Greece and Europe: Disagreement on Foreclosure Protection

The latest in the Greek saga has delayed the latest 2 Billion Euro aid tranche and has put a hold on the 10 Billion Euros earmarked for recapitalizing the banks.

The disagreement is on what level of foreclosure protection to provide.  Greece had wanted the level of protection at €300,000 for primary residences, but recently lowered this threshold to €180,000 for a homeowners primary residence.  The sticking point seems to be on the income level of the homeowner.  Greece has lowered the amount from €2,200 per month to just under €2,000.  Europe wants this to be reduced to €1,100 per month.

What Europe wants to avoid is homeowners who are not paying because of strategic reasons. The Greeks argue that €1,100 is at the poverty line and the middle class would be affected, thus this threshold should be higher.  A compromise is in the works since Greece recently lowered this amount to €1,850 and my guess it will be lowered even more.

This needs to get settled within a week since the important recapitalization of the banks with 10 Billion Euros on the line.  Without the banking system back on its feet, the prospects of recovery in Greece are greatly hindered.  Thus, I expect the Greek side to very motivated to wrap this up.

The migration issue will push Germany to compromise as well since Merkel is feeling the heat on the domestic political front with lots of refugees entering the country.  Greece and Turkey are key players in stemming the flow.  Merkel recently made a visit to Turkey right before their November 1st elections.  This shows how important this issue is for Merkel.

The mediators look to be the French again.  Expect the Greeks to lower level of the homeowner further with the final figure somewhere near the €1,500 amount thanks to French intervention and German domestic political reasons.  I expect this to get done soon. This should not be a repeat of the brinkmanship that occurred the last time around.