After six-and-a-half years of credit contraction, Greek banks are hoping that 2017 will be the first that the amount of loans issued will expand. Sector officials estimate that if things go smoothly next year and the country is not plunged into fresh turmoil, then 2017 could see a 5-billion-euro increase in loans, with the credit expansion rate estimated at 2 percent.
Of course it is far from certain that things will go smoothly. It depends on a series of factors such as how swiftly the second bailout review is completed, when Greece enters the European Central Bank’s bond-buying program, how the return of deposits evolves, when the capital controls ease, if the positive climate is consolidated, if there is political stability and if the uncertainty is definitively banished.
The absence of any one of those factors could undermine the much-desired return to expansion next year.
After all, similar prospect had been forecast for 2014 and 2015, but the political developments and major uncertainty compromised the return to normality.
The picture as regards financing the private sector – households and corporations – has been particularly negative over the last few years.
The net flow of credit has been in the red for 78 months, as the loans being repaid have outweighed those being issued: The loan balance shrank from 257.47 billion euros at the end of 2010 to 197.76 billion in October, that is about 60 billion euros.
Loans to corporations fell from 130 billion in December 2010 to 93 billion euros in October 2016, while loans to households dropped from 119 billion six years ago to 91 billion.
Senior bank officials say that the main conditions for the increase in loan issues to materialize next year is an improvement in the economic climate, a restoration of trust and the launch of investments and asset purchases by enterprises. This requires the completion of the second review by the end of next month at the latest, as besides the strengthening of confidence it will pave the way for the accession of Greece to the ECB’s bond-buying program, bank officials stress.