ATHENS, Greece – The Greek government said Monday that mortgage holders may be allowed to pay discounted rates for up to 15 years, as part of a major effort to reduce the number of non-performing loans in the bailed-out country.
Just hours before taking up the defence portfolio, development minister Nikos Dendias said the government hopes to finalize plans next month granting loan holders the right to effectively freeze payments on 30 per cent of the money borrowed to buy their home.
The hope, he said, is that the property market recovers from the steep drop in prices seen during the six-year recession.
Dendias, who said the government was in talks with banks on the scheme, made the announcement after submitting legislation to parliament to provide debt relief for small businesses, which have been hard hit by austerity measures demanded by international rescue lenders.
Greece has already achieved a major restructuring deal for its privately-held sovereign debt and has been promised a further improvement in repayment terms for bailout loans.
But the conservative coalition government is anxious to provide some relief for ordinary Greeks as it faces the threat of an early general election in March.
“The model we are examining … is for a 30 per cent reduction on the value of purchase,” Dendias said.
“Then the loan would be divided into two parts: One part that would be serviced at the current rate, and a second part — known as a ‘balloon’ in banking terms — would be moved to a future date and repaid when the economy recovers and the house price returns to that original level. The model we are looking at is 15 years.”
Non-performing and restructured loans reached 40 per cent of the total by the end of last year, according to calculations included in inspection reports by the International Monetary Fund, which is participating in the Greek bailout alongside Greece’s partners in the eurozone.
Dendias made the remarks Monday shortly before resigning his position to become Greece’s new defence minister.
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