The Ultimate Moral Hazard: 70% of Greek Mortgages Are In Default

The Ultimate Moral Hazard: 70% of Greek Mortgages Are In Default (ZeroHedge, June 23 , 2015):

Just as we warned earlier in the year, total uncertainty about the future of Greece has enabled a growing sense of moral hazard as “if the nation doesn’t pay its debt, why should we” sweeps across the troubled nation. As Greeks’ tax remittances to the government, which were almost non-existent to begin with, have ground to a halt, so The FT reports, so-called ‘strategic defaults’ have become a way of life among Greece’s formerly affluent middle-class…“I still owe money on the car and motorboat I can’t afford to use. Even a holiday loan I’d forgotten about…I’m living with my mother looking for work and waiting for the bank to come up with another restructuring offer.”

As we detailed earlier this year,it appears taxpayers everywhere are learning from the best: their insolvent governments. In this case, Greek (non) taxpayers have decided to slow down their mandatory remittances to the government even more because the government may just not exist in two short weeks:

Most taxpayers have chosen to delay their payments, given that the positions of the two main parties leading the election polls are diametrically opposite: Poll leader SYRIZA promises to cancel the ENFIA and even write off bad loans, while ruling New Democracy acknowledges the difficulties but is avoiding raising issues that would generate problems and fiscal consequences.

The dwindling state revenues will not only hamper the next government’s fiscal moves, but, given that the fiscal gap will expand, also negotiations with the country’s creditors. The Finance Ministry will have to make plans for new measures and make sure that salaries, pensions and operating expenses are covered, especially in case the creditors do not pay the bailout installments which are already overdue.

Speaking to Kathimerini, a top ministry official confirmed the major slowdown in the rate of applications for debt settlement, and referred to post-election consequences from the shortfall in state revenues. The tax collection mechanism appears to be largely out of action while expired debts are swelling due to taxpayers’ wait-and-see tactics and the reduction in inspections. The same official pointed out that it is normal for revenues to lag during election periods, adding that this time there is no scope for shortfalls.

And now, as The FT reports, the situation has got far worse…

Strategic defaults have become a way of life among Greece’s formerly affluent middle-class. Many borrowed heavily as local banks competed to offer consumer loans at accessible interest rates after Greece joined the euro in 2001.

When the crisis struck they resisted changes to their lifestyle, convinced that it was only a blip on a continuous upward path to income levels matching those of Italy and Spain.

But they have since been forced to make harsh adjustments. With their own savings depleted and the country’s immediate future so uncertain — will Greece default on its debts and leave the euro? — many have simply stopped making payments altogether, virtually freezing economic activity.

Tax revenues for May, for example, fell €1bn short of the budget target, with so many Greek citizens balking at filing returns.

The government, itself, has contributed to the chain of non-payment by freezing payments due to suppliers. That has had a knock-on effect, stifling the small businesses that dominate the economy and building up a mountain of arrears that will take months, if not years, to settle.

“Business-to-business payments have almost been paused,” one Athens businessman says. “They are just rolling over postdated cheques.”

For Greek banks, mortgage loans left unserviced by strategic defaulters have become a particular headache, especially since the Syriza-led government says it is committed to protecting low-income homeowners from foreclosures on their properties

“There’s a real issue of moral hazard . . . Around 70 per cent of restructured mortgage loans aren’t being serviced because people think foreclosures will only be applied to big villa owners,” one banker said.

After six years of living in straitened circumstances, middle-class Greeks have also grown accustomed to shedding valuables inherited from their grandparents.

“There’s a big underground market in family heirlooms . . . many people feel a sense of shame at having to part with them so it’s not much talked about,” said Angelos, an appraiser for a Geneva-based antiques dealer.

“For buyers there are opportunities that only come along when there’s a real economic upheaval . . . in Greece it hasn’t happened since the second world war,” he adds.

As one middle-class father concluded, he is no longer embarrassed by his inability to pay, he says, because so many other parents are in the same situation.

”In the good years we took all these things for granted,” she says. “But the way Greece is headed with these people in charge [the Syriza government] I wonder whether I’ll ever have them again.”



4 thoughts on “The Ultimate Moral Hazard: 70% of Greek Mortgages Are In Default”

  1. The Greek debacle warrants greater analysis.

    Every Western “civilised” nation is either financially bankrupt, or sailing close to it.

    Even the powerhouse, Germany.

    This situation has been caused by a steady implementation of election promises which have cost far more than estimated………even if they were estimated.

    Funding these “Social dreams” in order that the electorate will stay loyal, necessitated borrowing, from the banksters, which in turn was backed by the issue of Government Bonds to these BANKSTERS as security for the loans.

    What the public don’t realise is that the cost of the loans, I.e. The interest, can only be paid through either the profitable gains from a vibrant trading economy or in the event of stagnation, from tax receipts.

    As the former doesn’t exist, and economies slow down, domestic expenditure shifts to essentials as people prioritise realising that over 66% of all domestic expense is for unnecessary luxuries pushed onto us by the incessant global marketing machine.

    Arguing this point home, I challenge anyone to look around their home and carefully pick out the ‘really essential’ items that cannot be discarded.

    So, tax receipts it is. And there is the foundation for the enslavement of mankind.
    The Rothschilds own us, because they own the Governments. They know the system stinks, stifles innovation and creates permanent indebtedness, but it matters not to those who can create what they call money, totally out of thin air, package it under a label called a currency, and then charge interest on it, while taking what assets the borrower has worked hard for as collateral at only 50% of its market value.

    The Greeks are pushing their luck with all forms of non-payments of loans, the Government has crumpled under EU/IMF pressure and cut funding for pensions and other support, is not paying suppliers, and unemployment is through the roof.

    As they prioritise, the Greeks will undoubtedly either rebel or do a Ghandi and withdraw……it is then that the Rothschild run EU will start to show its true colours of oppression and control………unless they’ve engineered a Third World War to smokescreen their conniving ways.

  2. Stanley’s summary is spot on.
    A dead economy cannot support debt or growth.
    Every western economy in the Euro, Japan and the US are all facing triple digit debt to GDP. That means every cent that comes in is already owed elsewhere.
    We have idiots in power, and they have destroyed the western economy.


Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.