• The political alliances of the next day will decide critical decisions for banks, funds, and borrowers

The exit of EDEK and DIPA from the new Parliament leaves a political vacuum. For years, these two parties functioned as shock absorbers, particularly during periods of critical economic decisions.

According to information obtained by Brief, the Presidential Palace is expressing strong concerns, as Nikos Christodoulides loses the key parliamentary allies that allowed him to pass difficult legislation and build consensus on economic and banking issues. DIKO, despite its 8 seats, does not possess the numerical strength to act as a stable pillar for majorities, meaning that every crucial bill will now be subject to fierce negotiation.

In June, the decisive battle begins at the Supreme Constitutional Court regarding the "package" of five laws concerning foreclosures, the biggest institutional clash of recent years between the executive branch, Parliament, and banks. If the Court rules in favor of Parliament, banks will face restrictions on their collaterals, paving the way for overhauls in how non-performing loans are managed.

Conversely, if the laws are deemed unconstitutional, political pressure will return with greater intensity to a new Parliament that is even more aggressive toward banks.

AKEL, strengthened with 15 seats, and ELAM, which emerged as the third political force with 8 seats, are expected to dominate the rhetoric in favor of borrower protection and against banking practices.

However, the big question mark lies elsewhere: in the 8 seats held by the newly formed parties ALMA and Direct Democracy (Amesi Dimokratia). These two parties constitute the unpredictable factor of the new parliamentary term. If they align with anti-establishment forces and adopt a hardline stance against banks, a potential majority could be formed, capable of pushing forward legislation with serious repercussions for the banking system.

Already, political and economic circles are commenting that the proposal for a windfall tax on banking profits will return to the table. Social discontent over the gap between high lending rates and near-zero deposit yields provides explosive political fuel.

At the same time, credit management companies (servicers) and investment funds that control a large portion of non-performing loans are also entering the crosshairs.

The new Parliament, as leaked recently, is expected to demand strict controls, transparency in recovery practices, and an expansion of the social criteria for the "Rent-to-Mortgage" scheme.

Cyprus is entering a period where economic stability will not depend solely on growth indicators or technocratic decisions, but on the fragile balances of a fragmented Parliament, where political alliances will shift from vote to vote.

Source: Brief