Auctions: The «middle solution» of the Greek government

Finance Minister Yannis Stournaras described in an interview at MEGA TV the axes upon which he expects the agreement with Greece’s lenders will move on the issue of auctions. "There are two trends that are both equally bad. First is to disallow all auctions and the second to implement their full deregulations from 1.1.2014," he said.

The "middle solution" supported by the Greek side provides for:

- abolition of the auction ban for those who owe up to 200,000 euros in banks. This clause will not exist from 1.1.2014

- keeping and gradual abolition of first residence protection after 1.1.2014, depending on the value and potential of the borrower to repay their debt or not

The Greek plan was initially intended to protect primary residences worth just under 300,000 euros. There will be no protection for residences of a greater value.

To qualify for protection, the debtor should be cooperative with the bank. This means they should appear in the bank to explain why they cannot pay their debt. Then they can come to an agreement to pay only what they can and the bank will accept a minimum payment. Government sources explained, however, that this does not mean a haircut on the debt, but an extension of the repayment period.

In the next phase, during the transitional protection scheme, the government will legislate other more flexible and modern ways of managing problematic loans, which take into account the data of property market and borrowers.

Explaining the issue of income criteria Stournaras said the Greek side gives more importance to the property’s value rather than the family income and added that he expects a reply from Troika.

He added that the ECB president is pushing for the lifting of the auction ban. ‘He does not want to reward those who are not paying, as this will create a culture of non-repayment of loans and risk a transmission of the “contamination” to the banks. Even those who are able to pay go to courts and this might create a movement.’