Bending to demands from international lenders, Greek Prime Minister Antonis Samaras’ coalition government will let banks foreclose on homes of customers, many of whom have suffered big pay cuts, tax hikes and slashed pensions under austerity, setting aside a bill that would have provided debt relief and with no measures geared toward directing banks to allow restructuring of loans.
The move could severely test the administration of the New Democracy Conservative leader whose government has a shaky thin five-vote majority in the Parliament even with the backing of its partner, the PASOK Socialists, who are also going against their party’s platform to let banks confiscate even primary homes of people who can’t afford to pay.
Finance Minister Yannis Stournaras said the freeze on foreclosures will end and banks will be allowed as of Jan. 1 to start taking people’s homes. “It auctions aren’t liberalized then banks will collapse,” from bad loans, he told the newspaper Real News.
He didn’t mention the debt relief plan nor allowing mortgagors to restructure loans. Each time the government moves to imposing additional austerity measures it says the economy will collapse unless it does.
A handful of MP’s from the ruling parties said they are unhappy with the idea, with one saying earlier it could spark “civil war,” but they are expected to be talked to and persuaded to back the plan. Samaras and PASOK leader Evangelos Venizelos have in the past ejected lawmakers fro the party for not following their orders on how to vote. Greek MP’s generally are required to vote the way their party leaders direct them.
Even though they are getting 50 billion euros ($65 billion) in recapitalization loans from the government – PASOK and New Democracy owe banks 250 million euros ($313.16 million in bad loans but aren’t required to pay back to the banks dependent on them – many Greek banks have been insisting customers pay their loans, mortgages and credit cards in full despite losing nearly half their disposable income. That has created a 42 percent default rate.
Banks and the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) have been pressuring Samaras to lift a ban that expires at the end of the year that bars banks from foreclosing on homes. The banks want to take them and auction them off.
The Troika has already put 38 billion euros ($50.67 billion) into rescuing Greek banks who were put into financial hot water when Venizelos, who was then finance minister in a previous government, imposed 74 percent losses on private investors, nearly wiping out small bondholders in the Diaspora and destroying Cyprus’ banking system in the process.
The Troika, which has spent about 38 billion euros ($50.67 billion) between them to rescue Greek banks, is squeezing Athens to take measures to clean up lenders’ balance sheets and institute reforms to insure that banks get paid first.
Sveral lawmakers from the country’s two-party ruling coalition said they still oppose foreclosures although in the past when they’ve voiced some dissent they’ve been brought into line. New Democracy MP Sophia Voultepsi earlier this month said lifting the ban was a bad idea. “People will take their shotguns… a collapsing property market is better than a civil war,” she said.
Another 11 lawmakers from New Democracy and its junior coalition partner, the Socialist PASOK party, are pushing for the freeze to be extended, newspaper Eleftherotypia reported which could put Samaras in a bind and test whether his government can stay together. Stournaras however said, “There will be social and economic criteria to protect the really needy” but he didn’t say what it would be.
Property foreclosures have already triggered protests in other indebted, crisis-hit European countries such as Spain. Greece is in the sixth year of a deep recession with 1.4 million people out of work and more than 110,000 businesses closing in the last three years. The country is being kept alive by two bailouts from the Troika totaling $325 billion but more could be needed yet, Germany’s central bank, the Bundesbank reported.
Greece’s auction freeze currently covers first homes worth less than 300,000-495,000 euros, depending on whether owners are married and have children. Some 80 percent of Greeks own their homes but 29 percent of people with mortgages aren’t paying, which could mean scores of thousands of homes would be seized and add more people to the ranks of the homeless.