Business World

Monday 14 October 2019

Antonis Galanopoulos: 'Greek economy still not bearing gifts for many despite signs of improvement'


Economic disaster: A man searches the contents of a public bin on a street in Thessaloniki, Greece, last June. Photo: Konstantinos Tsakalidis/Bloomberg
Economic disaster: A man searches the contents of a public bin on a street in Thessaloniki, Greece, last June. Photo: Konstantinos Tsakalidis/Bloomberg

Antonis Galanopoulos

To hear many investors tell it, Greece is in the midst of a supercharged recovery after suffering under years of recession and austerity.

But Greeks like Dimitra D. are not buying the turnaround story.

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The 53-year-old civil engineer is poised to lose her family home after her bank threatened to seize the €140,000 apartment used as collateral against a €50,000 loan she's unable to repay.

After years of going back and forth with her bank, she says she no longer has the will to fight for the property.

"I prefer to lose my home even though I know that it doesn't make sense in financial terms," she said, declining to give her family name because she's embarrassed by her financial situation. "I don't care anymore. I'll live in a 50sqm rental apartment but I'll have peace of mind."

By many measures Greece has turned a corner: its stock benchmark has jumped 26pc in 2019, set for its best first half in two decades, and trumping European shares' 8.1pc gain. Last year, the country recorded the strongest economic growth since 2007. Greece's 10-year bonds yield 3.3pc, a fraction of the 37pc the country had to pay at the height of the financial crisis.

Winding road: A tourist makes her way along a passageway in the tiny Anafiotika district of Athens. Photo: AFP/Getty Images
Winding road: A tourist makes her way along a passageway in the tiny Anafiotika district of Athens. Photo: AFP/Getty Images

For all that, many Greeks are still struggling to claw out from under mountains of debt after a decade during which the economy cratered, contracting by more than a quarter. The country's unemployment rate of 18.5pc is still among the highest in the European Union.

Since the start of the financial crisis in 2010, more than 87,500 small and medium-sized businesses have folded, while personal disposable income has shrunk by 14.5pc, national statistics show. About four million taxpayers, or about 37pc of the population, owe the state €104.4bn in backpayments - more than triple the arrears in 2010 of €32.5bn.

Greece's largest lenders have been recapitalised three times since the start of the debt crisis in 2009.

The country was rocked by riots during the financial crisis, when it appeared Greece was on the brink of imploding under the weight of the economic disaster that it was grappling with.

Financial wags lumped it with Portugal, Ireland and Spain at the time to create the ignominious 'Pigs' acronym used to describe the European countries worst hit by the global financial crisis that had, in Ireland at least, been exacerbated by carefree lending by the banks to fuel property mania.

And while the Irish Government's moves as the crisis deepened to steady the economy (via the creation of Nama, providing the bank guarantee and other measures) remain controversial, there was at least a relatively quick effort to tackle the sour loans that had clogged up the banks' arteries here.

By contrast, Greece, Spain and Portugal failed to address problems early. Ireland received one bailout, Greece three.

The eurozone governments and the International Monetary Fund put together three rounds of financial assistance for Greece (in 2010, 2012 and 2015), totalling more than €300bn in commitments, though the IMF stopped disbursing cash after the second round and only offered technical assistance. These programmes all proved insufficient.

The first two programmes underestimated the effect that tax increases and spending cuts would have on Greek economic growth. Successive Greek governments also delayed passing recommended structural reforms that would attract investment, such as cutting red tape.

Many Greeks are exhausted and are no longer putting up a fight to preserve their assets. With cases winding their way through Greek courts, which can take years, many people who were once determined to protect their properties, have seen the ceaseless pressure take its toll, said Dimitris Anastasopoulos, a lawyer who handles cases to stop banks from taking over primary residences.

"It's not so much a financial issue as a psychological one, with the whole procedure wearing them down," he said. "They now say let the bank take the home. They can't stand collection agencies reaching out to them for their debt."

Borrowers feel harassed, with the collection agencies calling them on a daily basis, Mr Anastasopoulos said.

"I know of some cases where my clients had a heart attack or a stroke due to the constant pressure," he said.

Repossession of Greek homes, which was unheard of, is becoming more prevalent as banks themselves face pressure to slash bad loans. Bank non-performing exposures stand at €81.8bn, or almost half of the country's gross domestic product.

Faced with an election year, the government of Prime Minister Alexis Tsipras is seeking to help protect primary residences.

At the end of March, parliament voted a primary-residence protection framework after a long-drawn dispute with the country's creditors over the eligibility criteria.

Distressed home owners can apply for help, and if they meet the criteria, banks will restructure the loan with the state subsidising a part of the instalments and the borrower having to repay the rest without any new delays.

The new framework covers bad loans worth around €25bn, based on data from the Hellenic Bank Association. Of that, the trade body expects about €10bn - corresponding to around 160,000 debtors - to use the new legislation and eventually some €5bn may be restructured and turned into performing loans.

If the estimates are right, the new plan will help both borrowers and lenders. Greece's creditors and the European Central Bank have identified the reduction of bad debt as the country's top priority.

Greek banks are auctioning off repossessed residences to clean up their balance sheets but so far the main buyers of these properties have been the banks themselves - with few other bidders emerging.

In 2018, some 10,000 properties, or about 85pc of the ones put on the block, were bought by the banks. Lenders estimate they'll buy back some 15,000 homes this year.

While the government is diving in to try to help, for some that aid is coming too late.

Georgia D. gave up her primary residence in an auction in 2018. She and her husband lost their jobs during the crisis and stopped servicing their loan. They even migrated to the US to find jobs, but found life there too expensive, forcing them to return to Greece. They managed to find small jobs to make ends meet, but were too dispirited to try to save their home.

"I was so depressed that I didn't even try to reach a deal with the bank," she said. "We were left to our own fate." (© Bloomberg)

Irish Independent

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