Greece relies on tourists for bad debt relief


Rhodes ferry operator Paris Kakas cannot afford another lost summer to the pandemic if he ever has to pay back the millions of euros he owes: “When the bank comes to ask, we let’s say sorry. “

Its anxious wait for the return of tourists highlights a crucial test for Greek banks, still grappling with the heaviest bad debt burden in Europe and the legacy of the financial crisis.

Greece is counting on the rescue of this summer season to avoid a wave of insolvency among tourist companies, already on their knees after a disastrous 2020.

Rhodes attracted 2.4 million visitors in 2019, but in April this year, closed luxury resorts and daisy-infested rental car lots made the Greek island near the Turkish coast look like ‘a ghost town.

Greece’s central bank estimates that a quarter of loans to the tourism sector, which in turn represents one-fifth of the overall economy, are now non-performing.

“Last year we basically stopped paying,” said Kakas, whose Sea Dreams ferry company saw its revenue plummet when the coronavirus pandemic abruptly halted travel.

While data on lending by economic sector is patchy, former deputy tourism minister Manos Konsolas told parliament in October that non-performing loans (NPLs) in the tourism industry stood at $ 3 billion. euros ($ 3.6 billion).

More worryingly, a third of all loans protected under debt moratoria introduced during the COVID-19 strike are in the vulnerable accommodation and food services sector, according to the Bank of Greece.

And despite the loss of billions of euros from NPL since the debt crisis, Greek banks still have the highest levels in the European Union, with 47.4 billion euros ($ 58 billion) in NPL or 30.2% of their portfolios, more than 10 times the EU average. .

“For a whole year of operation some hotels haven’t opened, so this obviously affects their books,” said Ioannis Hatzis, who owns three hotels in Rhodes and sits on the board of the country’s hoteliers federation.

“Any business that has tried to grow in recent years and has actually increased its debt will not be able to serve it if tourism does not rebound,” he said.

“HOW MUCH MONEY CAN YOU GIVE US?”

The government has injected around 40 billion euros to help businesses and has promised to withdraw support only gradually, but the tourism industry is badly in need of getting back to work.

After a decade of growth, it suffered its worst year on record in 2020, with only 7 million visitors against a record 33 million in 2019. The sector generated a turnover of 4 billion euros, or less a quarter of the $ 18 billion in 2019.

This year, as vaccines are rolled out, authorities expect 40% of 2019 levels.

Greece opened its doors to tourists from the EU and other key markets such as the United States, Israel and Britain on Saturday, lifting the need for people to self-quarantine while they have been vaccinated or tested negative for COVID-19.

For companies like Sea Dreams, which were already struggling with debt before the coronavirus crisis, investments are on hold and another bad year could spell the end.

“It’s not worth going to the bank now because whatever you tell them, they say, ‘OK, well, how much money can you give us? “Kakas said.” But we don’t have money to give you, we want you to give us money! “

Last year, Sea Dreams only sold 22,000 tickets to tourists traveling to neighboring islands, visiting Turkey or watching dolphins, up from 120,000 in 2019. Its turnover fell by 75% while its debt, reduced by half to 3.5 million euros in two restructurings, is still weighing on its balance sheet.

Kakas has taken a state grant of 200,000 euros to pay taxes, repairs and salaries and he hopes there will be enough customers this summer to cover around 2 million euros in running costs.

He relies on loans from friends and family to meet his additional cash needs and has considered operating a boat under a foreign flag, like Panama’s, to hire a cheaper foreign crew.

But without an influx of tourists, the measures can only limit the damage.

“Those who had problems with non-performing loans during the boom years of 2018 and 2019 are unlikely to recover this year,” said Nicholas Magginas, chief economist at the National Bank of Greece (NBGr.AT ).

‘PROTECT WHAT I HAVE’

As bad debt repayments have gone smoother than expected in the EU, the European Central Bank’s main supervisor, Andrea Enria, warned Greek banks this month that the crisis was not over and that lenders in general underestimated the risks.

Moreover, while Greek banks have made progress in removing credit risk from their balance sheets thanks to the government’s “Hercules” program which runs until the end of 2022, the debt problem remains.

Hercules was launched in 2019 to help Greek banks get rid of bad debt by turning bundles of debt into asset-backed securities that can be sold to investors.

Credit managers, who help collect and manage NPLs, oversee nearly 100 billion euros in Greek debt, half of which is securitized loans discharged by banks, said Tasos Panoussis, president of their association.

This will likely increase with more bad debt securitizations in the pipeline of large banks such as Alpha (ACBr.AT), National Bank and Piraeus (BOPr.AT).

Panoussis, managing director of the Greek branch of Italian debt collection firm doValue (DOVA.MI), said the funds were seeking amicable solutions with borrowers through restructuring to put loans back on track. rails.

Foreclosures were a last resort used only when borrowers were “totally uncooperative,” he said.

Some of the debt accumulated by Sea Dreams has been transferred to a debt fund and Kakas, whose business increased thanks to the credit facility in the early 2000s, is worried about coming after the guarantee.

“I don’t work to make money but to protect what I have,” he said. “I’m optimistic that the bank wants their money back. If they force me to work, they won’t get anything.”

(1 USD = 0.8238 euros)

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