Insight: In Greece, loan sharks compound the pain

Thu Nov 24, 2011 2:08pm EST
 
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By Amie Ferris-Rotman

ATHENS (Reuters) - For self-made businessman Dimitrios, the threats began with a phone call from a man who said they knew where his daughter was.

At first the 57-year-old window installer kept quiet about the calls. When his car was torched in front of his house, he hid the blackened metal shell from his family.

But when he awoke to his wife's screams at a huge banner that had been strung across their street, he could no longer hide the truth. "I WANT MY MONEY BACK," the banner read. And Dimitrios knew the illegal loan shark to whom he owed thousands was not prepared to wait.

Greece's economic crisis has forced the government to cut public spending by tens of billions, slash salaries and raise taxes. Greeks have raided their savings. According to small Greek lender Attica Bank, around 50 billion euros ($68 billion) have been taken out of Greek banks over the past two years, much of that by middle class people, says its head of wealth management Theodore Krintas.

Around 185-190 billion of bank liquidity remains, he said.

But as it has become harder for many Greeks to do the weekly shop, let alone pay the rent on their businesses or the mortgages on their homes, there has also been growth in illegal lending.

One academic who tracks Greece's black market says loan sharks turn over around 5 billion euros a year in Greece. The government puts the figure at double that -- 10 billion -- and says activity has more than quadrupled since the crisis began in 2009. Of that amount, more than half stays in the pockets of the lenders, who charge interest rates starting at 60 percent a year.

Half of those who take on such loans have suffered property losses or a breakdown in their marriage, the government says. At least some committed suicide when they could not pay up. And always there is the threat of violence. A high-ranking official in the finance ministry's economic crime department told Reuters many of the operations are connected to Balkan organised crime gangs.   Continued...