Elections Coming, Greece Will Subsidize Bad Mortgage Loan Payments

FILE - A man walks outside the headquarters of the Bank of Greece, in central Athens, on Monday, Jan. 28, 2019. (AP Photo/Petros Giannakouris)

With Prime Minister and Radical Left SYRIZA leader Alexis Tsipras reneging on promises to help beleaguered homeowners during a more than 8 ½-year long economic crisis, the government now is planning to help some pay mortgages to prevent foreclosures.

Greece plans to pump as much as 1 billion euros ($1.1 billion) into its banks over the next five years by subsidizing a part of households’ mortgage repayments, the financial news agency Bloomberg said, as Tsipras is trying to counter the fallout with elections coming.

Under the plan, some households unable to repay their home loans will restructure their debts with the banks, with the state then paying part of the remaining monthly installments, the news agency said, citing three sources it didn’t identify.

Greece’s four largest banks are buried under some 88.6 billion euros ($100.37 billion) of bad loans, some 40 percent of their portfolios, and with a government official warning they would need another injection of state funds despite a previous 50-billion euro ($56.64 billion) bailout.

The banks have been hounding people to pay mortgages, credit cards and loans although many customers can’t because of repeated pay cuts, tax hikes, slashed pensions and worker firings, with austerity perpetuated by Tsipras, who said he would reverse it.

He also lifted a moratorium on foreclosures that saw banks confiscating homes despite sometimes violent protests in courthouses where auctions were being conducted, leading the government to authorize online seizures.

Breaking another vow, Tsipras also let banks sell off bad loans to vulture collectors continuing to chase debtors, apart from the former ruling New Democracy and its then-partner, the now defunct-PASOK Socialists, who owe 250 million euros ($283.21 million) they aren’t repaying and with immunity given bank officers who ok’d the loans.

The slowdown in mortgage payments has seen banks fall behind targets to cut the number of the bad loans and left them unable to provide business loans, although a number of business loans aren’t being paid either.

A new scheme is aimed at converting  a part of the banks bad loans into performing assets, helping them repair their balance sheets with the annual cost of the subsidy expecting to rise to 200 million euros ($226.57 million,) the report added.

The new framework will support households unable to repay their mortgages who are at risk of losing their primary residence, which could be a political disaster for Tsipras who has fallen far behind New Democracy in polls.

There will be income and property conditions for eligibility, while borrowers will lose the subsidy if they miss a payment for more than 90 days and the subsidy could amount to as much as a third of the monthly payment, giving indebted homeowners the same break that the banks got.

The plan, which emulates Cyprus Estia model, could give Tsipras a political boost instead of facing more outrage after he continued – and then increased – the hated ENFIA property tax surcharge he said he would scrap but continued on orders of international lenders.

That was done as one of the conditions to get a third bailout of 86 billion euros ($97.43 billion) in the summer of 2015 from the Troika of the European Union-European Central Bank-European Stability Mechanism (EU-ECB-ESM) he said he would never seek or accept.

Almost 8 billion euros ($9.06 billion) of band loans are currently protected under an expiring law passed in 2010 that prevents foreclosure of some primary residences, according to Bank of Greece’s data.

The government and banks agreed on a replacement framework for protecting primary residences although the Troika still hasn’t signed off on it with the creditors earlier insisting that homes should be taken no matter the political cost and with the plan not allowing across-the-board protection for all homeowners who can’t pay.

Greek banks have committed to reducing bad loans by 60 percent by the end of 2021 with a number of plans being considered, including one from the Bank of Greece that Tsipras rejected as he accused the bank’s Governor, Yannis Stournaras, and nine other political rivals of taking bribes from the Swiss pharmaceutical company Novartis although not a shred of evidence has been produced.