**Title: Greece’s Bad Loan Legacy Leaves 1.5 Million Locked Out of Bank Credit**
Greece's financial landscape continues to be marred by the legacy of its debt crisis, which began in 2009. The situation has left approximately 1.5 million citizens, nearly a quarter of the adult population, unable to access bank credit. This issue is particularly acute for small business owners, who represent nearly half of those affected.
One such individual is George, a jewellery shop owner located just outside Athens. When the crisis hit, he found himself burdened with a €100,000 loan at a time when his business turnover was plummeting. As the financial sector collapsed, his loan was transferred from one bank to another and ultimately ended up with a credit servicing company. Despite his attempts to negotiate more manageable repayment terms, his requests were denied, leading him to seek resolution through the courts. Unfortunately, his case remains unresolved, caught in a legal system overwhelmed by a backlog of similar disputes.
George's predicament is not unique. The ongoing issue of non-performing loans (NPLs) is hindering Greece's economic recovery, despite the country experiencing growth rates that outpace the EU average. Many individuals and businesses are unable to secure new loans until their existing debts are settled, a process that could take years. According to government data and insights from service companies, around €75 billion—equivalent to nearly one-third of Greece's GDP—is tied up in legal disputes or delays in settlements.
Nana Papadogeorgaki, a lawyer representing numerous small business owners, emphasized the detrimental impact of this situation on the economy. “An economy cannot grow sustainably if such a large part of society has no access to financing, investment instruments, business loans, or credit cards,” she stated.
In response to the crisis, the Greek justice ministry has implemented reforms aimed at expediting the resolution of these cases. The ministry reported that recent changes to the civil code and the hiring of 1,000 additional judges have significantly reduced processing times. On average, cases now take 315 days to resolve, a drastic improvement from the 1,200 days reported two years ago. However, many experts believe that the backlog will persist for at least five more years, with some cases potentially dragging on until 2035.
The roots of this problem can be traced back to 2015 when Greece, under pressure from international lenders, established a legal framework that allowed banks to transfer over 90% of their bad loans—approximately €110 billion—to specialized credit servicing companies. However, the market for these bad loans did not become operational for another five years, largely due to administrative inefficiencies.
The credit servicing companies, tasked with restructuring loans and liquidating collateral, have faced significant public backlash during a period of austerity. Many borrowers used real estate as collateral, often their primary residences, which are protected by law. This has led many individuals to seek legal recourse in an effort to avoid losing their homes, further complicating the resolution process.
Theoni Alambasi, the general secretary of private debt in the finance ministry, acknowledged that the legal system's backlog is one of the major obstacles to quickly settling bad loans. International institutions, including the IMF and the EU, have criticized Greece for these delays, urging the country to implement further reforms to address the issue.
The Hellenic Loan Servicers Association, representing companies such as Do Value and Intrum, has pointed out that the legal processes surrounding loan servicing are often inconsistent and conflicting, which negatively impacts their ability to resolve cases efficiently.
As the situation continues to unfold, business owners like George and others are left grappling with the consequences of their debts. One hotel owner on the island of Crete, who took out a loan of approximately €1.2 million in the early 2000s, lamented, “We will die without ever repaying our debts.” With demands from servicers escalating to €2 million in the next two years, many business owners are struggling to meet even basic operational needs.
The ongoing legacy of Greece's debt crisis serves as a stark reminder of the challenges faced by individuals and businesses in the aftermath of financial turmoil. As the country works towards recovery, the resolution of these bad loans remains a critical hurdle that must be addressed to ensure a more inclusive and sustainable economic future.