL lenders concluded a fifth review of Cyprus’s economy on Friday, saying the island was making “relatively good progress” after a bailout last year but that key challenges lay ahead.

Representatives of the lenders, the troika – comprising the European Commission, the International Monetary Fund and the European Central Bank – said the island’s fiscal performance was on track and that the banking sector had started to stabilise.

But it said non-performing loans exceeding 50 per cent of banks’ domestic bank loan books needed to be addressed.

Lenders and representatives of the Cyprus government agreed on key provisions of a more effective foreclosures law to replace the time-consuming current process, under which it could take a bank up to 20 years to reclaim what it has lent.

“The key challenge is getting a handle on the non-performing loan issue,” a senior EU Commission source said.

“Right now, NPLs are exceeding 50 per cent of domestic banking loan books. It’s crystal clear this is an issue which needs to be addressed.”

The law will require ratification by parliament and will exclude primary residences from foreclosure until a new and more effective insolvency law takes effect from January 1.

Commission officials said that was a “prior action”, which means it must be approved by parliament before new aid is disbursed.

Readers' comments

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  • MartynG says:

    Och, I can see this one will ‘run and run’, to the detriment of the Cyprus economy and it’s still falling property markets. Too many cherished protections for borrowers, lousy recovery systems that will keep lawyers busy, and wealthy! For decades – a severely dented image for Cyprus property generally. The banks, still saddled with massive NPLs, will have little to lend, property values will, at best, bottom-out, eventually!, and businesses and property buyers will find loans, mortgages etc. almost impossible to get. So the Cyprus economy will continue to flounder, until, possibly, MedGas comes to the rescue – maybe 2022 onwards. This whole scenario needs a government prepared to ‘bite and swallow’ some cherished corruptions and evasions NOW if they are to get the country back on an ‘even-keel’. Track record suggests we’ll hear plenty of threats, promises, ‘programmes’ that amount to next-to-nothing and, guess what – Nothing is what is likely to ensue.

  • @KC on 2014/07/27 at 1:07 pm – According to Wikipedia – “A person’s primary residence, or main residence is the dwelling where they usually live, typically a house or an apartment. A person can only have one primary residence at any given time, though they may share the residence with other people. A primary residence is considered to be a legal residence for the purpose of income tax and/or acquiring a mortgage.”

    But I guess this question will be something that the government will be struggling with – particularly as many Cypriots have more than one property often shared with members of their family – and it would be quite easy for them to claim that their primary residence was another property. It will be interesting to see how the Cyprus government defines a ‘primary residence’ to avoid any ambiguity.

  • KC says:

    What is the definition of “primary residence”?

  • Stuart says:

    Good to see the patient is now stabilised although still comatosed. January 2015 is drawing ever nearer by which date the Repossessions Bill has to be approved.
    Which surgeon will be operating on the acute failure of non-performing loans?

  • @Mike on 2014/07/27 at 9:53 am – It will be interesting to see the wording of the law when it’s eventually published.

    I believe that one way to avoid any property being repossessed is to rent is to rent it to a friend/family member who then rents it back to you. No money needs to change hands. You will then be considered to be a sitting tenant and it will take years to repossess the property.

  • Mike says:

    Mmmm! Do I suspect a little shooting in the foot here. Primary residences excluded? Perhaps I should buy an expensive house as a primary residence, not pay anything back and get up to 20 years free living. At my age I will be long dead by then so where’s the problem?

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