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Adjustment program remains “frozen”

30/01/2015 07:13
There is growing uncertainty regarding the course of the economic program and the financing of Cyprus, after yesterday's decision of the majority of parliament to extend the suspension of the law on foreclosures until March 2.

International lenders already informed the Cypriot government that the program’s evaluation is permanently frozen, in a crucial year when Cyprus must refinance debt which amounts to €2,9 billion.
Creditors reiterated that with non-performing loans reaching 50%, it is necessary to begin clearing the burdened balance sheets of banks.

Source of international creditors told StockWatch that after yesterday's parliamentary decision, the program is suspended until March 2 and the € 86 million tranche will remain in the funds of IMF.
This development has alarmed Nicosia, since the plans of the Ministry of Finance to enter the market are postponed, Cyprus will not participate in the ECB’s QE program and most importantly, as deputy government spokesman Victor Papadopoulos told StockWatch, once again the credibility and authority of the Republic against the European partners and the international markets suffers.
"This decision was unnecessary," he said adding that "the government now must manage a difficult situation."

Currently, Cyprus has cash to cover its needs and refinance part of the debt by issuing treasury bills.
President of DISY Averof Neophytou, during his intervention in parliament, linked the decision to suspend the foreclosures with Bank of Cyprus liquidity status. The bank, which is based on extraordinary liquidity of € 7 billion from the CB, will be forced to increase that amount by € 800 mil, he said.
The opposition criticized the tactics of fear followed by the government and the delay in promotion of insolvency bills.

During the discussion with the Ministry of Finance in relation to the fifth bill of legislation governing the insolvency framework, for primary residence, serious disagreements emerged with the troika technocratic team.

Until Wednesday evening, it was expected that there would be a meeting of the government with the head of troika on Monday. After yesterday's developments, expectations for commencement of the sixth evaluation seem to evaporate.