Greece’s parliament on Wednesday passed the Papandreou government’s debt relief bill, which was designed to help thousands of households struggling with debt to restructure their loans with banks.
In these difficult circumstances, we are further obliged to stand by our fellow citizens.
With Greece’s economy in recession for a second straight year, non-performing loans are on the rise.
This is a result of the debt crisis and austerity measures agreed with the European Union and the IMF in exchange for a 110 billion-euro bailout.
Salary cuts affecting public sector workers and pensioners coupled with tax hikes have put the squeeze on household budgets with the government estimating that about 150,000 households are likely to take advantage of the law in the coming months.
“The dramatic situation of these families shows the importance of this law,” Economy Minister Louka Katseli told reporters.
“In these difficult circumstances, we are further obliged to stand by our fellow citizens.”
The debt relief legislation enables debtors to repay only a part of their outstanding loans in monthly instalments over four years, after they negotiate a settlement with their lenders.
The law does not specify what percentage of the loan can be forgiven but stipulates that debtors must provide proof that they are unable to fully repay their debt by liquidating assets.
Central bank statistics show Greek household loan balances fell to 119.4 billion euros.
According to the head of the national association of borrowers, about half a million households have past due debts.
The law enables borrowers to avoid foreclosure on their primary residence by committing to pay back debts at an average mortgage rate over a maximum period of 20 years for amounts up to 85 per cent of their property’s commercial value.