Cyprus next tranche in the air

Cyprus is unlikely to receive the next tranche of rescue funds from its Troika international lenders, after apparently falling foul of them over new legislation on loan foreclosures, the island’s government said on Thursday.

The government said lenders are unhappy with additions MPs attached to the legislation to dilute its effect on low-income groups and prevent mass repossessions.

European Union finance ministers meet today and they are going to discuss the bailout program of Cyprus. However, government spokesman Nikos Christodoulides said that the disbursement of 436 million euros, due at the end of September, was unlikely to be on the agenda.

“Under the current circumstances the disbursement of funds is not a given; I think it will not happen,” Christodoulides told state radio on Thursday.

The government is in a “very difficult situation” and “trying to limit the impact of the non-disbursement of this installment.”

Simon O’Connor, EC spokesman on economic affairs, said on Wednesday, “it appears clear that parts of the legislation voted through last Saturday, together with the foreclosures bill, are not compatible with the requirements... in this important policy area.”

He said the Commission would brief the finance ministers on Friday and remains “in close contact with the Cypriot authorities on this matter and are looking forward to hearing from them how they plan to proceed.” He was referring to the adoption of a controversial bill to streamline bank foreclosures of bad debts that was demanded by the Troika.