Valdis Dombrovskis, Vice President of the European Commission, warned on Sunday of “potential instability” in Greece’s recovery due to its increasing amount of non-performing loans (NPLs).
In an interview with the Athens News Agency, the EU official explained that the mountain of NPLs makes the Greek banking system “vulnerable,” and “hinders loans to the real economy.”
Greece has by far the highest rate of NPLs in the European Union. Over 40 percent of loans in the country are considered “non-performing”, compared to the EU average of 3.4 percent.
“With this high level of NPLs, of course there need to be some systemic structural solutions, both on workout of the current stock of NPLs but also addressing the root causes,” Dombrovskis said.
The EU commissioner also underlined the dangers Greece may encounter returning to the markets. “The tendency is clear that Greece is returning to the markets,” he stated. Still, its return after being excluded from the markets for nine years “is a very delicate task” which does not leave much room for either “maneuvers” or “mistakes.”
On a more hopeful note, Dombrovskis noted that Greece has already implemented major reform agendas during three consecutive programs. Each of these programs has successfully carried out reforms which strengthen the fundamental pillars of the Greek economy and increase its competitiveness in the world markets.