Greece rushes to clean up banks and bad loans | Business | Economy and finance news from a German perspective | DW

Walk into any Greek bank and ask for a loan, and you are likely to come out empty-handed and planted. But not if you are Pavlos Polakis.

The chain-smoker health minister obtained near-instantaneous approval for a gigantic 100,000-euro ($ 114,000) consumer loan this month, claiming he desperately needed the cash to cover personal and political expenses.

The revelation has sparked fierce political debate and an urgent investigation by an Athens prosecutor after the governor of the country’s central bank accused Polakis of calling him in to complain, but also making an “absurd” attempt to prevent him from investigating. the controversial loan.

In urgent court testimony this week, banker Yannis Stournaras said the minister, also a prominent aparatchik from Prime Minister Alexis Tsipras’ left-wing Syriza party, recorded the heated telephone exchange and later leaked its content to local media.

Inopportune scandal

If accused of illegal wiretapping, Polakis could face up to 10 years in prison, a scandal the government could surely do without before key national elections in the coming months.

But the Greeks are still scandalized.

“It’s called arrogance and abuse of authority,” snorts Thomas Barouhas, a baker from Athens. “We are caught in a rut,” he says, pulling trays of bread from a wall of steel furnaces, “struggling to pay off our debts, our loans, and the exorbitant taxes imposed during the financial crisis, and government ministers like Polakis are walking with easy loans. “

“There is not a business entity or a household in Greece that is not eager for a cash loan,” he adds. “I need a third of what Polakis got to renovate and start my bakery. But the mere suggestion makes my bank laugh.”

Saving money is almost impossible

A recent study by a leading group of experts in Athens showed that seven in 10 Greeks struggle to cover monthly expenses and accumulated debts while the country’s anemic banking system continues to limit loans after eight grueling years of austerity. More than 85 percent of those surveyed say they are still unable to set aside even the smallest of sums for savings or retirement; about half of them anticipate that the economy will worsen further next year despite Greece’s exit from austerity.

Greece’s shift from a fiscal basket case to a country with continuing budget surpluses was crucial in the lenders’ decision last August to free the worst economic player in the European Union from its bailout shackles.

The country’s banks may have survived the economic depression, but they have been forced to pay a heavy price; they became barely profitable institutions, unable to lend.

Worse still, its balance sheets are still littered with non-performing loans (NPL) that represent around 85 billion euros, or 40 percent of its balance sheets.

Greek baker Thomas Barouhas is not happy with the problems ordinary people in his country have faced when trying to obtain loans.

The difficult mortgage situation

Mortgages are behind the biggest malaise. They account for around a third of all bad loans and are mainly linked to cash-strapped Greeks who were left out of work and unable to pay their mortgages due to the crisis.

Still, a lot of more expensive loans include what the locals call batahtzides– Reluctant lenders to pay, hoping to benefit from possible write-offs or lenient legislation.

The Polakis affair underscores that, many Greeks say.

“He may be paying off his debts now,” said Sotiris Dimitrious, a 67-year-old butcher. “But who can say if the loan that he obtained so easily as a minister will go unpaid in the future.”

“Who are the banks ultimately going to go after?” I ask. “Me, a nameless taxpayer with no cash or connections? Or him or any other high profile person?”

“Eight years of financial crisis and tight supervision were supposed to fix Greece and its culture of failed practices, not prolong them.”

The urgency of Greece’s non-performing loans has left the country’s government and central bank scrambling to unite a set of radical plans. A new insolvency law has also been drafted in recent days, preventing banks from foreclosing on the primary residences of most homeowners.

Taking of Brussels

But on Wednesday, the EU’s executive arm, the European Commission, rejected those plans, saying they were “too generous”, insisting that Greek banks foreclose on lenders who defaulted on their home loans.

Protecting bad payers, the Commission said in its report, would raise “serious concerns regarding the impact of the law on the culture of payments and bank balances … [Its] the overall design could allow for strategic failures. “

With elections scheduled for the next few months, tougher legislation addressing Greece’s growing caste of indebted moneylenders could further hurt the government’s decline in popularity.

“It’s sure to upset a lot of Greeks who can’t pay,” said Evangelos Davalos, a 44-year-old merchant. “But it is more important to end the mentality and practice of these opportunists who are strangling the banks and the economy as a whole.”

Greek banks remain the slowest in tackling cargo among the top 10 EU countries ranked by default rate, according to UBS. Experts say the faster they move to clean up their loan books, the easier it is for them to loosen lending standards, helping businesses and the economy grow.

“I don’t expect anything,” said Barouhas, the baker. “But maybe things can get better enough for my kids. That’s the hope we all cling to.”

Greece has until March 11 to produce a revised plan and a host of other reforms or else it will face a € 1 billion freeze in desperately needed funds this spring, ahead of national elections.

About William G.

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