By Yiannis Papadoyiannis
The number of households who are unable to pay their debts is showing a meteoric rise due to the deterioration of economic conditions and the increase in taxation, with the difficulty being faced by many even to repaying mortgage loans showing the extent of the problem.
Bank officials estimate that at the end of 2012 some 20 percent of borrowers were unable to service their housing loans, which amount to 15 billion euros. Another 11.1 billion euros in consumer loans is not being serviced as almost 37 percent of loans in this category are qualified as bad.
The increase in nonperforming loans (NPLs) is an inescapable effect of the dire economic conditions and soaring unemployment that is approaching 27 percent. According to data from the National Bank of Greece, in September 2012 it had received 17,194 applications from clients to have their debts settled as they were unable to pay them. In December 2011 that number had stood at 5,930, which means the increase was more than 200 percent within just nine months.
The National Bank loans that were affected by legislation for the protection of borrowers in weak social groups (with a suspension on auctions for debts below 200,000 euros) added up to 1.05 billion euros in September 2012, from 365.7 million euros in December 2011, representing an increase of 186 percent.
The picture presented by National is but a reflection of the the general situation in the sector, hurting mostly the systemic banks: National, Eurobank, Alpha and Piraeus are facing a rapid deterioration in their loan portfolios.
Bank officials told Kathimerini that in 2012 there was an expected slump in economic activity as a result of the back-to-back general elections in May and June and widespread concern about a possible Greek exit from the eurozone.
The only redeeming feature is that in the last few months there has been a slowdown in the creation of new NPLs. However, for the picture to show a significant improvement, the market will immediately require growth policies (privatizations, the restarting of construction of major highways etc) that will bolster economic activity and contribute to creating jobs.