Persistent NPL Burden Slows Investment and Economic Momentum
Greeces economy may have left its prolonged crisis behind six years ago, yet more than €90 billion in non performing loans remain in the hands of loan servicing companies. Nearly half of all active tax IDs still owe money to these firms, trapping countless small and medium sized businesses, professionals and households in a cycle of financial strain.
Servicers appear in no rush to restructure the distressed portfolios they acquired, often citing legal constraints or structural weaknesses in the economy. Investment firms that purchased specific segments of these portfolios, particularly in tourism, demonstrate a different reality as repayment rates approach 90 percent.
Businesses continue to bear the brunt of this slow pace because limited access to credit restricts their ability to invest and expand even in thriving sectors. Thousands of properties also remain tied up in servicing portfolios, aggravating the housing shortage and contributing to soaring rental prices.
The timeline for fully addressing the NPL backlog stretches beyond 10 years at the current rate, reducing opportunities for productive firms to regain momentum. Risks extend further as delays threaten the stability of the state backed Hercules securitization scheme, which was designed to help banks shed bad loans by guaranteeing senior notes.
Investors purchased bonds issued by special purpose vehicles holding the non performing portfolios, with the Greek state guaranteeing the safer tranche. Should recoveries fall short and the senior notes fail to be repaid, the public budget would be responsible for covering the gap, adding pressure to public debt.
Government agencies and the Bank of Greece have recently intensified efforts to speed up progress as concerns grow over stalled restructuring. Servicers currently earn around €500 million a year in management fees, prompting criticism that they lack sufficient incentive to accelerate workouts.
Officials argue that 2026 must mark a turning point with a significantly faster pace of loan restructuring to support businesses and households. Accelerating the resolution of distressed portfolios is seen as essential for restoring credit flows, unlocking investment and ensuring that the next phase of economic expansion is not derailed by old debts.
