International

Greece sets red line: No mass foreclosures

Greek Prime Minister Alexis Tsipras listens to French President Francois Hollande during their meeting at Maximos Mansion in Athens, Friday, Oct. 23, 2015. (Yannis Kolesidis/Pool photo via AP)

ATHENS: Greek Prime Minister Alexis Tsipras Friday said his country would fully meet its obligations under a multibillion-euro bailout but would not tolerate mass foreclosures on problem mortgage loans for thousands of indebted people.

Setting a red line in talks with the lenders now in Athens for consultations, Tsipras said turning the country into an “arena of confiscations” of homes was out of the question.

Although he did not so directly, he was implicitly referring to talks with creditors, which have hit a snag over protection of primary residences of homeowners who cannot afford to pay their mortgages.

“Some may be attempting to revive a debate [on Greece exiting the euro] ... by delaying the implementation of reviews and delaying the recapitalization of banks,” Tsipras told journalists after talks with French President Francois Hollande.

Representatives of the country’s lenders are in Athens assessing compliance with reforms required under the 86 billion euro bailout. Athens wants the review concluded soon so it can proceed with debt-relief talks and complete the recapitalization of its four main banks by end of the year.

Hollande, in Greece on a two-day visit, has sided with Tsipras’ call for debt renegotiation. In a speech to parliament, he also said homeowners should be protected.

HOMEOWNERS“It is very important for commitments to be met, and for there to be no doubts over fundamental rights of families in Greece – the right for a roof over their heads – and here I’m speaking about confiscations of primary residences,” Hollande said.

Greek officials have said there are disagreements with lenders on a mechanism to tackle nonperforming loans at banks.

The ratio of nonperforming loans at Greek banks was 35.6 percent in the first quarter, the highest ratio in Europe bar Cyprus.

A high rate of nonperforming loans, after years of recession and high unemployment, is one of the main reasons capital buffers of Greek banks are eroded.

Lenders were also weakened by capital flight earlier this year when Greece teetered on the verge of toppling out of the euro.

Banks are in line to get a portion of bailout cash by the end of the year, but a high proportion of bad loans also means banks are reluctant to extend credit, stunting potential growth.

Athens wants protection from foreclosures to cover property values of at least 200,000 euros. Lenders insist the threshold should not exceed 120,000. Greece calculates that would cover only 17 percent of mortgage holders.

Tsipras said Greece would meet its bailout obligations, though he said the country had its limits.

“It is one thing meeting our obligations, and a completely different matter for one to consider Greece is a convict serving jail time. It isn’t.” Tsipras said.

An estimated 320,000 homeowners are behind on their mortgages in the country. About 130,000 of them have applied for foreclosure protection under an existing law, which sets a threshold of 300,000 euros.

 
A version of this article appeared in the print edition of The Daily Star on October 24, 2015, on page 6.

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