Household debt growing fast

The debt of Greek households is rising rapidly; according to Bank of Greece data, it represented 25 percent of the country’s domestic product (GDP), or 37.8 billion euros, at the end of September, from 22 percent at the end of 2002 and 18 percent a year earlier; nevertheless, it remains well below the eurozone average, which stands at 48 percent of GDP. However, central bank officials are reportedly expressing concern that the full liberalization of consumer loans as of June 30 this year has accelerated the rate of growth of household debt and that it could fuel inflationary pressures after a period in which upward trends had stabilized. The annual rate of increase in consumer loans was 23.6 percent in September, from 23.2 percent in August and 22.6 percent in July. Total lending to households was up 29.7 percent while mortgages increased 30.1 percent. Greek inflation hovers steadily above 3 percent, about double the eurozone average, threatening the economy’s competitiveness and employment. The Foundation for Economic and Industrial Research has estimated Greek competitiveness at 16 percent below the EU average. The central bank said in its recent interim report on monetary policy that Greece’s high growth rates are based on domestic demand boosted by lending, and recommended a more export-fueled growth policy helped by more foreign investment.