European Central Bank (ECB) refrain from expressing an opinion in a dispute in Cyprus between the government and the opposition, regarding a law extending the foreclosure moratorium by three more months.
The law was voted early July and was sent back to the parliament by the President of the Republic Nicos Anastasiades. In a plenary session on Tuesday the parliament rejected by majority the President’s reasons on the law.
Cyprus Ministry of Finance, in a press release says that it has consulted the ECB on the draft law as it considered that this issue concerned the ECB`s responsibilities for ensuring financial stability.
It adds that the ECB by a letter dated 20/7/2021 informed the Minister of Finance that it decided not to express an opinion, as the draft law only marginally touches on the ECB’s fields of competence.
The ECB decided not to express an opinion after taking into account the fact the draft law is only to extend the suspension of the procedures for foreclosures until 31 October 2021. Also, the scope of the draft law will be limited to main residences with an estimated value of up to 350, 000 euros, small commercial properties with an annual turnover of up to 750,000 euros and agricultural land plots of estimated value up to 100,000 euros.
The ECB notes that the importance of policy measures to reduce the impact of the pandemic on economic and financial stability makes it equally important to manage the exit from this support.
According to the ECB, economic and financial policy measures have so far limited the implementation of credit risk and the transmission of adverse effects between the real economy and the financial system.
It furthermore notes that as long as significant restrictions are in place to control the pandemic in euro area countries, supporting economic policy to avoid the bankruptcy of adversely affected but viable companies and the significant increase in unemployment will protect short-term financial stability.
With the gradual lifting of the restrictions and the improvement of the adjustment of parts of the economy to these restrictions, the ECB emphasizes that extensive policy support, especially for companies, should be phased out in order to avoid disproportionately serious consequences.
The Ministry of Finance points out that it will continue to consult with the ECB on draft legislation falling within its areas of competence and to monitor the effectiveness of the foreclosure framework.