Greek banks are ever more fearful of the bad loans monster, as deteriorating financial conditions could lead to the doubling of loans in arrears that at the end of 2008 amounted to about 10 billion euros. According to Bank of Greece data, the index of loans in arrears stood at 4.8 percent last September, while bank officials estimate that 2008 closed with the index at between 5 percent and 5.5 percent. The stress tests of banks and the Bank of Greece, which aim at gauging loans that could pose a risk, point to a considerable increase in bad loans, which may range between 2.5 and 5 billion euros. Some pessimistic estimates even suggest that the index might rise to as high as 10 percent of all loans this year. Such a development would take bad loans to a level above 20 billion euros and have serious impacts on the capital situation in the sector. Senior bank officials acknowledge the deterioration in the quality of loan portfolios but note a particularly worrying development. This is none other than the sharp increase in mortgage loan arrears, which are traditionally seen in Greece as a safe haven. Bad housing loans in September came to 4.6 percent, up from 3.6 percent in December 2007. This reflects the increasing difficulty of households to meet even their basic obligations. Deteriorating financial conditions and declining economic growth have also had serious impacts on entrepreneurship. Companies must live with a drop in revenues and rising loan servicing costs. The Bank of Greece expects the impact to be greater in construction, shipping, tourism and retail trade. The rise in bad loans will lead to an increase in provisions, which according to stress tests will be as high as 50 to 80 percent, hurting bank profits. Deutsche Bank forecasts that Greek bank profits will be slashed in 2009 and 2010 due to higher provisions. In 2009 it expects profits to fall for National Bank (by 37 percent), Eurobank EFG (57 percent), Alpha Bank (33 percent) and Piraeus Bank (81 percent).