Filenews 3 April 2022 - by Eleftheria Paizanos
Cyprus is expected to accept a reprimand from the Commission next Wednesday, for the inconsistency it has shown in the commitments it has made in relation to the Recovery Fund. From the very first prerequisites, the country found itself exposed, as the disbursement of € 85 million. snag into the bills that strengthen the legal framework for the management of non-performing loans and define the licensing and operation of loan servicing companies.
Following the assurances received from the Parliament that the bills would be taken to the plenary at the end of March, the Ministry of Finance prepared the relevant request to receive the €85 million the second tranche from the European fund. However, once again he did not finally submit the relevant request to Brussels, as members of the Parliamentary Committee on Finance asked for more time to re-examine the bills and the amendments tabled by opposition parties tomorrow.
The new delay, according to information provided by "F", angered the European authorities, who asked the Republic for an explanation. Next Wednesday, the 6th of the month, technocrats of the General Directorate of Development of the Ministry of Finance will have a new teleconference with the competent officials of the European Commission (EU), who are expected to convey their dislike for the non-implementation of the first package of prerequisites. It should be noted that these prerequisites had to be approved no later than December 31 2021, while in February the request would be submitted to the EU for the country to receive the European cash. In fact, if everything went according to the plan agreed between the two sides, until now the €85 million would be in the state coffers.
Headache in government
The further postponement of the discussion of the bills in the Plenum of the House causes great concern but also a headache for the government camp, which worries that a precedent may be created for the milestones of the next tranches. A competent government source expressed its concern to "F" about the stance taken by the Parliament. At the same time, he noted that this behaviour by the Parliament leaves the country exposed, which is essentially once again losing its credibility. In fact, Cyprus failed in the first crash test, as all 14 prerequisites should have been implemented by now, among which five needed approval from Parliament. As we have been told, in previous teleconferences Europeans were sympathetic to the delay that was taking place and were not particularly demanding. This time, a competent source said, the arguments and excuses on the part of Cyprus will be ignored. He also said that if this tactic continues in the future, there may also be a problem during the evaluations by foreign firms, as the three-year fiscal planning of the state took into account the growth that will result from the projects and actions provided by the Recovery Fund. As things stand, on Wednesday the EU will signal to the Cypriot authorities that if this situation continues there may be misadventures about the money from the European fund.
Concern also about amendments
However, apart from the delay in parliament, the government is also concerned about the intentions of parties in relation to the two bills on loan servicing companies. This is because if the party amendments are passed, there will be further problems as the changes clash with the philosophy of the bills. In such a case, the EU will ask for an amendment to the bills, which will again delay the process. As we have been told, the stance taken by Cyprus will perhaps jeopardise the total funding, amounting to €1.2 billion, from the Recovery Fund.
It is recalled that the amendment that burns the government is the one concerning the protection of guarantors from management companies. This amendment was tabled by ELAM, DIPA and Ecologists and provides for the prohibition of access of loan management companies to the data of guarantors, through the Artemis database and the Cadastre. This amendment seems to acquire the required majority to be approved, as it is supported by the three parties that propose it, but also AKEL and EDEK.
Last Monday an amendment was also tabled by the DIKO, which explicitly defines the eligibility criteria for the licensing of the loan servicer, as well as the rights of borrowers. In addition, the conditions and stages for borrowers are defined, so that they can contact an Insolvency Advisor and the Financial Commissioner. It is also proposed to incorporate into the law the relevant directives of the Central Bank. On the part of the opposition parties, it has been said many times that they will only approve the relevant bills if the amendments are passed.
They bet on the Plan
Cyprus is leaving a great deal in the Recovery Plan, since, as state officials have stated many times, its successful implementation is important for public finances and the prospect of growth. In his previous statements, Finance Minister Constantinos Petrides had argued that based on studies the Recovery Plan is expected to add 7% to the Cypriot GDP and will help open tens of thousands of jobs.
The Recovery Fund provides for a total of 133 reform and investment measures. For Cyprus to disburse the total amount of €1.2 billion by 2026 it will have to implement a total of 58 reforms and 75 investments, of which 41% and 23% are related to the green and digital transitions respectively. Cyprus will disburse the money through eleven instalments. By design, Member States will receive money twice a year. In 2022, if all goes well, €170 million will end up in the state coffers. (second and third doses). The fourth instalment (€115 million) and fifth tranche (€150 million) will be paid by June and December 2023 respectively. At the same time, in 2024 the country will receive in two instalments an amount of €245 million. and in 2025 an amount of €225 million. Finally, an amount of €244.4 million Cyprus will receive in 2026.
It should be noted that so far the amount of funding received by Cyprus - as an advance payment - was €156.8 million. This money was taken by the country, without preconditions, last September, after the signing of the financing agreement between the Republic and the EU.
The 13 milestones that have been implemented for the second tranche
The 13 milestones related to the second tranche that have been implemented concern the reform of the Public Service, the independence of the Transmission System Operator from the EAC and the protection of informants, who report bad practices and acts of corruption. Also, the goal of strengthening the circular economy in industry has been achieved, while plans to promote energy efficiency investments in small and medium-sized enterprises, municipalities, communities and the wider public sector and the encouragement of the use of RES and energy saving measures in public and local authorities have been announced by the Ministry of Energy. In addition, the equipment has been installed to strengthen existing isotopic databases of Cypriot food and beverages. In the meantime, by June 30 the remaining 18 milestones will have to be implemented, for the approval of the third tranche, of which five will have to go through the stumbling block of the Parliament.
