In an effort to end a long-standing dispute over mounting repayment costs caused by exchange rate fluctuations, Greece will soon present – according to Reuters – an out-of-court settlement for loans worth billions of euros in Swiss francs. More than 50,000 Greeks took out mortgage loans in Swiss francs in the mid-2000s, attracted by lower interest rates, Reuters reports. They are now repaying them with much higher installments following the rise of the Swiss franc against the euro. Swiss franc mortgage loans were also popular in parts of Central Europe.
Reuters: The agreement Greece is promoting for Swiss franc mortgage loans
Many Greek borrowers turned to the courts hoping to receive compensation. Final decisions are still pending. “The proposed agreement will be announced in the coming days and will include a reduction of between 15% and 50% on the remaining loan amount,” a senior government official said.
The Greek government had planned to announce the agreement in the summer, but due to complex technical issues, it was only finalized in recent weeks.
It will provide favorable conversion of remaining loans from Swiss francs to euros, with a discount ranging between 15% and 50% on the exchange rate, depending on borrowers’ income.
The cost for Greek banks
The total cost for Greek banks will range between 400 and 600 million euros, depending on the number of loans they granted and borrower participation, the government official and another banking sector official reported, without providing more details. The scheme will be voluntary.
According to Finance Ministry data, of the approximately 37,000 Swiss franc loans remaining, 20,000 are held by banks, while 17,000 are non-performing loans held by credit management companies or have been securitized through the so-called non-performing loans reduction program “Hercules”.
