Two in 10 families heavily in debt

Strong credit growth is pushing a large number of Greeks into financial strife as newly compiled figures show that two in ten families or some 650,000 households are struggling to pay back their debts after taking on too many loans. Data from the country’s banks highlighted that 60 percent of households that have taken on too much debt belong to low-income earners, those that earn 15,000 euros per annum or less. Low-income groups are struggling under the growing weight of consumer loans as a large number of them are required to dish out more than 30 percent of their income per month to service financial obligations. When a household is forced to allocate more than a third of its income per month for payments, then banks see the borrower as being excessively in debt. Data show, however, that the number of households that default on their loan payments is often smaller than expected. Bank sources say that this suggests that some borrowers are receiving financial assistance from family members or may have other forms of undeclared income. Greece has a relatively large underground economy, with economists estimating it at about half the size of actual economic output. Bank data also showed that low-income earners normally prefer consumer finance schemes, such as car loans and credit cards. While 40 percent of low-income earners have a credit card, only 5 percent of high-income earners have needed to resort to such a service.