Troika Backs Off Foreclosures

With negotiations at a standstill over the size of a budget gap in 2014 and a series of delayed reforms, Greece’s international lenders said they have withdrawn their insistence that banks be allowed to foreclose on people who can’t afford to pay their mortgages because of crushing austerity measures but target only those who are taking advantage of a ban against confiscating homes.

Simon O’Connor, spokesman for European Economic and Monetary Affairs spokesman Olli Rehn said on Dec. 2 that the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) doesn’t want the moratorium lifted fully as it had previously demanded but only to prevent homeowners from “systematically abusing” the protection it offers,

He also suggested that it’s up to the government to protect people who would lose their homes because pay cuts, tax hikes and slashed pensions have left them unable to pay.

Finance Minister Yannis Stournaras had been pushing for the foreclosures as well with banks pressing the government to let them go after homes even of those who legitimately couldn’t afford to pay because the government had broken its contracts with workers by cutting their pay.

Prime Minister Antonis Samaras, the New Democracy Conservative leader and his coalition partner, Deputy PM and PASOK Socialist leader Evangelos Venizelos, said it was important for banks to regain the ability to help recapitalize themselves by foreclosures even while insisting that those who couldn’t afford to pay would be exempt.

They acknowledged only a small percentage of homeowners are using the ban to not pay but didn’t explain if that was the case how taking their homes would help the banks if the vast majority of mortgagors would be protected.

O’Connor responded to journalists’ questions in Brussels by saying that the current ban on banks repossessing homes with a value of less than 200,000 euros if customers have stopped paying their mortgages also protected those who had the ability to pay but just stopped doing so.

“We want a solution that will protect the truly vulnerable but will also allow banks to put things order,” said O’Connor. “The general moratorium on foreclosures allows for systematic abuse from people who are trying to get away without paying.”

The foreclosures issue has been one of the main obstacles to Greece and the Troika reaching an agreement that would help conclude the latest review of the Greek adjustment program and clinch the release of the next tranche of one billion euros ($1.37 billion).

After blistering criticism, the government began to distance itself from lifting the foreclosure ban with a number of lawmakers from the ruling parties, which has only a four-vote majority in the 300-member Parliament, saying they wouldn’t go, threatening a mini-rebellion that could have even brought down the government some analysts said.

Venizelos, changing his tune, said he conveyed that uncertainty when he spoke on the phone with Rehn and German Finance Minister Wolfgang Schaeuble,  hardliner on austerity, on Dec. 2.

Reports in the Greek media hinted that IMF envoy Poul Thomsen had warned the Greek government to prepare accommodation for people who lose their homes rather trying to resist efforts to remove, or change the terms of, the foreclosure ban. There are almost no government programs now for the homeless, which is left to NGO’s to deal with as Greece has almost no safety net for the vulnerable or dispossessed.

These reports were not confirmed or denied by the troika but O’Connor said that the Greek banking system was not in a position to allow some homeowners to continue avoiding mortgage repayments even though the government has given the banks 50 billion euros ($67.74 billion).

“The protection of the socially vulnerable is the role of the state, not the banking system,” he said in Brussels. He didn’t explain why it was the role of the state to protect privately-owned banks.