In a meeting yesterday morning that started later than scheduled because the Troika mission leaders found themselves sitting in a room of empty chairs, waiting for deputies other than the Greens’ Yiorgos Perdikis and chairman Nicolas Papadopoulos to show up, the Troika was grilled by the House Finance committee on the issues of NPLs and foreclosures.
While acknowledging Cyprus’ better than expected economic performance and praising the economy’s resilience, the representatives of international lenders warned that NPL levels are unsustainable and need to be addressed with the utmost urgency.
The government’s foreclosures bill, the committee was told, needs to be passed by the end of August, if the next tranche from the €10bn Troika bailout loan to Cyprus is to be approved in September. But Georgiades also said that some points remain under negotiation with the Troika delegates, meaning the bill is not finalised yet.
Foreclosures through public auctions with no Land Registry involvement comprise the gist of the bill, as a means of easing the process for banks to recoup delinquent loans that have no hope of becoming manageable through restructuring.
Some committee members raised the need for the definition of NPLs to fall in line with that adopted by the rest of the world, but this was apparently denied by the Troika mission heads.
“Their response was disheartening,” Perdikis said. “While they conceded that negotiating was always an option, this is not viewed positively.”
The Troika’s argument had been that even if the definition was to be matched with that prevalent in the rest of the world, NPLs in Cyprus would decrease from 52% to 48%. It also claimed that Cypriots average higher per capita bank deposits than the rest of Europe.
“We were again told that our bloated banking system has been irreversibly and excessively exposed to risk, and Troika mission head Delia Velculescu showed us a graph and said ‘the money is there, your banks are full of deposits’,” Perdikis said. “And when she was told that most of these deposits belong to foreigners, she insisted that they belong to Cypriots, who can, and should, use them to repay their loans.”
According to Perdikis, Velculescu argued that “18% of unemployment can’t possibly justify 52% NPLs – that can only mean that it’s not just your unemployed that aren’t repaying their loans.”
But committee chairman Papadopoulos rejected this argument. “The extremely high levels of NPLs are hardly a paradox,” he said. “What has happened in Cyprus has happened nowhere else in the world. Haircuts have never been imposed on one country’s depositors to finance the banking system of another country – in our case that of Greece. Nowhere in the world have there been so strict NPL definitions.”
AKEL’s deputy Stavros Evagorou was critical of both the Troika and the government’s handling. “The Troika blamed the banks for not moving fast enough in collecting from the big borrowers,” he said. “But they insist on the foreclosures bill, which we refuse to accept.”
According to Evagorou, the international lenders have “praised Cyprus’ return to the markets but did not concern themselves with Cypriots’ inability to return to the super markets.”
Meanwhile, committee members also expressed concern over the Troika’s remarks over the design of the Guaranteed Minimum Income social welfare scheme.
AKEL deputy Yiannos Lamaris said that when asked where the additional funds required to implement the GMI will come from, the Troika delegates said that they could only be raised through social spending cuts.
“The GMI scheme is cost-neutral, which does not allow the government to shift money from elsewhere in the budget,” he claimed.
Lamaris said that this response by the Troika points to an “effort by the government and the Labour minister to dupe the House and the public.”
Perdikis was equally critical. “This bill was not created to expand social welfare spending,” he said. “It was created – the Troika told us today – to reduce spending and target it better.”
Perdikis said that the scheme’s aim is to weed out those welfare recipients that do not really need it through better targeting, and cut other social spending.
“But because it is not being implemented effectively due to staff shortages, insufficient communication, and too short deadlines, it seems that people in real need for social welfare will be left out of the scheme,” he said. “While the government and the parties voted to expand the net and increase social welfare, what is actually happening is making the net smaller.”
Source:Cyprus Mail
