Greeks are burrowing into debt

Personal debt shot up dramatically over the last year, and Greeks now owe banks a total of almost 50 billion euros, according to figures made public by the Bank of Greece (BoG) on Wednesday. The central bank’s calculations indicate that at the end of August, overall debt, including mortgages, for the country’s households was up 28.4 percent from last year. This amounts to a combined total of 46.9 billion euros. The most notable rise has been in the money owed in personal loans, which has increased by 67.5 percent in the last year to a total of 5.6 billion euros. Credit cards, whose use was virtually non-existent in Greece just a couple of decades ago, now account for 7.1 billion euros currently owed by debt-ridden Greeks. This represents a rise of almost 23 percent since 2003. Borrowing cash in order to go shopping is also gaining in popularity, according to the bank’s new figures. Consumer loans went up by over a third, which means that the Greeks who took them out now owe 15.3 billion euros. After house prices skyrocketed around the country in recent years, it is perhaps no surprise that mortgages account for the majority of household debt at 30.2 billion euros – 23.1 percent higher than last year. Prospective home-buyers may be comforted by figures that the BoG released last week, which suggested that the Greek housing market had mostly stabilized. When presenting the bank’s interim monetary policy report on October 19, BoG Governor Nicholas Garganas expressed concern about how rapidly Greeks were getting themselves deeper into debt. He also announced that Greek households are currently defaulting on 2.5 billion euros’ worth of loans and, when combined with business loans, the amount reached 7.8 billion – 5 percent of Greece’s GDP. When combined, business and personal loans and mortgages amount to 27 percent of Greek GDP. They may help significantly to fuel the Greek economy, but last week Garganas asked banks to be more cautious when approving customer loans. The BoG’s latest figures are likely to highlight this warning.