Nonperforming loans have reached a record level of 57 billion euros, as they go hand in hand with soaring unemployment that has already hit 25 percent and could grow further if recession forecasts for the next couple of years prove true.
With one in every four loans not being repaid for more than three months, the bank system is feeling the pressure, leading to additional capital requirements that are expected to aggravate the state debt further.
The greatest part of the bad loans derives from business activity, accounting for some 33 billion euros of loans that are not being repaid. Bad mortgage loans come close behind, as they are approaching a record 20 percent of all housing loans, amounting to 15 billion euros. Consumer loans and credit card bills that are not being repaid add up to 30 percent.
Another worrying factor is that nonperforming housing and consumer loans have reached this level despite the fact that banks have proceeded to favorable arrangements for some 665,000 loans totaling 20 billion euros.
The Development Ministry is already working on changing the legislation for overindebted households. The main changes will concern the continuation of loan repayments by borrowers who seek to benefit from the legislation. Currently installment payments are frozen until borrowers’ cases are heard. The amount of the installment will be determined by the loan recipients who apply for protection according to the law. The change in legislation is aimed at borrowers avoiding accumulating more debt until their cases are heard, as well as reducing abuse of the law by borrowers.
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.
Furthermore, in cooperation with banks, the Development Ministry is promoting a regulation for a 30 percent reduction in the monthly installment borrowers have to pay. This amendment will reach Parliament along with the withdrawal of the names of borrowers who despite being blacklisted for not having repaid their loans since 2009, have managed to pay their dues since then in spite of the crisis. This will be a form of amnesty, used as an incentive for debt payment.