Household loans galore

Borrowing in Greece has two sides: Households have borrowed too much and businesses too little. A first glance at the figures makes for comforting reading, as household and corporate borrowing from banks corresponds to just 84 percent of gross domestic product, when the average rate in the eurozone stands at 129 percent. However, a closer look reveals that this low level is due to the relatively low level of business loans. In contrast, household loans have increased at a frightening rate, getting very close to the European average. In the eurozone, 60 percent of loans are to companies and 40 percent to households, whereas in Greece it is almost the reverse: Business loans account for 48 percent, against 52 percent for household loans. Consequently, it emerges that Europeans borrow in order to create new or expand existing business activities, while in Greece people borrow mainly to acquire a house and for consumption, chiefly buying products made by Greece’s European partners. Therefore, Europe borrows to expand its production base and Greece to buy the products of European and other industries. This ratio tipped further in favor of household loans in 2007, with consumer credit expanding at a much higher rate than business loans. This is due to low entrepreneurship in Greece, which is only to be expected in a country dominated by bureaucracy, where profit is seen almost as stealing and no models of business creativity are promoted. Part of the blame lies with banks, which are oriented toward consumption. Banks distribute credit cards and personal loans with great ease, even to people who have not even requested a loan, while demanding excessive guarantees from new entrepreneurs. An experienced businessman told Kathimerini that banks do not focus on the business plan and prospects of an enterprise, but on guarantees. As a result, even business ideas or ventures with great prospects in Greece find it hard to secure funding from a bank. On the other hand, bank officials underscore the particularities of the Greek economy, saying companies in Europe are bigger and have greater access to funding.