Greek bailout threatened as funds delayed

By Andrew Jay Rosenbaum

ANKARA

Greece faces a new challenge as creditors withhold bailout funds.

For the past two weeks, the Greek government has been stuck in fraught negotiations with the Eurogroup, the International Monetary Fund, the EU and the European Central bank over how many Greek debtors holding bad mortgages should be protected from foreclosure.

The issue is critical for Greek banks, for which nearly half of all outstanding loans are mortgages and other consumer loans that are not being paid back. Greek government proposals would protect about 60 percent of all debtors with non-performing mortgages.

The government insists on prohibiting foreclosures on primary residencies which are currently protected if they are under a taxable value of €200,000 ($215,284). The creditors want to reduce this to a market value of €120,000 ($131,226), and to protect only the owners living below the poverty threshold.

At the Eurogroup meeting in Brussels on Monday, French Finance Minister Michel Sapin told the media that this issue must be resolved without delay.

"One thorny issue remains: the seizure of homes for households who can't pay their debts. I want an agreement to be reached today. France wants an agreement today," Sapin said.

"Greece is making considerable efforts. They are scrupulously respecting the July agreement," he said. The July agreement between the Eurogroup and the Greek government listed a series of economic reforms that Greece must enact without delay.

But, on Sunday, after a teleconference meeting with the Eurogroup and representatives of Athens, the Greek government told local media that the legislation on economic reforms was behind by three weeks.

Greece badly needs the next payment of €2 billion ($2.2 billion) of its €86 billion ($92.5 billion), three-year bailout plan to cover outstanding debts. But the Eurogroup has made it clear that no further funds will be released without agreement on the bad mortgages issue.