Creditors to discuss debtors

The burning issue of the new bankruptcy code has been forwarded to the meetings that the administration of the Finance Ministry will have on Monday with the mission chiefs of the country’s creditors. Talks will also include the difference between the government and the creditors in the bridge program for the protection of debtors’ primary residences.

The main problem with the planned bankruptcy framework concerns the profile of the entity that will purchase the homes of the debtors with mortgages secured against their main residences and lease the properties back to the debtors. The creditors want the entity to operate with private economy criteria, to fend off strategic defaulters.

The bridge program, which is meant to cover the interest of mortgage loans for any households hurt by the crisis for nine months, dominated Friday’s teleconference agenda involving Greek banks’ chief executive officers with the creditors’ mission chiefs.

The teleconference also touched on liquidity matters in the economy through the instruments the government has activated, the freezing of tranches for corporate and household loans concerning debtors hurt by the crisis, and the estimates about the course of nonperforming loans after that freeze ends.

Next week’s negotiations on the bridge program will center on the disagreement about whether the mortgage tranche subsidy should cover all households hurt by the crisis, as the Greek side proposes, or cover only the most vulnerable categories based on specific criteria regarding the value of the protected main residence and the amount of dues, as the creditors would have it.

Based on the Finance Ministry’s proposal, the subsidy will be horizontal, regardless of the value of the protected properties, and will cover 330,000 households. However, the subsidy will grow depending on the status of each loan, rewarding the debtors who have been consistent in servicing their debts up to the outbreak of the pandemic with the highest subsidy (at 90% of the tranche). The subsidy will also decline for each of the three quarters it will last for, starting in August in the expectation the economy will gradually revert to normality.