Huge reaction to gov’t blueprint

Intention to expand protection of borrowers’ main residences draws rejection from lenders and eurozone

The government’s proposal concerning the protection of debtors’ primary residences has met with a very negative response from local banks and the country’s creditors, which points to a very difficult 10 days of negotiations between all parties involved.

The antagonism began with the government’s stated intention to legislate unilaterally on the protection of main residences, ignoring the position of the banks, which according to government sources rejected the plan as “unacceptable,” although the banks have not confirmed whether they have submitted their positions.

It appears that the distance between the government and the credit sector is so great that the ruling party’s inflexibility – which according to banks expands the pool of debtors who qualify for protection, damages their capital base and undermines their commitments to regulators concerning the reduction of bad loans – has even made the bankers willing to cooperate to side with the hardliners.

This became evident at a meeting yesterday of the systemic banks’ managing directors, where they decided to close ranks against the government’s intention to raise the ceiling of protection. Senior bank officials say that the government proposal is driven by election concerns and will lead to a new generation of strategic defaulters hoping to benefit from the expanded protection the government is promising.

Greece’s creditors have also reacted negatively to the government’s plans, along with the Labor Ministry’s intention to offer another restructuring option to social security debtors, saying that none of this helps the “culture of paying,” as eurozone officials say.

The creditors will not tolerate another extension of the so-called Katseli law protecting debtors’ primary residences after February 28. A eurozone official told Kathimerini that the creditors have been expecting the government to submit a plan to replace the law’s protection since last September, and that after five months the plan submitted yesterday by the Finance Ministry is not acceptable.