Lending rates would top 35 pct after euro exit

Lending rates would soar to above 35 percent if Greece were to exit the eurozone, according to a National Bank of Greece report, as the devaluation of the new national currency by 40 percent would take the inflation rate to over 32 percent.

Such a development would force the monetary authorities to raise lending rates at banks to at least five percentage points above the inflation rate, that is at 37 percent or higher.

The cost of such a development would be unbearable for households and enterprises to repay the loans they have taken out. For instance, the monthly installment of a 20-year housing loan of 100,000 euros with a 5 percent rate would soar from 660 euros today to the equivalent of 3,000 euros in the new national currency.

Bank officials suggest that after a decade of low interest rates, the country’s economy is threatened with a return to what the cost of money was like back in the 1980s, when lending rates amounted to 30 percent, rendering it prohibitive for companies and households to borrow.


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