Greece considers Cypriot model for non-performing loan management

The Greek government is studying new measures to manage non-performing loans (NPLs), using the Cypriot model as a reference point. The proposed strategy focuses on six key areas aimed at protecting debtors while maintaining the stability of the financial system and the Hercules Program.

Key proposals include imposing caps on interest rates to prevent debt inflation caused by compounding, and the potential operation of a property re-leasing entity. The government aims to address the issue where borrowers pay installments that only cover interest costs without reducing the principal.

Additionally, the measures seek to improve the code of ethics for debt servicers and create more sustainable restructuring plans. For businesses involving personal guarantees, the government is considering debt haircuts, provided they do not create moral hazard. Currently, debt management companies handle annual restructurings totaling approximately 7 billion euros, with a 30% re-default rate.