Greece says new insolvency code gives ‘second chance’ to debtors

Greece’s conservative government has drafted a bill which overhauls its insolvency code, seeking to help over-indebted households and businesses make a fresh start after a crippling decade-long debt crisis.

More than 1 million individuals and 300,000 businesses owe money to banks and the state, legacy of a decade-long financial crisis that shrank the country’s economy by a quarter.

The bill, which was submitted for public consultation on Thursday, replaces existing fragmented rules for restructuring and bankruptcy of individual and corporate debt with a single framework and speeds up debt write-offs, officials said.

“They [debtors] can have a new start without the burdens of the past, just only one year after the relevant court decisions on bankruptcy,” a senior official who helped draft the bill told Reuters. Under the current rules, debtors have to wait for decades before their debts are written off.

Total debt of the private sector in Greece exceeds 200 billion euros ($236 billion). The bill also protects debtors from eviction from their primary residencies and offers state subsidies for loan repayments.

“[The bill] fights the phenomenon of ‘zombie’ businesses created in the past years due to the continuous accumulation of debts,” government spokesman Stelios Petsas told reporters.

The bill is expected to be submitted to parliament in coming months and, once approved, will take effect in 2021. [Reuters]