INTERNATIONAL lenders will release the next tranche of financial assistance only once Cyprus puts in place an effective foreclosures framework in line with the terms of its bailout agreement, a senior EU official said on Monday.
“Putting these legal provisions in place … is of course essential to make progress with the high level of non-performing loans (NPLs) in Cyprus, including large corporate loans, and to return Cyprus to financial health,” Eurogroup President Jeroen Dijsselbloem told a news conference.
The European official was referring to four bills passed by opposition parties that limit the scope of a foreclosures bill aimed at tackling rising NPLs – a prerequisite for the disbursement of the next tranche of financial assistance worth close to €500 million.
President Nicos Anastasiades has referred the bills to the Supreme Court, which will rule on their legitimacy later this month.
Rejection of the bills by the Supreme Court would open the way for the assistance and get the island’s bailout obligations back on track.
Cyprus has passed four previous reviews with flying colours but the matter is set to delay completion of the fifth.
Dijsselbloem said an effective framework for private debt restructuring “remains an important pending issue that prevents the conclusion of the review”.
The remainder of the process will be handled by the Eurogroup working group.
State broadcaster CyBC quoted Finance Minister Harris Georgiades as saying that the economy could go on for a few more months without the tranche.
Speaking in Washington DC where he attended the International Monetary Fund summit over the weekend, Georgiades said his interlocutors fully understood that it was inevitable to have some delay and political difficulty in implementing such a demanding reform programme.
“Without this meaning that financing could go on without resolving the problem,” Georgiades said.
“But I emphasised that it did not affect the implementation of the programme in general, or the gradual improvement of the economy,” he added.
The minister reiterated that Cyprus could stop relying on troika financing earlier than expected.
“I consider the objective fully feasible,” he said. “From the moment that Cyprus has succeeded in returning to the international markets and all basic indicators, like public debt, and public deficit, exceed the targets, and credibility is restored.”
However, Georgiades emphasised that the effort for reform and consolidation would not stop prematurely.
“On the contrary, the fact that we have the first concrete results, with the recession ending gradually and unemployment falling for the first time in years, it should give us the confidence to continue,” he said.
So, from Nigel’s figures below, without wishing to be rude and in the simplest of terms:
If it takes a payment of €1.01bn in a month to reduce the NPLs by €0.05bn (1/558th of the total NPLs), how many monthly payments will it take and how much will it cost to reduce the €27.9bn NPLs to €0?
Answer (without being too complicated): €1.01bn x 558 = €563.58bn over approx 46.5 years.
Even though the above calculations are pretty basic, they aren’t that far off the mark.
So, are the Troika and the Cyprus establishment not just having a laugh, (stating that the CypEconomy was “on track” and that there’s a solvable problem that a few bits of legislation can make disappear)?
I would say “Tee hee”, but it’s not even funny any more.
What will the fire sale value of unfinished apartments be, I wonder. What will be the final price achieved at auction be, for homes seized from innocent buyers.
Only a small fraction of 27.5 billion and thousands of people depending on the state, is my guess.
Will those responsible for this disaster fall on their swords. Sadly not, for THIS IS CYPRUS.
@Denton.
Thanks for the correction. Of course it should be ‘billion’ and I apologise for this slip of the keyboard! The figure last July was €28.88 billion so by simple extrapolation we could be around the €30 billion mark by now. Hardly surprising the Troika is not going to budge!
@Stuart & Denton Mackrell – Non-Performing Loans (NPLs) stood at 47.66% of total loans at the end of August, up from 46.94% the previous month, according to Central Bank of Cyprus.
But despite the increase in percentage terms, NPLs fell to €27.9 billion from €27.95 billion in the previous month. This resulted from loan repayments amounting to €1.01 billion in August, reducing the total value of loans to €58.54 billion.
@Stuart. I think you mean Euro30bn not million!! Last figure I saw was Euro26bn but hey, with accelerating interest and floating charges, 30bn may not be far from the mark.
Quote: “Cyprus has passed four previous reviews with flying colours” must be the overstatement of the century. From what has been reported in these columns, Cyprus authorities have ducked, dived, protested, moaned, groaned, pleaded and begged the Troika to give them more time or latitude by amending the MoU at least five times already in order to accommodate their inept performance.
With NPLs now approaching €30 million, the Troika has simply lost patience with the perpetual prevarication by these politicos and is rightly demanding their compliance with the clear and unmistakeable requirements of clause 1.30 of section ‘C’ in the latest update of the Cyprus MoU. For a government in such dire straits, playing ‘who blinked first’ is neither appropriate nor politically astute but certainly typical of amateurish regimes.
There are approximately a dozen companies who make up probably 80 to 90 % of the non-performing loans. I don’t doubt for a minute that they have no intention of making any effort to pay off their loans, and even less ability to do so, even if they wanted to. In the UK, the more lenient banks may accept an offer of interest only, but these developers probably wouldn’t even agree to that. The collateral for the loans are countless properties in various stages of completion, and which are worth nowhere near what is owed. The answer is simple: if the borrower has not got the money, nor the means to repay it, then foreclose and take the property, making the borrowers bankrupt into the bargain……..
It seems that the policy of ‘smoke and mirrors’ that has worked so well for years in covering up whatever needs to be covered up in Cypriot affairs of all sorts is still being practised with the expectation that the ‘problem’ will simply go away when those pursuing it get fed up, move on, get demoralised by the system or run out of money. It’s worked brilliantly for many, many years. Who is to say it wont work this time?
Peter @ 0823 – Exactly right. Where are the brash and bombastic politico’s now, What happened to the demands they would never accept any compromise on.
Having caused the problem now they must fix it. Look at the salary structure first – no one is indispensable.
I thought WE were going to rewrite the terms and conditions? Just what went wrong?
False over-optimism prevails!
Too many people with Big and, we hear, ‘un-serviced’ Loans, flowing from years, probably decades of unregulated, uncontrolled lending, corruption across politicians, ‘personalities’, developers, bankers, ‘professionals’, ‘friends and relatives’, – too many ‘soft’ loans with little or no repayment schedules, and now, doubtless, lots of ‘duckin n divin’ as the Troika, rightly, turns up the heat.
The Troika needs to – and will! – insist a rigorous new approach to NPLs is defined – and Actioned! – before any further Bail-out monies are released……
Cyprus needs to clean up the lending cess-pits, put tight regulation in place before the banks start lending again. We know that ‘litt’l ol’ Ireland’ managed their property related defaults via massive clear outs that put the rights of ‘decent, honest’ people before eviction from family homes, repossession and the inevitable legal and other squabbles that typically follow such events. Yes, many struggling ‘ordinary’ borrowers in Cyprus need this kind of treatment – but the Top-End needs to be dealt with quickly and efficiently as part of a massive clear out of the ‘Grace and Favour’ regimes that have contributed to the massive, unsustainable ‘NPL’ situations.
The effusive optimism of Cyprus politicos in the face of imminent disaster never ceases to amaze!!
When told ‘No means No’ on the foreclosures bills not once but several times by the Troika, they interpret this clear message as ‘probably Yes if we hold out long enough’.
Quote: “The economy could go on for a few more months without the tranche”. I doubt it, especially with the ECB ‘stress test’ in two weeks’ time.