NICOSIA – Cyprus’ recovery from a 2013 economic crisis in which bad loans almost brought down the banks is ongoing but the problem that created it is too, with the level of private sector indebtedness and non-performing loans still too high, the International Monetary Fund said.
The IMF and European Union and European Central Bank five years ago put up a 10-billion euro ($12.33 billion) bailout to save Cyprus after its major banks nearly went under because of bad loans given to Greek businesses who wouldn’t repay and big holdings in Greek bonds that were devalued 74 percent.
Cypriot President Nicos Anastasiades, reneging on campaign promises then, allowed banks to confiscate 47.5 percent of accounts of more than 100,000 euros ($123,320), nearly wiping out the life savings of many, and didn’t go after the bank managers who created the trouble.
An IMF mission visited Nicosia during March 19-30 for the second post-program monitoring discussions and after it was done said the economy – on the back of continuing record tourism seasons – has come back fast, the Chinese state news agency Xinhua reported.
The statement said Cyprus’s economic growth has been spurred as well by the construction sector and professional services and is set to expand 4-4.25 percent between now and the end of 2019.
The IMF and creditors though have wanted faster foreclosures of homes of people who couldn’t pay because of austerity measures attached to the bailout and for tougher collection of bad loans, including amending bankruptcy laws to remove protection.
Cyprus also needs to adopt macro-critical structural reforms in order to preserve financial stability, protect the downward trajectory of public debt, and support balanced and durable growth, it said.
Cyprus Cooperative Bank, the island’s second largest lender, was put up for sale in March because of too many bad loans, most of which are secured by primary residence mortgages that under current law cannot be foreclosed.
Despite loan restructuring programs the past few years, the bad loans still total some 20 billion euros ($24.66 billion), more than 40 percent of the total portfolio of the banks, who are struggling to collect them.