Four key measures—designed to stem the rise of “red” private debt (which exceeds 240 billion euros) —are set to take effect in June, led by the new emergency 72-installment payment plan, which gives overdue debtors one more opportunity to settle, under favorable terms, the debts they have incurred with the Tax Authority and Social Security Funds, by December 31, 2023.
Also significant are the upcoming changes to the out-of-court settlement mechanism, with an expansion of eligibility for the program, setting a new debt threshold of 5,000 euros, down from the current 10,000 euros.
The package of measures to address the major problem of household over-indebtedness is complemented by the conditional unfreezing of bank accounts as well as new changes to the framework protecting primary residences.
Tender procedures for the Real Estate Acquisition and Leaseback Agency are expected to be completed by the end of June, with the agency set to begin operations in late fall.
- The platform for the new 72-installment payment plan for debts owed to the Tax Office and the EFKA is expected to launch by the end of this month, and will allow debtors with overdue debts confirmed by December 31, 2023, to enroll. A key requirement is that newer obligations—that is, those incurred after January 1, 2024—must have been paid off or settled and are being paid off regularly. The minimum monthly installment is set at 30 euros, while the principal debt is subject to a fixed annual interest rate of 5.84%.
- At the same time, specific compliance requirements are stipulated. The debtor must have filed income tax returns for the past five years, provided the relevant deadline has passed, not have been convicted of tax evasion or smuggling, and have settled any other overdue debts not covered by this arrangement. As long as the arrangement is adhered to, significant benefits are provided, such as tax compliance status, suspension of enforcement measures, and suspension of criminal prosecution for debts owed to the State.
- The new framework of the Out-of-Court Mechanism for debts owed to the State and social security funds allows debtors with debts exceeding 5,000 euros to participate, thereby expanding access to a tool that until now applied only to debts exceeding €10,000. Through the out-of-court settlement, debts can be repaid in up to 240 monthly installments at a fixed interest rate of 3%. Unlike the 72-installment arrangement, the out-of-court mechanism takes into account the debtor’s overall financial situation.
- Income, assets, bank deposits, other obligations, and actual repayment capacity are all examined. For this reason, participation requires consent to waive banking and tax confidentiality. The advantage of the process is that, in specific cases, it may provide not only for long-term repayment but also for partial write-off of interest, surcharges, or even part of the principal debt.
- Taxpayers and businesses with frozen accounts due to overdue debts will be able to “unfreeze” them by paying 25% of the total debt and arranging a payment plan for the remaining amount. This option is available only once and is intended to maintain a minimum level of liquidity to cover operational needs, particularly for small and medium-sized enterprises and self-employed professionals.
Primary residence
- New targeted procedures are introduced to protect primary residences through the out-of-court mechanism: Unlike the current framework, which takes into account all debts and assets, the new procedure focuses solely on the value of the primary residence, without necessarily considering the totality of the debtor’s assets. The arrangement will be based on the market value of the property and the debtor’s actual ability to repay, allowing for lower installments and, where justified, larger debt “haircuts.” The amount of the debt will be determined by the value of the debtor’s assets and their income, while the proposal will be calculated using an algorithm that considers only the value of the primary residence, ensuring lower monthly installments and a larger “haircut." The remaining assets will be liquidated through auctions, with the proceeds directed toward the repayment of other debts.
In the final stretch
The international tender for the Real Estate Acquisition and Leaseback Agency is also entering its final phase . By the end of June , the procedures for submitting binding bids and selecting the investor are set to be completed.
The agency is scheduled to be fully operational by the end of fall. The new mechanism is intended for vulnerable households facing financial hardship and at risk of losing their primary residence, as they are no longer able to meet any debt repayment arrangements. The Agency will purchase the vulnerable debtor’s primary residence at a discount of approximately 30% of its market value and then lease it back to them, allowing them to remain in their home with subsidized rent.
The government subsidy is estimated to range from 70 to 210 euros per month, while the lease term may last up to 12 years. At the end of the 12-year period (or earlier if the debtor recovers financially), the debtor has the exclusive right to buy back their home at its current market value (or 70% of that value, depending on the final terms), provided they have been consistent in paying the rent.