European Commission VP and Commissioner for the Euro and Social Dialogue Valdis Dombrovskis emphasized that the creation of a “bad bank” to better deal with the acute problem of non-performing loans (NPLs) in Greece is an issue that the country itself has to decide.
Nevertheless, Dombrovskis’ comments, in an interview published by a Greek newspaper over the weekend, come after the approval last week by the Commission of an action plan submitted by Athens to ameliorate the “mountain” of debt entailed in NPLs. The latter weigh heavily on Greece’s thrice-recapitalized four systemic banks.
The action plan includes, among others, a proposal for a “bad bank”, where the most distressed NPLs would be deposited.
European creditors now appear increasingly positive to such a prospect, given that NPLs in Greece increased in the first half of 2017, with only the third quarter of 2017 showing a decrease.
Greece continues to hold the unenviable “top spot” in terms of NPLs in the Eurozone, at 46.7 percent, followed by Cyprus (32.1 percent), Portugal (14.6 percent) and Italy (12.1 percent).
The figures signify that even if economic growth permanently returns to recession-plagued Greece, several years will be necessary to significantly reduce NPLs.
On the “down side”, creating such a corporate structure will necessitate up to 20 billion euros, with no source of funding appearing on the horizon as yet.
On his part, Dombrovskis told the Athens weekly “RealNews” that Eurozone member-states will be able to create national institutions to manage NPLs, if they want, within the framework of the ERBD’s directive and the Commission’s rules regarding state support.
