Editorial: Who is Mr. Dragasakis warning?

Everyone, and above all the government, knows that the problem of non-performing loans is a gaping wound in the banking system. The unavoidable linkage with protection of debtors’ primary residences from foreclosure renders the resolution of the problem even more difficult, as the current electoral period is an impediment to a rational and effective solution.

The deputy prime minister for the second time in just a few days sent a message to all those in the PM’s circle of advisors who seek a solution that serves opportunistic electoral motives. Although he announced that an arrangement will be in place by the end of the month, at the same time he chose to warn that “if we do not pay attention we may arrive at an arrangement that will force banks to seek fresh capital”.  He said that we must realise that the solution proposed by the Hellenic Financial Stability Fund and which is being reviewed by the finance ministry may require state guarantees.

It has been evident for quite some time that there is a divergence between the proposals of the banks, the desires of government circles, and the views of Greece’s creditors. The current protection ceiling for primary residences – between 180,000 and 280,000 euros – is viewed as unrealistic by both the banks and creditors, as it does not offer a definitive resolution of the problem. The government’s intention of lowering the ceiling to 150,000 changes very little. Instead, it perpetuates a climate of insecurity in the banking system.

Mr. Dragasakis is avoiding being clear about the ceiling in the new arrangement. He is simply warning about the dangers of an ineffectual arrangement. “We must look at the fiscal impact – whether the state will be burdened, if the banks will need more capital, and how we will find it,” he said.

Obviously one must factor in the social dimension. However, one must also ensure the credibility and security of the banking system. Certainly, there are no easy solutions. It would be dangerous to choose for electoral reasons a solution that will simply kick the can down the road for a few months.

Greek citizens will once again be asked to shoulder the cost of inertia or half-baked solutions due to political timidity. They have already paid enough for opportunistic choices, delays, and ideological fixations.

The last thing they need is to pay once again for the vote-mongering choices of a wayward government.