Greece and Troika
continue the discussions of the milestones that must be met in order for the
finance ministers to approve the 2 billion euros financing tranche. Greece
needs the financing payment in order to make payments due to the private sector.
There are several issues
that remain obstacles and the government is seeking a political solution,
again. The first is the big issue is with home auctions. Creditors are
pressuring for home auctions for those that have delinquent payments on their
home loans. The disagreement is on the amount of income and the objective value
of the home purchased. The reality is that home prices in Greece do not reflect
market value. The second problem is with the recently voted bill of the 100
installment payments for those that owe to the government and public agencies,
like insurance funds. Creditors want for those who miss even one payment due to
exclude them from the program.
As far as the home
auctions, the law today is open for home auctions as the law that provided home
protection has expired. Only individuals
or a public agencies may go ahead for home auctions. Banks do not use this right
but only to industries, and in rare cases. The current law gives the
possibility for those that have been enrolled, to have home protection from
liquidation, provided that they have met 80% of the fair value payment in a 25
year time span.
Another issue that is
among the obstacles is the value added tax of 23% that the government decided
to impose on private schools. The creditors opposed such a decision and asked
the government to find equivalents.
As far as bank recapitalization
which is part of the milestones, and must be completed by year end, the week of
November 9 is crucial, as all four banks have opened their book offering for
the increase in share capital. Some banks have begun to liquidate their positions
in assets held overseas.
It is estimated that bad loans in the Greek banks are 100 billion euros in exposure, as of Q1 2015, and estimated at 41% of their loan portfolios. As the unemployment rate is over 25% in the Greek labor market this impacts the borrowers' ability to meet their obligations and service their loans. The above graph shows this clearly.
