It bailed out the banks, which now receive a “clean” bill of health from the European Commission. However, the “Hercules” plan is being implemented with serious problems and delays, and the “non-performing” loans that were removed from bank balance sheets continue to poison the real economy.
Six years after the launch of the “Hercules” plan, the European Commission is issuing the strongest warnings yet about its problematic implementation, emphasizing, among other things, that even last summer’s reforms have not substantially accelerated enforcement, while the securitizations of “Hercules” will incur new losses due to the Supreme Court ’s ruling on the calculation of interest on loans restructured under the Katseli law.
Record low in banks’ non-performing loans
In the in-depth review of the Greek economy published the day before yesterday—in which, for the first time, Greece is no longer classified among European economies with imbalances—the European Commission acknowledges the consolidation of bank portfolios.
It emphasizes that the quality of assets in Greek banks has continued to improve. In September 2025, the non-performing loan (NPL) ratio stood at 2.8%, 0.6 percentage points lower than in September 2024. This is the lowest NPL ratio since Greece joined the eurozone and represents a significant improvement from the peak in 2016, when the NPL ratio reached 47.4%.
"Hercules" as the catalyst
The main driver of this decline was the securitizations carried out under the Hellenic Asset Protection Scheme (HAPS/“Hercules”), with the provision of state guarantees on senior-secured securities.
From 2019 to 2025, a total of 23 transactions under the “Hercules” program were completed, involving loans worth €58 billion (gross book value), while state guarantees totaling €21.5 billion were utilized. By the end of 2025, the stock of outstanding guarantees had fallen to €17.1 billion.
The program allowed banks to accelerate the consolidation of their balance sheets and refocus on financing the economy.
The hard part has begun
However, as the Commission points out, following the completion of the final securitizations under the “Hercules” program, the pace of NPL reduction has slowed.
More recently, the decline in banks’ NPL ratio is mainly due to strong credit expansion and a few portfolio sales, while organic resolution continued to play only a marginal role, despite relatively subdued inflows of new NPLs over the past two years.
Although asset quality has improved significantly, NPL levels in Greece remain above the EU average (1.9% in September 2025), while NPL coverage ratios are generally in line with the EU average.
In particular, household UBI levels were the highest in the EU. In June 2025, the highest concentrations of UBI in key sectors, as measured by UBI indices, were observed in agriculture (17.2%), food services (12.9%), retail (6.4%), construction (5.0%), and manufacturing (4.8%).
Going forward, the Commission notes, banks intend to focus on organic growth and continue to use non-organic measures sporadically to keep NPL levels within the targets of their business plans.
Loans managed by servicers are a “burden”
Following the initial success of “Hercules,” the problem of “non-performing” loans has been shifted away from the banks, and their resolution by servicers is proceeding at a very slow pace.
The resolution of NPLs outside the banking sector has remained slow, the Commission notes, with legacy NPL portfolios continuing to weigh on the economy. A large portion of the NPL exposures that were removed from banks through securitizations and direct sales was transferred to credit management companies, which managed debts totaling €80 billion as of December 2025. This represents an increase of approximately €5 billion compared to the previous 12 months, largely reflecting the final wave of large securitizations.
However, even excluding this one-off effect, the pace of resolution remains sluggish. The bulk of this debt remains non-performing, and credit management companies face legal obstacles, particularly in liquidation proceedings, i.e., auctions.
Business plans are not being followed
As a result, many portfolios securitized under the “Hercules” program continued to underperform relative to their business plans, primarily due to lower-than-expected recoveries from collateral liquidations.
The 2026 Supreme Court decision, which revised the calculation of interest for borrowers granted protection from insolvency under Law 3869/2010 (the Katseli Law), is likely to further negatively impact the performance of the “Hercules” program. The program’s performance will also be affected by the voluntary conversion of loans denominated in Swiss francs.
Reform without the expected results
In July 2025, the government introduced measures aimed at improving the efficiency of judicial proceedings and addressing bottlenecks and delays in enforcement.
Nevertheless, the Commission notes that recent data indicate that the resolution of non-performing loans remains sluggish. The high rate of unsuccessful auctions and limited third-party participation may be linked to the excessively long duration of post-auction judicial dispute resolution, as well as delays in registering transactions in the land registry.
This also has a negative impact on housing supply, as many properties remain tied up during protracted debt enforcement proceedings, but often stay off the market for a long time even after successful auctions.
Effective debt restructuring by credit management companies and the efficient operation of debt enforcement are of fundamental importance for reducing private debt, the Commission concludes.
Two-speed debt
Regarding the evolution of the private sector’s debt burden, the Commission notes that it is moving at two speeds:
- For households, deleveraging continues, with the debt-to-GDP ratio estimated to have fallen further by about 1.5 percentage points, reaching 37.5% in 2025. Projections indicate that household debt will continue to decline gradually.
- In contrast, the debt ratio of non-financial corporations increased by 2 percentage points to 57.5% in 2025. Lending to businesses is growing rapidly, supported by lower borrowing rates and public programs such as the Recovery Fund.