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February 5, 2014
February 5, 2014

Greece: On auctions

Author: Dimitris Papoutsis Translator: Eleni Nicolaou
Category: On the crisis
This article is also available in: elesit
Greece: On auctions

The actual dimensions

There are a few things that need to be mentioned from the outset. The year the Greek government, irresponsibly, imposed the troika (IMF-ECB-E.C) to the country, as representatives of the creditors and signed, without any negotiation, the first bail-out, the overall bad debts of the Greek banks (which, during the financial crisis of 2008 had little exposure to toxic products and were not at risk) amounted to about €300 billion, broken down approximately as follows: €100 billion in Greek State bonds, €100 billion in corporate loans and €100 billion in mortgage and consumer loans. About 450,000 households have mortgages, mainly during the period after the country joined the Eurozone (2000), the total amounting to around €72 billion. This amount corresponds to 40% of the national GDP and is very small compared to other countries. (In Ireland mortgages reached 300% of the GDP). It is now estimated that the red mortgages (loans delayed more than 90 days) represent a 30% of the total (data coming from a speech in parliament of the SYRIZA MP Yorgos Stathakis). Consequently, (even if we consider the original loan amount as the remaining debt) the total amount of the red mortgage arrears cannot exceed the €21.5 billion. Actually, the estimates converge to a sum of €18 billion. In fact, the amount of red mortgages on main residence is even smaller. This is eventually the quantitative parameter of the issue of “red mortgages in Greece” and it provides a clear answer to scaremongering (statements by the Finance Minister and others) that if the auctions of the main residence are banned, the banking system will collapse.

The institutional framework

Following the outburst of the financial crisis in 2008, the then Greek Government reinforced the banks with €28 billion, but imposed the protection of all the assets of borrowers (suspension of auctions) for debts up to €200,000. This provision, with the extensions that were adopted thereafter, was in force up to 31/12/2013. In 2010, after the implementation of the first bail-out, the Law 3869/2010 for the indebted households, still in force today (as amended in June 2013 and recently in December), was adopted, laying down the conditions and defining the procedures for the protection of the main residence. The legislative framework was complemented in June 2013 by the 4161/2013 Law, concerning, however, only updated borrowers, not regulating therefore red mortgages. At the end of 2013, under social pressure, the Government filed and enacted a law (note the tacit tolerance of the troika and its acceptance by the banks), which extends, under certain conditions, the prohibition of main residence auctions for one year, in order to establish a regulatory framework for the red mortgages issue, as stated. But the rhetoric conceals the true intentions.

Intentions

We believe that the data presented above makes clear that the pro-austerity governments of the past 4 years have been reluctant in regulating the problem of red mortgages brought about by their wild austerity policies implemented after 2010. (Until then, the percentage of red mortgages was very low and normal). In a country being under a banks domination regime, for the last 20 years, there is the paradox according to which the banks are still managed by their former owners, while, through their recapitalisation with public money, they actually belong to the State. Currently, approximately 180,000 households are in danger of losing their homes (main residence). These households, in fact, pay back their loans through taxation (the taxation has increased up to 7 times the last 4 years, while the broadening of the tax base has been mainly towards the lower economic strata) and through reduced wages and pensions. From these additional taxes and cuts, a total of about €220 billion, in cash and guarantees, has been given to the banks by the Greek government, aggravating heavily the public debt. Nevertheless, the Government prefers to keep the borrowers trapped, obscuring the real problem which is that, given the economic disaster, these mortgages are impossible to be repaid.

An effective solution to the problem of red mortgages, foreclosures and auctions must take into account the decline in property values the last 4years (targeted and violently implemented by the bail-outs). It is a general assumption that, in a mortgage contract, both the lender and the borrower share responsibilities. That is why the banks, before approving a mortgage, carry out research about the economic potential of the prospective borrower and proceed into detailed assessments, by experts, of the collateral for a mortgage. Thus, a prerequisite for any arrangement of red mortgages (and consequently foreclosures, auctions and evictions) is restructuring them under the following principles:

a) Reduction of the mortgage or the mortgage balance proportional to the decrease of the property value.

b) Any auctioning of a property having been given as collateral must deplete all claims of the bank against the borrower. That is, it cannot be acceptable for a bank seizing the borrower’s home, selling it off for pennies and then chasing them for the remainder of the mortgage (since it has assessed and accepted the property as security for the entire mortgage).

c) The aim must be not only the protection of the main residence but also the total and final relieve from their financial obligations of borrowers who, because of the crisis, are unable to repay their mortgage.

All the above will answer the query of the borrowers, who see the banks refusing any discussion about restructuring the red mortgages, while, at the same time, negotiating selling them to foreign funds in degrading prices reaching up to 20%. The attitude of the troika, obsessed with and persisting in removing the ban on auctions is revelatory and confirms that they imposed a reduction in property values and seek a further reduction in order to serve foreign investors. Besides, the reduction of transfer tax to 3% (although presented as tax relief) serves exactly those purposes.

The political problem

The Government, adopting this law, aimed actually at overcoming the governmental MPs’ reactions, so they would vote for the so-called flat real estate tax, which is in the same direction of the depreciation of property, through overtax. The government knows that the auctioning issue may awaken the Greek Society. Housing in Greece has psychological parameters completely different than in the rest of Europe. It is not accidental that home ownership rate amounts to about 80%. The “roof tile” is sacred to the Greeks.

Right now, the fight against the auctions has two goals:

a) The struggle for the improvement of the legislative framework that protects the main residence (beyond 2014) along with the necessary restructuring of mortgages and

b) The cancellation, practically, of auctioning. This is a privileged field for the Greek society that has suffered successive consecutive blows in the last four years. Various social movements acting against auctions have been developed and are already being coordinated in joint action. (I am referring to the ‘coordination’ of over 20 collectives that has shown activist work and to other spontaneous movements across the country having managed, through their intervention, to prevent auctions). Equally important, in my opinion, is that these movements promote the fight rather than charitable solidarity. The problem of auctions could become a tipping point for social struggles against the pro-austerity governments and the destructive policies imposed by the troika. If Society is defeated therein it will be defeated permanently.

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Greece: On auctions by Dimitris Papoutsis is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.

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