NICOSIA (Reuters) - Lawmakers in Cyprus on Saturday approved legislation governing foreclosures, paving the way for the bailed-out island to join the European Central Bank’s sovereign bond-buying programme.
In a majority vote, the Cypriot parliament approved an insolvency framework for private debtors, ending a months-long standoff with the government over dealing with non-performing loans that are among the highest in Europe.
The new framework protects primary homes with a mortgage worth up to 250,000 euros (£180,605) but with repossession and auction processes in place thereafter, replacing a previous practice which meant banks could spend up to 20 years attempting to recoup their debt from defaulters.
Cyprus, a member of the euro zone since 2008, had been excluded from the 1.1 trillion-euro quantitative easing (QE) programme the ECB launched in March until the law took effect.
The Mediterranean island, which signed an up to 10 billion euro bailout deal in 2013, had to adopt the legislation before further disbursement of aid. It has received just over half of the bailout amount in an adjustment programme due to run to mid-2016.
ECB President Mario Draghi had said on March 5 that once the foreclosures framework was adopted and Cyprus received a positive assessment from lenders, it would be able to participate in the QE programme.
Cypriot officials say ECB purchases of Cypriot government debt would help bring down yields and assist Cyprus in its return to capital markets. They have said that the ECB could buy up to 500 million euros in Cypriot sovereign bonds under the programme.
Cyprus’s banking sector has one of the highest non-performing loan rates in Europe, representing more than 50 percent of total loans.
Reporting by Michele Kambas; editing by John Stonestreet