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Greek Banks: Growth Hindered by Debt

21 Mar

Summary

Greek banks face financing limits due to private debt outside the system.
NPL ratio fell to below 4%, nearing European average.
Distressed loans equivalent to a third of Greece's GDP.

Greek banks face limitations in financing economic growth, as identified by ECB economists. A substantial amount of the country's private debt exists outside the traditional banking sector, presenting a significant challenge.

Following a severe economic crisis a decade ago, Greek banks experienced substantial losses, a surge in non-performing loans (NPLs) reaching nearly 50%, and a drastic drop in deposits. However, macroeconomic stabilization has led to improved liquidity, higher profits, and better capital conditions.

Currently, the NPL ratio has fallen below 4%, aligning with European averages. The four major Greek banks reported nearly 5 billion euros in net earnings for 2025. Despite these improvements, unresolved distressed loans, equivalent to about a third of Greece's GDP, continue to restrict banks' capacity to support new investments and lending to businesses and households.

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