Under an onslaught of 63.6 billion euros in non-performing loans and many people unable to meet payments after three years of austerity measures, Greek banks said they’ve been left virtual-ly unable to lend.
As default rates on mortgages approach 23 percent, the government said it would lift a ban on mortgage foreclosures for homes less than 200,000 euros that expires at the end of the year to help bank balance sheets, but that drew protests among lawmakers in the ruling parties of the country’s coalition government.
The non-performing loans have stifled the ability to restore desperately needed liquidity to a stagnant economy, bank officials said, and coincided with a drop in deposits from 237 billion euros at the end of 2009 to 162 billion in June.
Counting loans and credit cards, the overall rate of bad loans in Greece rose from 5 percent in 2008 to nearly 28 percent in March. Banking officials expect June figures to approach 30 percent.
Greek banks have been rocked by a series of blows, losing some 37.7 billion euros when a previous government in 2011 imposed 74 percent losses on investors to write down the country’s debt by $134 billion.
Since then, to keep them solvent, the banks have received 50 billion euros in recapitalization from the government, using bailout funds given by international lenders, but the non-performing loans are undercutting their ability to help the economy, officials said.
“This is the result of the recession. The main problem it could cause is that the calculations were based on [bad loans] being 12 percent to 15 percent and Greece may find itself in a position where the banks will need extra money or they wouldn’t be able to restore liquidity,” Aggelos Tsakanikas, head of research for the Athens-based Foundation for Economic and Industrial Research (IOBE,) told Southeast European Times.
Finance Ministry officials said it’s critical to slow and reverse the rate of non-performing loans not only for restoring liquidity to the economy but also for securing banks’ capital bases.
With the EU-IMF-ECB Troika also pressuring Greece, the coalition government of Prime Minister Antonis Samaras, the New Democracy Conservative leader, and his partner the PASOK Socialists, said they will allow banks to begin foreclosures on homes starting Jan. 1, 2014. As many as 15,000 properties could face foreclosure.
Antonis Klapsis, head of research at the Konstandinos Karamanlis Institute of Democracy, said Samaras has no choice but to lift the ban if he wants to see any chance of economic recovery next year. “It’s very populist to say the banks are trying to get people’s houses. No bank wants to get anyone’s house. They just want to get their money back,” he told SETimes.
The government may allow homeowners to have a five-year period between stopping mortgage payments before a home is seized but that would be retroactive and foresees 6,000-7,000 homes a year being taken.
With Greece floating the idea of a “haircut” on its loans to the Troika, the major opposition Coalition of the Radical Left (SYRIZA) has called for debt forgiveness for all Greeks below the poverty line.
New Democracy and PASOK, which want Greeks to pay their loans in full, also have been criticized for failing to repay 250 million euros they owe banks, which aren’t pursuing them. The government has also given immunity to the bank officers who gave them the money.
Maria Ioannou, a civil servant who’s been waiting almost a year to get her pension, said she has no sympathy for the banks. “I asked the banks to give me a grace period and to restructure because I’d have a zero income and my pension was being cut. They said no,” she told SETimes. “I had no choice but to default even though I wanted to pay.”
(Used by permission of Southeast European Times, www.setimes.com)
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