ECONOMY

Borrowing rates remain at high levels

borrowing-rates-remain-at-high-levels

The cost of money is refusing to drop at any significant pace in Greece as borrowing remains stubbornly high for local enterprises and households in the face of low interest rates in the eurozone.

Small and medium-sized enterprises and the few households that are able to secure bank credit are burdened with rates that are twice the eurozone average.

In contrast, interest rates for deposits in Greece have converged to a great extent with those in the rest of the euro area, taking the interest for time deposits to 0.57 percent with a declining trend as the liquidity of banks is gradually being restored.

The reduction in deposit rates is fully compatible with the eurozone trend, where the average level came to 0.30 percent in July, although the picture varies from country to country.

The actual yields of time deposits in a series of countries are practically at zero, or even negative when inflation is factored in. In Greece, with the consumer price index standing at 0.6 percent according to the latest figures, the yields are in fact zero.

These are the main conclusions from the comparison of data from the Bank of Greece and the European Central Bank: They show that the average interest on loans up to 250,000 euros came to 4.90 percent in July, compared to 2.06 percent in the eurozone, while loans to SMEs saw their interest rise to 3.90 percent from 3.71 percent a month earlier.

Those rates actually appear relatively low because a considerable part of the new subsidies for corporations from European programs such as COSME bear a lower price thanks to the collateral they have for a section of the loan.

Market figures show that the actual rates banks charge companies that do not have an exclusive relationship with a single bank are higher by one or two percentage points.

The same applies to the mortgage loan rates that BoG figures showed to have averaged at 3.22 percent in July, while the actual rates are close to 5 percent.

Central bank data also showed a marginal credit expansion to corporations, with new loans in July adding up to 770 million euros. June has so far been the only month this year when issues exceeded 1 billion euros.