International lenders will withhold the next payment in Cyprus’s 10-billion-euro bailout unless the island’s Parliament passes a crucial law this week speeding up foreclosures of nonperforming banks loans (NPLs).
Around 45 percent of loans by Cyprus banks are classed as nonperforming because borrowers are seriously late with their payments and under current laws it can take banks 20 years to regain the loan through the courts.
Cyprus’s level of NPLs is the highest in Europe at almost 140 percent of GDP, the International Monetary Fund has said.
The troika of lenders – the International Monetary Fund, European Commission and European Central Bank – say unless the new law is passed the NPLs must be classed as nonrecoverable and Cyprus banks will fail EU stress tests due in the fall.
Parliament has delayed a vote on the foreclosures bill several times amid opposition fears it could lead to owner-occupiers being evicted from their homes.
The center-right government of President Nicos Anastasiades says the bill is targeted at major business borrowers who owe the bulk of the money.
The next 436-million-euro tranche of bailout money is due in late September and the troika has said the foreclosures bill must be passed at a session of Parliament scheduled for this Friday.