ECB negatively views draft law to save primary residences

The ECB opined that the new law could be used strategically – to default – and could backfire for Greece

The European Central Bank (ECB) views the Greek government’s draft law to protect primary residences from foreclosures as risky. A legal opinion released on Saturday states that the law could encourage strategic defaults.

The finance ministry had asked for the ECB’s views on the draft legislation. The new law would protect low-income debtors as a way of dealing with what the SYRIZA government calls the humanitarian crisis caused by austerity in Greece, a cost-cutting policy implemented after the state couldn’t finance its needs beginning in 2010.

The law offers protection to primary homes valued up to … 300,000 euros. Borrowers whose annual  income is less than 50,000 euros are eligible to save their homes with this new bill as long as their bank deposits and other liquid assets do not exceed 30,000 euros.

Of course, trying to sell the ECB a piece of legislation that would benefit someone who makes 4,000 euros a month (48,000 euros annually) and isn’t paying monthly payments on a mortgage of 200,000 euros for a home valued at … 290,000 euros will be an interesting prospect.