Plan waives interest on expired debts
The government is attempting to tackle the mountain of bad debts created by enterprises in Greece with a bill that will provide for a two-year payment plan and form part of Development Minister Nikos Dendias’s meeting on Wednesday with the representatives of the country’s creditors.
The proposed regulation will provide for a common means of handling banks’ nonperforming loans as well as debts to the state and social security funds while doing away with fines and penalties, allowing for the payment of debts in up to 120 tranches, according to sources.
The number of installments will be decided on a case-by-case basis, and if a debtor defaults on a tranche they will not be allowed to continue in the program but rather will face interest payments and the threat of penalties as before.
Dendias held a meeting regarding the issue with Finance Minister Gikas Hardouvelis on Monday and, according to the statements of a government official, the country’s creditors have not expressed any major concern about the regulation. On the contrary, the lenders’ representatives appear to have given the plan their blessing, while asking for figures on the fiscal impact that writing off the interest and penalties would have on tax authorities and social security funds.
Development Ministry officials said that the plan concerning bad loans will not affect the overall capital adequacy of banks. In fact the credit sector will benefit from tax exemptions in the future, while funds amounting to 20-22 billion euros concerning provisions for bad loans will be released.
According to the same estimates, if 18 percent of the enterprises that are currently not servicing their debts join the payment plan and start paying, there will be net benefits for the state and the social security funds.
The basic principle of the plan is for a voluntary agreement between creditors and debtor for the extrajudicial arrangement of debts. Small enterprises with a turnover of up to 900,000 euros per year and up to nine employees will secure the automatic involvement of the state in the plan if their crediting banks agree to participate.
