Cyprus gets taste of EU’s €85 million with a caveat

Cyprus will get Friday the first tranche of €85 million from the EU's Recovery and Resilience Mechanism, as European Commission technocrats told Cyprus' Parliamentary Committee on Finance. The technocrats will participate tomorrow in the first annual event for the Recovery and Resilience Facility in Cyprus.

The delegation of the European Commission's Directorate General for Economic and Financial Affairs (DG ECFIN), met on Thursday with the Parliamentary Finance Committee and stressed the need for timely implementation of the legislation related to the Facility.

The problem of Non-Performing Loans (NPLs) and high energy prices dominated the discussion, with Commission's technocrats pointing out the need for further progress in relation to NPLs and meeting the Facility's milestones, while MPs noted the special conditions of Cyprus after the 2013 financial crisis and the need for more to be done to protect vulnerable groups.

The Director of Recovery & Resilience Task Force at the European Commission, Maria Teresa Fabregas said that it's very important that the member states comply with the legal elements of the Plan and emphasised the great role of the Parliaments in the adoption of the relevant agreements. She noted the important reforms passed by the Cypriot Parliament in the fields of justice, energy, dealing with NPLs, while mentioning that there are other laws that must be adopted, regarding inter alia labour market, education and tax planning.

Director for economies of the member states in DG ECFIN Luc Tholoniat said that it was confirmed that Cyprus would be subject to an in-depth review of macroeconomic balances. He also mentioned Commission's recommendation, that repeated suspensions of foreclosures in Cyprus create problems in terms of achieving the goal of further reduction of NPLs.

Regarding the ‘Mortgage to Rent’ scheme that the Government proposed to protect vulnerable borrowers who cannot restructure their loans secured against their primary residence, he said that they were reviewing it in collaboration with the Directorate General for Competition of the European Commission.

He also noted that tomorrow will be the day of the first disbursement for Cyprus from the Recovery and Resilience Mechanism of the amount of 85 million euros and said that this is the beginning of a long journey. At the same time, he said that the Commission is examining Cyprus' second payment request.

The European technocrat said also that there should be some revision of Cyprus' Plan, since due to the very good economic performance of the country, which was not expected, Cyprus will lose approximately €90 million compared to the original plan. He added, however, that Cyprus will benefit with an additional €50 million for actions in the energy sector from the REPower EU plan, while it could benefit from the use of loans within the program.

Regarding support in the energy sector, he said that the EU is trying to provide support and for that the rules of the Stability and Growth Pact have been suspended to give countries time to take the necessary measures. He noted however that measures to be taken should be targeted, temporary, encourage energy saving and take into account fiscal cost.

For her part, the President of the Committee on Finance, Christiana Erotokritou noted that although Cyprus is on the right track in terms of dealing with NPLs, the special conditions of the Cypriot economy and the consequences of the 2013 haircut must be taken into account. She noted the need for plans and mechanisms to protect vulnerable owners and avoid further problems in the future, as well as the need for measures to address the problem of high energy prices.