The Cypriot parliament adopted Saturday a controversial bill to streamline bank foreclosures of bad debts, clearing the way for international lenders to release the next tranche of a 10 billion euro loan.
The emergency vote came a day after a deadline set by the so-called troika of lenders, who bailed Cyprus out last year and had warned that the next tranche, 436 million euros ($565 million), would be withheld unless the bill was passed.
The foreclosure bill was approved by a vote of 47-seven, with one abstention, in the 56-member House of Representatives.
The new law ensures that foreclosures cannot be indefinitely delayed, reducing the process from years to months, establishing procedures for valuating properties and auctioning them.
As for borrowers, it allows them to appeal estimated valuations and obliges banks to try to restructure loans before seeking repossession of homes, while also preventing banks from arbitrarily upping the lending rate.
In a separate vote, MPs decided that the foreclosures bill will not come into effect until the government submits a separate bill on insolvencies, scheduled by the end of the year.
That would govern the treatment of specific groups of individuals based on their ability to repay their debts, and is a reflection of fears there would be mass repossessions of first homes in the recession-hit economy.
It was backed by the opposition parties which hold a parliamentary majority, but opposed by the ruling right-wing Disy party.
Government spokesman Nicos Christodoulides welcomed passage of the foreclosures bill, saying in a statement that it "changes and modernises" current procedures.
He said the bill, supported by the troika of international lenders, was passed without substantial changes to its content.
However, referring to the second measure, he said the government "would carefully evaluate its content and possible consequences."
The government aimed "to promote reforms in a way that primarily ensures the protection of vulnerable groups, while simultaneously guaranteeing the process of recovery and stabilisation of the economy."
- Country needs 'calm' -
President Nicos Anastasiades has the power to send it back to parliament for review, or to the Supreme Court, either step of which would freeze its implementation until action is taken.
Opposition AKEL MP Yiannos Lamaris urged Anastasiades not to do that.
"What this country needs today is calm and dialogue, not a political crisis, and I consider such an action by the president would cause a chasm in society," Lamaris told reporters.
Around 46 percent of Cypriot bank loans are classed as non-performing (NPLs) for being seriously in arrears. Under current legislation, it can take banks 20 years to recover the money.
The troika (International Monetary Fund, European Commission and European Central Bank) said that, if the bill were not passed, the NPLs must be classed as non-recoverable and Cypriot banks will fail EU stress tests due in the autumn.
The next 436 million euro tranche of bailout money is due in late September.
In return for the March 2013 rescue, the government adopted swingeing austerity measures and radically restructured the bloated banking sector.
Credit rating agency Moody's Investors Service said in early August that Cyprus has an "elevated risk of default in the medium-term" because of the high level of NPLs.