Athens - Dimitris Pikrodimitris took out a mortgage four years ago when he was drawing an annual income of 27,000 euros ($36,720).
But the economy quickly sank into a debt crisis, forcing Greeks to tighten their belts and driving the insurance agent's wages down to just 6,500 euros last year.
“I have difficulty even making basic expenses. I haven't paid the loan for the last two years,” Pikrodimitris told AFP.
The number of defaulting debtors like Pikrodimitris is growing in Greece, and experts are warning that the situation could blow up and smash hopes the country can finally emerge from a crippling six-year recession this year.
Greece's central bank said that non-performing loans - loans for which debtors have failed to make payments for more than 90
days - are currently worth 77 billion euros.
“Managing non-performing loans is a key challenge for banks,” Yannis Stournaras, a former finance minister who is now the Bank of Greece chief, told parliament last month.
Repayment has stalled on around 30 percent of mortgages and business loans, and around 50 percent of consumer loans, says Victor Tsiafoutis, a lawyer offering guidance to debtors at Athens-based consumer group Ekpizo.
“This is a bomb that is going to blow (and cause) a breakdown in the bank system,” Tsiafoutis said.
“Imagine a default of 70 billion euros. Who is going to pay this money?”
Greece's central bank said the rate of non-performing loans has risen to 33.5 percent at the end of March from 32 percent last year.
These so-called 'red' loans were mostly responsible for some 600 million euros in combined bank losses in the first quarter of the year, it added.
“The large number of non-performing loans is suppressing the process of economic recovery (and) represents a significant risk for banks,” added George Pagoulatos, a professor of European politics and economy at the Athens university of economics.
“Private sector balance sheets have become very strained,” Rishi Goyal, head of the IMF's Greece unit, told an Economist conference this week.
“Unless the problem is resolved, resources will remain trapped... and this will have negative consequences on growth.”
To protect homeowners from total ruin, Greece has restricted forced auctions of a debtor's primary residence.
But a related backlog of court appeals for bankruptcy protection -100,000 according to some estimates - could take a decade to resolve.
The Bank of Greece recently issued a set of recommendations to banks on how to deal with the issue that included partial debt writedowns, extended loan terms and the acceptance of additional forms of collateral.
But those are only recommendations, and banks have until December to apply them if they agree to.
In the meantime, hard-pressed debtors like 39-year-old Pikrodimitris have received little relief.
When he asked his bank to reschedule his mortgage, he was asked to pay 3,600 euros just to secure a settlement - a sum that is now more than half his annual income.
“I'm trying to avoid foreclosure,” he told AFP.
“When I took the loan, I took a risk and the bank took a risk. Eventually I will lose my home (while) the bank will never lose,” he said.
Tsiafoutis, the consumer group lawyer, said Greeks were “manipulated” by the banks before the crisis to take out loans and over-consume.
A key example, Tsiafoutis said, was mortgages denominated in Swiss francs, which cost some 70,000 consumers in Greece dearly when the save haven currency surged against the euro.
The euro traded at around 1.49 Swiss francs before the crisis, but now stands at just 1.2 francs.
“If a consumer borrowed 100,000 euros, today they might owe 130,000 euros even after paying interest all this period,” the lawyer explained.
“Banks played a very dark role in promoting these type of loans... to people unable to understand what they were signing up to,” he adds.
Even now, commercial lending rates remain exorbitant even though the European Central Bank's benchmark rate is at a record low of 0.15 percent.
The ECB's reference rate has an indirect impact on consumer rates charged by commercial banks.
“(Banks charge) almost 20 percent for credit cards and an average of 15 percent on consumer loans. This should be lowered to 5.0-7.0 percent,” the lawyer argued.
Greek bankers insist they see no immediate threat to the credit system from bad loans.
“This is an exceptionally serious issue, but I think it is manageable,” Michalis Sallas, head of Piraeus Bank, one of the four main lenders, said after a top-level government meeting on Wednesday.
Sallas stressed that “banks have provisions (against bad loans) of over 50 percent, and assets and collateral exceed the remaining amount.
So there is no threat to the banking system.”
Greek banks were recapitalised last year with funds from an EU-IMF bailout, after they were forced to cancel over 100 billion euros in state debt in 2012. - Sapa-AFP