By Thanos Tsiros
The Greek government is expected to offer a more compromising position in this week’s renewed talks with institutional creditors over the still pending issue of non-performing loans in Greece, as lenders have long pointed to the fact that a mountain of outstanding private debt is asphyxiating credit liquidity in the country.
Lenders, especially the IMF, want the government to change the legal framework in order to allow the sale, resale and management of so-called “bad loan” portfolios by distress funds. Performing loans could also be included in order to increase the value of such portfolios. The development, if it pans out, comes after the more-or-less confirmation that the VAT rate will reach the stratospheric level of 24 percent – the current highest level is 23 percent.
Given that the issue of liberalizing the framework for NPLs will generate opposition within the ruling party, leftist SYRIZA, the government is studying the prospect of liberalization “in doses”, namely, on a six-month basis at first.
According to reports, the Tsipras government will free up 20 to 25 percent of the NPLs market by the end of the year. That figure translates into 20 to 25 billion euros worth of NPLs, given that the latest estimates put corporate, business, personal and households arrears to banks at the Olympus-sized 100 to 110 billion euros.
A second tranche with the same percentages would be freed up in the first half of 2017, with the remaining half ostensibly put up for sale to funds in 2018.
Mortgage holders would still retain legal protection under the so-called Katseli law, which favors primary home owners unable to fully pay monthly installments to the bank.
Even with a resolution to the issue this week, the April 22 date for achieving the first review of the Greek program now appears extremely difficult, with the Greek side now mostly aiming for May 1.
The other remaining "thorns" in negotiations are still the level and size of cuts to supplementary pensions and guaranteeing-generating revenue measures to achieve a 3.5-percent of GDP primary budget surplus in 2018, a prospect that without GDP growth looms as herculean.
