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THE International Monetary Fund said on Thursday that it would not release €88 million (£69m) in pending bailout payments to Cyprus.
Cyprus’s parliament had voted to block a controversial foreclosure law from taking effect at the end of the month.
An IMF statement claimed that the month-long suspension of the law contravened the terms of its €10 billion (£7.84bn) rescue deal, which had been agreed in March last year. Further steps will be discussed with the Cypriot authorities.
The law would have made it easier for the country’s banks to force the collection of bad loans, which account for around half of all loans.
The European Union had released a €350m (£275m) instalment prior to the vote, bringing the amount of bailout cash given to Cyprus so far to €5.7bn (£4.47bn).
MPs said they had approved the suspension to give the government time to draft additional insolvency legislation that would act as an extra buffer protecting those who lost their jobs or saw their income slashed in the country’s near financial meltdown from also losing their homes.
But the IMF claimed that it was simply backing the government.
“We support the Cypriot authorities in their efforts to progress on their ambitious and far-reaching reform programme,” a statement said.
“We look forward to continued co-operation, and will agree with the authorities on next steps in the period ahead.”
Finance Minister Harris Georgiades fumed that the suspension had been “unnecessary and inexcusable,” claiming that it undermined Cyprus’s credibility.
“It sends the message that we haven’t overcome attitudes that have cost us in the past,” he said.
This is the second time IMF authorities have intervened in the island’s internal affairs over the foreclosures law.
In September, eurozone lenders refused to release a €436m (£342m) instalment after parliament excluded debtors’ primary residences from foreclosure.
The impasse was only overcome when, after two months, MPs backtracked on some of the legislation and the Supreme Court struck down other parts as unconstitutional.
