February 28, 2014 2:54 pm

Cyprus government resigns as utilities privatisation bill fails

Cypriot flag©AFP

The Cyprus government resigned on Friday after parliament failed to approve draft legislation to privatise three state utilities as part of the island’s €10bn bailout by international lenders.

A government spokesman said a fresh version of the law would be presented to parliament later on Friday and would be debated, and voted on, on Tuesday. President Nicos Anastasiades, leader of the centre-right Democratic Rally party, is expected to appoint a new cabinet by mid-March, a party official said.

Approval of the privatisation law is seen as a condition for the EU and International Monetary Fund to release a €230m tranche of funding in March to keep the public finances afloat.

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“Civil servants’ salaries and pensions may not get paid next month if the law doesn’t go through,” warned Averof Neophytou, the Democratic Rally chairman.

Cyprus weathered a banking collapse a year ago that triggered a bail-in of uninsured depositors at the island’s two largest lenders, along with the eurozone’s first capital controls. It won praise from the EU and International Monetary Fund for a rapid fiscal consolidation.

The privatisation of the state electricity utility EAC, the telecoms organisation CyTA, and the Cyprus Ports Authority, is projected to raise €1.4bn by 2018. But the government faces strong opposition to sell-offs of state entities from powerful Cypriot trade unions, which have staged strikes this week, causing power outages and delays in handling ships at the island’s main ports of Limassol and Larnaca.

Thursday night’s vote in the 56-member parliament resulted in a 25-25 tie with five abstentions. It came two days after the nationalist Democratic Party (Diko) announced it was pulling out of the governing coalition over differences concerning a new round of UN-sponsored talks aimed at reunifying the Greek and Turkish Cypriot sectors of the island.

“We proposed a number of amendments to ensure workers’ legacy rights and the country’s national security . . . We were surprised that the governing party rejected all of them,” said Nicolas Papadopoulos, the Diko party leader. Four cabinet ministers from Diko abstained from voting.

Hardline nationalists, opposed to a proposed settlement giving the smaller Turkish Cypriot community equal political rights with the Greek Cypriots in a federated Cyprus, won a close-fought vote in Diko’s Central Committee on whether to remain in the government.

Reunification talks resumed this month under UN auspices following a US diplomatic push aimed at reducing instability in the east Mediterranean. The Greek Cypriot negotiator, Andreas Mavroyiannis, held talks in Ankara on Thursday, marking his community’s First Direct contact with Turkish officials in almost 40 years of intermittent peace negotiations.

Kudret Ozersay, the Turkish Cypriot negotiator, met foreign ministry officials in Athens on Thursday, despite reservations voiced by the Greek government at the prospect of “four-way” talks on a settlement.

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