Cypriot parliament passed a controversial bill on Thursday potentially threatening to derail Cyprus' bailout program.
The bill, voted by opposition parties which muster a majority in parliament, provides for the suspension until Jan. 13, 2015 of a law regulating foreclosures of properties offered as collateral in non-performing loans.
The foreclosures law is considered crucial for the banks of the eastern Mediterranean island struggling to cope with bad loans making up about one-half of total loans.
Though the suspension of the foreclosures bill is expected to end when the government will send to parliament additional bills to regulate foreclosures, it remains to be seen how international lenders will react to the law.
Finance Minister Haris Georgiades issued a terse written statement warning about possible consequences for the country's economy struggling to return to growth after four years of recession.
"The decision made today by the House of Representatives undermines in a critical way the credibility of the country," Georgiades said.
He said it was an "unnecessary and unjustified" measure which sends out the message that "we have not got rid of attitudes and behaviors that have cost us so much."
Previous legislation also pushed through parliament by the opposition mustering a majority of votes, which excluded the primary residence of debtors from foreclosures, resulted in a two-month suspension of the release of a 436-million-euro tranche by the Eurogroup and the International Monetary Fund.
International lenders finally released the money earlier this month after the High Court declared the legislation unconstitutional.
A possible reaction by international lenders may be the suspension of further appraisal of progress in the implementation of Cypriot economic adjustment program.
An early reaction would be the cancellation of a new review by Troika teams of technocrats representing the European Commission, the European Central Bank and the International Monetary Fund scheduled for early January.
That would result in a delay in the release of further assistance out of a 10-billion-euro bailout deal, jeopardizing the government's planning to lead the economy into growth and its plans to seek financing from international markets.
