June kicks off with five interventions targeting private debt exceeding €240 billion, as the government’s economic team opens a new cycle of arrangements and facilitations for households and businesses this month, attempting to curb the expansion of overdue debts to tax authorities, insurance funds and banks. The focus centers on the new 72-installment arrangement, expansion of the out-of-court mechanism, unfreezing of bank accounts, and primary residence protection measures for vulnerable debtors. Meanwhile, the countdown continues for the new Real Estate Acquisition and Re-leasing Entity, as the international tender has entered its final phase, with binding offers submitted and investor selection expected by the end of the current month.
Here’s the breakdown:
1. New 72-installment arrangement: The platform for the new 72-installment arrangement for debts to tax authorities and EFKA is expected to open by late June, allowing inclusion for debtors with overdue obligations confirmed by December 31, 2023. A basic prerequisite is that newer obligations created after January 1, 2024, must be paid off or properly arranged and being paid normally. The minimum monthly installment is set at €30, while the basic debt carries a fixed annual interest rate of 5.84%. Specific compliance conditions apply: debtors must have filed income tax returns for the past five years (where deadlines have expired), must not have been irrevocably convicted of tax evasion or smuggling, and must have settled any other overdue debts not included in this specific arrangement. While the arrangement is maintained, significant benefits are provided, including tax clearance certificates, suspension of enforcement collection measures, and suspension of criminal prosecution for public debts.
2. Out-of-court mechanism: Utilization of the out-of-court mechanism for debts to the State and insurance funds. The new framework allows inclusion for debtors with debts above €5,000, thus broadening access to a tool that previously covered debts above €10,000. Through the out-of-court mechanism, debts can be repaid in up to 240 monthly installments with a fixed 3% interest rate. Unlike the 72-installment arrangement, the out-of-court mechanism considers the debtor’s overall financial picture, examining income, assets, bank deposits, other obligations and actual repayment capacity. For this reason, inclusion requires consent to lift banking and tax secrecy. The advantage of this procedure is that in specific cases, it can provide not only long-term repayment but also partial write-off of interest, surcharges, or even part of the principal debt.
3. Bank account seizure lifting: Taxpayers and businesses with frozen accounts due to overdue debts can “unblock” them by paying 25% of the total debt and arranging the remaining amount. This option is provided once and aims to maintain a minimum liquidity level to cover operational needs, especially for small and medium enterprises and freelancers.
4. Targeted primary residence protection through the out-of-court mechanism: Unlike the current framework that considers total debts and assets, the new procedure focuses only on the primary residence value without mandatory calculation of their total assets. The arrangement will be based on the property’s commercial value and the debtor’s actual repayment capacity, allowing lower installments and, where justified, greater debt “haircuts.” The debt amount will be determined by the debtor’s asset value and income, while the proposal will be calculated through an algorithm examining only the main residence value, ensuring lower monthly installments and greater “haircuts.” Remaining assets will be liquidated through auctions, with proceeds directed to repaying other debts.
5. Real Estate Acquisition and Re-leasing Entity: The international tender for the Real Estate Acquisition and Re-leasing Entity has entered its final phase, with binding offer submissions completed and investor selection expected in late June. The entity is scheduled to be fully operational by late autumn. The new mechanism targets vulnerable households facing financial dead-ends who risk losing their main residence as they can no longer service any debt arrangement. The Entity will purchase the vulnerable debtor’s main residence at approximately 30% discount from its commercial value and then re-lease it to them, allowing them to remain in their home with subsidized rent. State subsidy is estimated to range from €70 to €210 monthly, while lease duration can extend up to 12 years. At the end of the 12-year period (or earlier if they recover financially), the debtor has exclusive right to buy back their home at current commercial value (or 70% thereof, depending on final regulations), provided they were consistent in rent payments.
