Bad Loans in Greece Hit $73.2 Billion

Many customers of Greek banks have been unable to repay loans because of pay cuts and tax hikes. (Reuters)

Buried under big pay cuts, tax hikes, and slashed pensions but pressed by banks to cover mortgages, loans and credit cards in full, 25 percent of Greeks have given up and stopped paying, driving the total of Non-Performing Loans (NPL’s) to  57 billion euros ($73.2 billion,) nearly one-fourth of the country’s 232.32 billion euros ($298.73 billion) Gross Domestic Product, or GDP.

The startling figure puts additional pressure on Greece’s reeling banks which are expecting a second re-capitalization, this one for about $64.29 billion and with two state banks already being pushed into private hands because of near-insolvency.

With Prime Minister Antonis Samaras’ uneasy coalition government ready to impose another $14.6 billion in austerity measures, the numbers of Greeks who can’t pay loans and likely to default outright is expected to rise sharply.

Most of the bad loans come from the business community, which is 33 billion euros ($42.43 billion) behind, followed closely by mortgages at 15 billion euros ($19.28 billion) while consumer loans and credit card bills more than three months behind account for some 30 percent of the NPL’s, despite pressure being applied on customers by banks and collection agencies.

A worrying factor is that Greeks have been unable to pay even though banks have arranged more favorable terms for some 665,000 loans in the batch, which total 20 billion euros ($25.71 billion.) The major opposition Coalition of the Radical Left (SYRIZA) party has been pressing the government to mandate better terms for overwhelmed consumers and the Development Ministry is reportedly working on regulations to help over-indebted households.

Another change planned is for the extension of the repayment period of housing loans concerning main residences, which currently stands at 20 years. This could be stretched to up to 40 years, based also on the age of the borrower.

The Development Ministry is also promoting a regulation for a 30 percent reduction in the monthly installment borrowers have to pay to coincide with the average rate of pay cuts and to force banks to remove the names of debtors from lists showing them as deadbeats to create an amnesty if the customers can repay a part of their loans.