Unanimously with 45 votes in favor, the Plenary Session of the Parliament passed the law on the issuance of government guarantees for the granting of loans by credit institutions to companies and independent employees.
The law was passed by Parliament on April 22, 2021, with the aim of providing government guarantees of up to 1 billion euros to address the effects of the measures taken to address the COVID-19 pandemic. This possibility is granted by the EU for another two months and Cyprus is expected to request an extension of its implementation.
The European Union's Directorate-General for Competition has examined the compatibility of the law with the competition rules and concluded that amendments should be made to open an invitation to all credit institutions to provide government guarantees without restrictions on their distribution. Furthermore, the European Central Bank issued a relevant Opinion according to which it is proposed the non-participation of representatives of the Central Bank of Cyprus in the Supervisory Committee due to the risk of conflict of responsibilities.
In particular, the new law includes provisions concerning the open call for government guarantees to all credit institutions and, consequently, the repeal of Article 10 of the basic law, which applies criteria for the allocation of government guarantees to credit institutions.
The replacement of the Monitoring Committee, as recommended by the current legislation, by the Information Committee and the deletion of the relevant provision for the participation of two CBC officials, so that the said committee is composed of a representative of the General Accounting Office and a representative of the Ministry of Finance, appointed by the Minister of Finance, as well as the Auditor General or his representative as an observer.
Defining, as the sole purpose of the Information Committee, the ex-post information of the Minister of Finance and the Parliamentary Committee on Finance and Budget regarding the implementation of the law, as well as the clarification that the Information Committee does not interfere in the decision-making process of credit institutions with the procedures of credit risk management and lending with government guarantees.
The replacement in the basic law of the schedules regarding the information provided to the Minister of Finance and the Parliamentary Committee on Finance and Budget by the Information Committee for the purposes of aligning them with the obligation of the credit institutions to provide, quarterly instead of quarterly, data to the General for the loans they grant.
In her speech, DIKO MP Christiana Erotokritou spoke of “irresponsibility of the Government”, which on May 19, 2020 had withdrawn the bill, because the opposition insisted on an independent authority to control where this huge amount of loans would be given. state guarantees. He also stated that today the bill that was resubmitted and passed by the Parliament, is amended not because it has inapplicable and unconstitutional provisions, as claimed by the Ministry of Foreign Affairs, referring to the opposition amendments, but for the inapplicable and unconstitutional provisions set by the Government for participation. as a supervisor. He noted that other countries have had this tool in their hands since 2020. He added that the rulers have chosen to leave without this tool businesses, self-employed workers and households just for a stubbornness.
ELAM MP Sotiris Ioannou said that this law is a necessity since for many months several companies are on the verge of collapse and the fund for the unemployment fund will increase.
DIPA MP Alekos Tryfonidis said the law is another useful tool to support businesses and self-employed workers, but expressed strong concerns about the impact of some changes to the bill and whether it will affect transparency and control. He said they will monitor the progress of the process after the law is passed and will intervene if necessary.
EDEK MP Elias Myrianthous said that the voting of the bill has been delayed too much and most companies are on the verge of lack of liquidity. He added that one of the vulnerabilities of the bill is that it does not refer to new companies, which have been established in the last year.
Environmentalist Stavros Papadouris resented the fact that this useful tool used by all EU member states was not used in Cyprus “for a stubbornness”. He also said that he does not know if the cost can be measured from its non-implementation and expressed the hope that it will not be the closure of businesses.
DISY MP Onoufrios Koula referred to all the other measures taken by the Government to deal with the effects of the pandemic and said that the result was that Cyprus had less recession last year and higher growth this year than the EU average. He added that very few countries have achieved this. He also said that the tool of state guarantees will be useful now that the other tools of support of the Government have stopped.
AKEL MP Aristos Damianos spoke of an unjustified delay by the Government and said that they do not know how much damage was done during these two years, with thousands of bankruptcies and liquidations of companies. He also expressed concern about some of the changes in the law such as the alteration, as he said, of the element of preventive control after the audit committee has been renamed to information committee.
The President of DIKO, Nikolas Papadopoulos, welcomed the passage of the law and stated that the Government kept him in the drawers for a year and a half because he did not want the control by the Auditor General. He also said that what the Government wanted to pass in the law was considered illegal by the Commission. He also said that this program ends in two months and if Cyprus does not succeed in extension it will lose this support. He also wondered how we were going to ask for an extension of the period, explaining that the Government did not want control since a specific debate was taking place in the European Parliament. He called on the Government to apologize for the lack of support to Cypriot companies, the delay and the “resilience of Cyprus”.