EU warns Cyprus new legislation softening foreclosures law clashes with rescue deal's terms

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The European Union is warning Cyprus that it may be flouting the terms of its multibillion-euro rescue package after the country's parliament approved legislation softening a crucial foreclosures law.

Though legislators have approved a law that significantly cuts the time banks need to seize and sell off property in order to tackle a huge number of bad loans, they backed several other measures that give additional cover to borrowers, including writing off the outstanding amount of a loan once property is foreclosed on.

Simon O'Connor, a spokesman at the European Commission, said Wednesday that some of those laws "aren't compatible" with the bailout's terms.

He said euro area members will hear how Cypriot officials plan to deal with this at a meeting this Friday of the currency zone's finance ministers.