November 8, 2015
The release of €2 billion tranche from ESM to Greece has been stalled for one major reason: the far different safety net for proprietors that envoys of institutions and the Greek government are setting with respect to the foresclosures of primary residencies. The issue is huge and the solution seems to necessitate political coordination.
During the last couple of weeks major EU figures paid visit to Greece to see first hand the development of the bailout program and the progress of the implementation process. The Greek government is doing its best to catch up with strict deadlines in a domestic market that is asphyxiating by the continuous economic slowdown. The stress tests of the four Greek systemic banks -i.e. Piraeus, Alpha, Eurobank, National Bank- unveiled two scenarios on the recovery prospects of the banking system, but for the moment the “green light” was given by the ECB. All other prior actions included in the MoU have passed through the Parliament.
The Greek side has made everything was possible to abide by the commitments it was forced to assume last July, crossing the Rubicon plenty of times since summer. On the other hand, the role of the institutions is hardly seen as supportive as statements from the European Commission are moving towards adding more pressure to the government rather than assisting and listening to the Greek side when necessary. The major issue that has blocked the negotiations so far is that of the foreclosures of primary residences. In the graphic below you can see what the current situation on overdue loans looks like (tap to enlarge):
39% of primary residency loans are either non-served or ill-served with proprietors facing huge economic difficulties. The majority of these proprieties belong to middle or low-income tax payers that creditors press the government to force them out in an eviction raid. The negotiations so far have not yielded any significant result, with the Greek side insisting on the social repercussions of such a decision and with the creditors remaining reluctant to face reality. Social repercussions of evictions could not be handled by the government and could cause chaos in an already exhausted and financially overstretched society.
The deadlock intensifies as creditors connect a final resolution on that matter with the release of the €2 billion tranche from ESM. PM Tsipras is taking this issue in his hands and asks for a political solution, foreseeing that tomorrow’s Eurogroup would not bring something different on the table other than more pressure. The major weapon to bring back negotiation balance is the handling of the refugee crisis and the excessive burden the country is assuming. Greece cannot handle such massive inflows threatening domestic stability at a time when EU pretends to seek for a viable, common solution. In similar respect, as Bridging Europe’s survey unveils, the Greek Prime Minister knows his government’s policy on the refugee crisis is endorsed by the outright majority of Greeks (i.e. 69%) while concerns over EU responsiveness are outstandingly high (i.e. 82%).
Connecting now the foreclosures issue with the refugee crisis in practice, it is impossible for the Greek government to consent to the eviction of people from their homes, and at the same time to receiving and shelter tens of thousands of refugees, as agreed in the last extraordinary EU Summit with the participation of non-EU Balkan states.
The shortsightedness of the EU and of the major influential leaders is going beyond judgement. The myopic stance on both issues could blow up stability in Greece, increase extreme right voices, create conditions of chaos in the islands and further increase the death toll of refugees .
To contact the author Dimitris Rapidis:
Twitter: @rapidisDimitris Rapidis