ECONOMY

Safety net to protect poor debtors from repossessions

The government is planning to end a ban on house repossessions from 2014 while creating a safety net for financially challenged borrowers by introducing specific criteria based on household income.

The principles of the new policy addressing bad loans to banks were discussed in a meeting at the Development Ministry with the troika on Thursday. The details will be hammered out with technical experts from the European Commission, European Central Bank and International Monetary Fund with a view to an agreement being reached in December.

Development Ministry sources said that issues such as whether borrowers are cooperating with lenders and what would be considered acceptable spending for them to maintain a respectable standard of living would be considered. With the assistance of the Hellenic Statistical Authority, the ministry will also be establishing a standard monthly cost of living rate that can be used to determine how a borrower should be dealt with by banks or courts when forfeiting on his or her loan terms.

Even with the ban lifted, however, borrowers will still be able to safeguard their primary residence provided its value does not exceed 150 percent of the tax-free threshold for the acquisition of a primary residence.

The ban on house repossessions was established in September 2009 to protect borrowers from losing their primary residence over debts to a bank of up to 200,000 euros. It has since been extended several times, most recently until December 31.

A further extension for another six months appears unlikely, but if there is no agreement with the troika by year-end it is possible, albeit not for as many as six months, in order to avert social upheaval.

The issue is so sensitive that the government and the troika agreed yesterday not to make any statements until there is something concrete to announce.