Greece plans debt cap and foreclosure freeze for defaulted loans

Greece's Ministry of National Economy and Finance has introduced a draft law for borrowers with loans in default. The proposal aims to reduce excessive interest demands, speed up bilateral restructuring, and set limits on claims by banks, funds, and servicers.

The draft is under public consultation until October 22. Theoni Alabassi, General Secretary for the Financial Sector and Private Debt Management, said the goal is less uncertainty for borrowers, more responsibility for lenders, and a rules-based private debt system.

“less uncertainty for the borrower, more responsibility for the lender and a private debt regulation system that operates with rules and produces real solutions”

A central element is a ceiling on interest for all loan types. Total claims may not exceed double or triple the original principal, applying automatically to consumer, mortgage, and business loans regardless of whether the claim has been transferred, securitized, or is managed by servicers.

The measure targets thousands of borrowers with old debts, especially those with accumulated agricultural, business, or mortgage loans. Even debts in default for years or decades cannot exceed triple the original principal, while farmers' debts are capped at double.

For loans up to 200,000 euros, the framework reduces interest and freezes foreclosures. For old agricultural debts where data is insufficient, such as loans predating 1990, a special calculation method is foreseen. Amounts exceeding the limits, including excessive interest and additional charges, are effectively written off.

Banks, funds, and servicers must proceed with recalculations under the new framework.