BAD LOANS

Particularly for vulnerable households, no one was threatened with losing their primary house since the law imposes a freezing on any legal action after their inclusion in the intermediary programme.

The data published by the EBA is more in line with the pessimistic estimates by the BoG, confirming that in the danger zone there are loans of 10.98 billion euros out of a total of 22.2 billion euros of loans that have been suspended.

The basic plan of the government foresees that a program similar to the "Bridge" program will be created for small businesses and professionals.

Speaking at a press conference held to present the bank's program to support tourism businesses, the head of Eurobank noted that one of the effects of the crisis will be the increase in non-performing loans (NPLs). "I am optimistic that this time the problem will be much smaller and manageable. The banking system has better know-how in terms of managing bad debt", he said.

Bank officials say that it is too early to draw any safe conclusions about the level of new bad loans, adding that all forecasts for the domestic economy predict a strong recovery in 2021. Regarding this year's challenges, they highlight that the ECB has provided tools and flexibility for banks to support sustainable businesses and minimize the impact on their balance sheets.

In recent weeks, the government has picked up efforts on this front, as a very small number of loans (tied to primary residencies) have qualified for favorable treatment, indicating that a wave of forced home sales is coming up, in what may trigger significant opposition at a community level.

In recent weeks, it appears that talks on the issue have frozen amidst objections from the European Central Bank (ECB ) over accepting senior debt to be issued by the program as having no risk, while Greece has rejected a proposal to issue special purpose state bonds to support the 12 billion euros of guarantees.

"The scheme itself is not a panacea for resolving the asset quality problem in the banking system, given that we estimate only up to around 36 billion euros of NPEs can be dealt with through this scheme compared to around 71 billion euros of outstanding NPEs in the system as of September 2019," Nondas Nicolaides, Vice President – Senior Credit Officer at Moody’s Investors Service, told Business Daily.

Bad loans are not something new in Greece. In fact, they are as old as the crisis itself. However, no previous Greek government showed any determination to address the issue, as international creditors adopted a similar stance. Since the crisis arose in 2008, Greek governments kept putting the issue on the back burner by blocking efforts by lenders to recover nonperforming loans (NPLs), providing loan holders with protection.

The loans, reaching 3.4 billion euros, were issued prior to the crisis to vulnerable social groups, such as fire and earthquake victims, residents on remote islands, Roma, farmers, and small business owners. Out of the total amount, 2.1 billion euros have gone to individuals and 1.3 billion euros went to small businesses.