Cyprus faces fresh bailout uncertainty after privatisation vote

Next installment of financial aid contingent on privatisation plan

Police look on as demonstrators outside Cyprus’s parliament protest plans by the government to sell off state-owned enterprises. Photograph: Andreas Manolis/Reuters

Police look on as demonstrators outside Cyprus’s parliament protest plans by the government to sell off state-owned enterprises. Photograph: Andreas Manolis/Reuters

Fri, Feb 28, 2014, 12:38

Cyprus’s government will re-submit a privatisation law to parliament, a spokesman said today, a day after lawmakers rejected a sell-off plan, putting the island’s bailout programme at risk.

Government spokesman Christos Stylianides said legislation amended to accommodate concerns over workers’ legacy rights, would be submitted to the House of Representatives today. It was not immediately clear when parliament would reconvene to debate the bill.

“We hope the soonest possible,” Mr Stylianides said.

Parliament voted down a roadmap for privatisations - a condition of the country’s international bailout - in a cliffhanger vote late yesterday. Approval of the measure is contingent on Cyprus getting its next tranche of aid in March.

The ‘No’ vote raises the risk the island will be plunged back into fiscal turmoil just a year after the €10 billion lifeline from the European Union and IMF pulled it back from the brink of default.

Cypriot president Nicos Anastasiades, who brokered the initial accord with lenders a year ago, said reforms would continue. “I am determined that the country continue its path towards stabilisation and recovery,” he said on his official Twitter account.

Yesterday’s vote was reminiscent of a chaotic bailout a year ago, when Cyprus’s fractious parliament rejected initial bailout terms only to accept considerably harsher conditions from lenders later, including the closure of a major bank.

Since then, the island state has gained plaudits from lenders for its commitment to reform, even though parliament has not always toed the line.

“We hope to have the consent of parliament so we don’t have anything off-tone which affects the credibility and reputation of the Republic of Cyprus, particularly at a time when it is regaining that credibility and things are stabilising,” Mr Stylianides said.

The Cypriot finance minister has previously warned that the roadmap must be approved by March 5th for Cyprus to receive new aid worth €236 million.

Plans to establish a framework for the sale of ports, telecoms and electricity utilities have met stiff opposition from labour unions, with hundreds protesting outside parliament yesterday evening.

Reuters

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