Bad Loans Threaten Bank Plans

Some 77 billion euros in bad loans is jeopardizing Greek government hopes that a bank recapitalization will kick start lending.

ATHENS – Some 77 billion euros in non-performing loans during a crushing economic crisis is jeopardizing Greek government hopes that a bank recapitalization will kick start lending and bring balance to the sector.

About 43 billion euros of that is in corporate loans, especially fish farming and coastal shipping, while Greeks besieged by austerity measures have also been unable to pay their loans, credit cards and mortgages.

Bankers are working toward restructuring loans after great reluctance to do so, as they had been insisting that people who couldn’t pay had to pay, although exempting the ruling parties of Prime Minister Antonis Samaras’ New Democracy Conservatives and his partner the PASOK Socialists, who together owe 250 million euros in bad loans.

They aren’t being chased for the money with banks relying on the government to come up with 50 billion euros in recapitalization after being pushed into difficulty when a former administration under PASOK stiffed investors and bond holders with 74 percent losses.

The results of the European Central Bank’s (ECB) ongoing stress tests on 128 banks across the Eurozone, including four Greek lenders, look like they will not be made public for some time yet.

In October, the banks undergoing the stress tests – among which Greece’s National, Piraeus, Alpha and Eurobank – will receive analytical reports and have to submit proposals within 15 days as to how they plan to cover any capital gaps. They will have to implement these measures within six to nine months.

So far, the government believes it will have to kick in about 4 billion euros more to help the banks, although it could be as high as 5 billion euros.

In the meantime, heavily-indebted Greek households who were promised help and debt restructuring plans by the government have been ignored.