'Bad debt' emerges as the biggest specter plaguing Athens in the post-bailout period

Monday, 11 February 2019 11:34
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The pressing issue of "bad debt" burdening Greece's four systemic banks - a major concern of European creditors before and after the last bailout ended in August 2018 - has re-emerged with a vengeance on the country's political and economic scene this month.

In the wake of a series of high-profile statements over the recent period, a meeting is scheduled today between a trio to top ministers with banks' managements. It was Economy Minister and Deputy PM Yannis Dragasakis' quip of Greek banks possibly needing a fourth consecutive recapitalization - with taxpayers footing the bill - that sparked the latest concerns and speculation. The latter will be one of the three ministers meeting with bank officials.

According to reports out of Athens, the leftist and distinctly poll-trailing Tsipras government wants to renew a framework for the legal protection of primary residences with the current conditions, and possibly, include all types of NPLs initially allocated with primary residences as a guarantee.

Banks and creditors, conversely, want to lower the value threshold for properties under protection, to roughly 100,000 euros, and only for primary residences burdened with non-serviced mortgages.

The government, on its part, sent its proposal last Thursday, one which includes "haircuts" of loans and a subsidization of a monthly payment - via state coffers - along the lines of a so-called "Cyprus model".

Government sources have confirmed the disagreements with creditors and banks, although expressing optimism that the so-called "Katselis law" for primary residences' protection will be renewed before it expires at the end of the month.

The catchphrase used by the shaky leftist government is "protection of the working class home" from foreclosures and auctions, without however, defining what it considers as a "working-class" residence, i.e. with a value exceeding 100,000 euros, 200,000 or even 250,000 euros.

Negotiations are continuing ahead of a countdown for the first two elections of 2019 in Greece, with local government and European Parliament polls set for May, and with general elections coming no later than October.


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