Crucial Cyprus loan foreclosure bill set for vote

The Cypriot parliament will vote Saturday on a controversial bill to streamline bank foreclosures of bad debts, Finance Committee chairman Nicolas Papadopoulos said, amid fears some people could lose their homes.

The emergency session will come a day after a deadline set by international lenders who bailed the economy out last year and have warned that the next tranche of the 10 billion euro ($13.1 billion) loan will be withheld if the bill is not passed.

A vote, already repeatedly delayed, had been set for Friday, but opposition parties, who together hold a majority in the 56-seat parliament, want more changes.

Main opposition communist party AKEL wants safeguards to ensure that first homes and small businesses with bad loans of up to 350,000 euros are safe from repossession by the banks.

"AKEL has reaffirmed its position that the government has agreed with the troika (lenders) for express mass repossession procedures, which is destructive to society and for the economy,» said a spokesman, Stefanos Stefanou.

"Therefore, AKEL is not going to vote for the bill if its philosophy does not radically change."

Other opposition MPs are also demanding protection for primary residences.

But the centre-right government of President Nicos Anastasiades says the bill is targeted at major business borrowers who owe the bulk of the money, promising that first residences will be protected.

The cabinet will meet Thursday evening to review the proposed amendments. Its response will then be reviewed by the joint finance and interior committee on Friday.

Around 46 percent of Cypriot bank loans are classed as non-performing (NPLs) for being seriously in arrears. Under current legislation, it can take banks 20 years to recover the money.

The troika (IMF, European Commission and European Central Bank) says that, if the bill is not passed, the NPLs must be classed as non-recoverable and Cypriot banks will fail EU stress tests due in the autumn.

The next 436 million euro tranche of bailout money is due in late September.

In return for the March 2013 rescue, the government adopted swingeing austerity measures and radically restructured the bloated banking sector.

Credit rating agency Moody's Investors Service said in early August that Cyprus has an “elevated risk of default in the medium-term” because of the high level of NPLs. [AFP]