Distressed Greeks Say ‘What Recovery?’ as Banks Seize Homes

(Bloomberg) -- To hear many investors tell it, Greece is in the midst of a supercharged recovery after being the euro debt crisis's poster child and suffering under years of recession and austerity.

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

The 53-year-old civil engineer is poised to lose her family home after her bank threatened to seize the 140,000-euro ($157,000) apartment used as collateral against a 50,000-euro 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 any more. I'll live in a 50 square-meter rental apartment but I'll have peace of mind.”

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

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 18.5 percent 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 14.5 percent, national statistics show. About 4 million taxpayers, or about 37 percent of the population, owe the state 104.4 billion euros in back payments—more than triple the arrears in 2010 of 32.5 billion euros.

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, 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 81.8 billion euros, or almost half of the country's gross domestic product. They are the biggest drag on the Greek economy.

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 subsidizing a part of the installments and the borrower having to repay the rest without any new delays.

The new framework covers bad loans worth around 25 billion euros, based on data from the Hellenic Bank Association. Of that, the trade body expects about 10 billion euros—corresponding to around 160,000 debtors—to use the new legislation and eventually some 5 billion euros 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 85 percent 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 and 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 U.S. 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 and 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.”

--With assistance from Paul Tugwell.

To contact the editor responsible for this story: Vidya Root at vroot@bloomberg.net

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