December 7, 2016 / 5:24 PM / 8 months ago

UPDATE 1-Aid institutions wary of politics sapping Cyprus reforms -source

(Adds quotes, details, background)

By Marc Jones

LONDON, Dec 7 (Reuters) - Cyprus needs to speed up its tackling of the bad loans held by banks and could see privatisation plans sapped by politics next year, a source familiar with the thinking of the international organisations policing the country's economic reforms said.

The European Central Bank, International Monetary Fund and the European Commission have been monitoring the progress of the Cypriot economy since its financial bailout programme ended earlier this year.

"The pace of NPL (non-performing loans) resolution has to accelerate," the source said on Wednesday, adding that some banks were working quite successfully at the process. "Foreclosure rules have to be used more forcefully."

The source was also wary that reform and privatisation efforts could suffer. Government support has already started to fracture and momentum could be lost once campaigning for a 2018 presidential election gets going next year.

"There are risks the reforms are blocked," said the source, said. "Today it is much more difficult for the government to build consensus than it was after the (last) election."

He stressed, however, that Cyprus' efforts since the bailout programme wound up had been solid and that the contagion risks from any flare-up of Greece's problems were now "very small".

Reporting by Marc Jones; Editing by Mark Heinrich

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