Sixteen years after the start of the Greek debt crisis, hundreds of thousands of non-performing loans remain trapped in the courts, limiting households’ and businesses’ access to new financing and slowing the economy’s full recovery, according to a Reuters investigation.
The case of Mr. Giorgos, owner of a jewelry store outside Athens, is characteristic. In 2009, he found himself with a new loan of 100,000 euros at a time when his business turnover was collapsing. His loan was successively transferred from bank to bank and eventually to a claims management company, which rejected his request for a more favorable settlement. The case is still in the courts, while due to interest the debt has now doubled.
“I have had a noose around my neck for 16 years. I am trapped. I cannot get a new loan to repay the old one, invest in my business, or even issue a credit card,” he told Reuters, asking that his full name not be disclosed.
According to data from the government and loan servicing companies, about 1.5 million citizens —almost one quarter of the adult population— remain essentially “unserviceable by banks,” while nearly half are small and medium-sized entrepreneurs. At the same time, about 75 billion euros, an amount corresponding to almost one third of Greek GDP, remain tied up due to pending court cases or delays in settlement procedures.
“An economy cannot grow sustainably when such a large part of society has no access to financing, investment tools, business loans, or credit cards,” said lawyer Nana Papageorgaki, who represents dozens of small entrepreneurs.
The Ministry of Justice told Reuters that recent changes to the Code of Civil Procedure and the hiring of 1,000 additional judges have significantly reduced the time needed to deliver justice. According to the ministry, the average trial time has been reduced to 315 days, from about 1,200 two years ago, while it estimates that pending cases will have been settled by 2028.
However, government officials and experts who spoke to Reuters estimate that at least five more years will be required to complete the process. Ms. Papageorgaki argues that in several cases delays still approach or even exceed 1,000 days, while there are cases that have already been given hearing dates as far ahead as 2035.
The current picture has its roots in 2015, when Greece, under pressure from international creditors, created the institutional framework for the transfer of more than 90% of non-performing loans, with a total value of about 110 billion euros, to specialized servicing companies. However, this market was slow to function effectively, while first-home protection and mass legal appeals further slowed the procedures.
The General Secretary for Private Debt at the Ministry of National Economy and Finance, Theoni Alambasi, described judicial pending cases as one of the most significant obstacles to the rapid resolution of “bad” loans. For their part, servicing companies argue that the problem is mainly due to lengthy judicial procedures and conflicting court decisions.
At the same time, thousands of entrepreneurs continue to find themselves in a financial dead end. The owner of a small hotel in Crete, who had taken out a loan of about 1.2 million euros in the early 2000s, said that the servicing company is demanding repayment of 2 million euros within the next two years. “We cannot even replace an old air conditioner,” he said characteristically.