By Angelos Anastasiou
Thursday’s plenary vote on the bill governing the sale of loans by banks to third parties is of crucial importance and a compromise can be reached by then, DISY leader Averof Neophytou said on Wednesday.
Speaking after a meeting with the Troika’s Cyprus mission chiefs, Neophytou said allowing Cyprus’ bailout programme to veer off track at the final hurdle would be the absolute nightmare scenario.
“I believe there is a sense of responsibility, and we have enough hours until tomorrow morning (Thursday) to come up with a solution,” he said.
“We should have passed this bill by October, and the Troika’s review of Cyprus’ economic adjustment programme ends tomorrow. I hope we won’t have to face a negative evaluation of progress, and we won’t show that as a country we have loosened our efforts at the end of the road.”
He was referring to the Troika’s resistance to a proposal affording borrowers the right to bid to buy their loan back at a discount, after it has been deemed non-performing by the lender but before it can be sold to third parties like investment funds.
Critics argue that such a clause would create moral hazard, encouraging even those who can afford to repay their loan to let it go unserviced so they can buy it back at a discount.
Neophytou said discussion with the Troika is ongoing and negotiations are tough, but a solution must be found.
“I, personally, shiver at the nightmare scenario that Cyprus should go through what Greece went through in September 2014, at the end of the road, when it loosened its efforts and things fell apart,” he said.
AKEL, which has said it will vote against the bill, leapt at the chance to criticise DISY’s leader.
“Once again, he is trying to terrorise and blackmail our people, threatening with nightmare scenarios unless small borrowers and their guarantors are left unprotected against vulture funds,” said party spokesman Yiorgos Loucaides.
“But he doesn’t see or understand the nightmare citizens have been forced to live through for the last few years, and they don’t shiver over the tragic consequences the loan-sales bill will have on thousands of households and small businesses.”
Meanwhile, DIKO – the key to passing or rejecting the bill on Thursday, as it controls the swing votes required for a majority – unveiled its proposals for the amendment of the draft legislation, which it has deemed ‘red lines’, meaning it will vote against the bill if they are not adopted.
“The amendments include the right for borrowers and guarantors to buy back their loans at a discount before being sold to any third party,” DIKO leader Nicolas Papadopoulos said.
“There is also a ban on such sales to Turkish-owned companies for reasons of national interest, and a clause stipulating that in the event of sale, unless otherwise stated in the contract, Cypriot courts will have jurisdiction over the loan contract.”
With these proposals, Papadopoulos added, there will be a haircut on loans, private borrowing will decrease, and a large number of loans will become viable.
“We hope we will be able to persuade other parties, as well as our European allies, to back them.”
Papadopoulos said the House can’t legislate what the borrower and the bank might agree on.
“A bank might agree to grant the borrower a year to repay the discounted loan, or two or three months,” he said.
“This decision is not for us to make. It will be made by the bank and the borrower.”
