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Greek Banks Relieved by Freeze on Foreclosures

banksThe American newspaper, The Wall Street Journal, commented on the recent decision of the Greek government to extend for one more year, the suspension of foreclosures on primary residences.
The vote on the law governing foreclosures is described as an “unusual Christmas gift” for Greek banks. According to the article, Greece’s largest four banks (National Bank of Greece, Piraeus Bank, Alpha Bank and Eurobank), which collectively control more than 90% of the market, had been pushing for this result despite disagreement by the Troika. The article underlines that this is not the way banks usually operate; in general they will try to get rid of borrowers who have defaulted.
This highlights the scale of the problems facing the Greek banking system, which after six years of recession and the collapse of the property market, holds around 70 billion euros of bad loans or one-third of the country’s GDP.
As reported, about 24% of Greek mortgages (17.4 billion euros) are in default and real-estate prices have decreased dramatically. Forcing the banks to foreclose on lapsed mortgages would be a disaster and could end up driving prices down further.
The Greek Government, as well as the banks and their borrowers are in favor of a calm and measured approach. According to a leading Greek banker “We have no interest or desire, or the administrative capacity, to turn our banks into real-estate agencies.”
 
 
 

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