Some 20 percent of the country’s bad loans, or about 20 billion euros, is owed by so-called “strategic defaulters” and constitutes both corporate and household credit, according to the governor of the Bank of Greece, Yannis Stournaras.
Strategic defaulters are borrowers who refrain from paying their debts to lenders in order to take advantage of the financial crisis even though they are able to pay their dues. Stournaras noted that tackling nonperforming loans constitutes the biggest single challenge not only for banks but for the country’s economy in general.
Bad loans across the European Union amount to 900 billion euros, of which 100 billion concerns Greece and its banks. If the NPLs are efficiently tackled – especially those held by strategic defaulters who can pay – then the banks will obtain a source of revenues for the coming years.
The issue of strategic defaulters has repeatedly been highlighted as crucial, with the BoG saying in its latest monetary report that “the complexity of the legislation often leads to decisions that practically protect borrowers who are not objectively unable to service their loans.” In other words, the various legal clauses and the inefficiency of the Greek legal system discourage many borrowers from seeing their obligations through.
Banking sources estimate that some 40 percent of the people who have filed for protection are not only able to service their loans but also have very high deposits in bank accounts.
The general picture as regards NPLs in Greece is particularly negative: Out of a total balance of 204.5 billion euros owed by corporations (96.5 billion), the self-employed (13.5 billion) and households (94.5 billion), more than half is either classified as bad (delayed by over 90 days) or on the verge of becoming bad.
Bank officials say that unless the issue is tackled conclusively, the banking system will not be able to stabilize and actively contribute toward the financing of enterprises and households so that the economy can start to recover.