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The Political Economy of NPLs resolution: Ownership and conditionality

Panagiotarea, Eleni, (2016), “The Political Economy of NPLs resolution: Ownership and conditionality”, Hellenic Observatory LSE, 13 Οκτωβρη

Greece’s non-performing exposure ratio is the second highest in Europe, largely linked to the unprecedented contraction of domestic economic activity in recent years. Causality is known to go both ways, with persistently high non-performing loans (NPLs) constituting a drag on credit and GDP growth. Theoretically, Greek governments keen to reduce the debt overhang and restore the productive pillars of the economy should have created the conditions for a rapid and effective workout of NPLs. The country’s third bailout programme has provided a road map for reform, with the Institutions bent on facilitating or enforcing ownership. Conditionality, anchored on a ‘reforms for cash’ logic, has reduced perceived or real margins for noncompliance.

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