Greece scrambles to contain fallout from home foreclosures

Greece scrambles to contain fallout from foreclosures

Greek government officials were scrambling Thursday to contain the fallout from violent protests that disrupted the resumption of forced property auctions by the country's banks.

After having been frozen for months due to public opposition, forced home sales started again on Wednesday resulting in clashes between left wing groups and police at the heavily guarded courts where the auctions took place. A handful of law enforcers and demonstrators were injured during the violence in Athens which ended after law enforcers fired tear gas at protesters.

Despite the protests, 12 of the 29 scheduled sales took place in the Greek capital. Among the assets

sold was a cluster of parking slots and a luxury Athens home, according to officials involved in the sale.

Online auctions were also launched in what is seen as being a crucial step in helping Greek banks get a grip on the 100 billions of euros of bad loans sitting on their balance sheets.

In a bid to appease public opposition to the measure, the government and banks have agreed to implement a 300,000 euro floor price on properties going under the hammer to shield lower income groups. A Greek law, voted in 2011, also protects 70% of primary residencies from being taken by banks, according to government spokesman Dimitris Tzanakopoulos,. who said that only top end properties are being sold.

"Those who are protesting, should realize which debts and which social groups are being affected," he said.

SEE ALSO: Greece to resume home foreclosures November 29

Greece's lenders have turned up the heat on the government on forced home sales, placing the issue at the top of a to-do list needed to unlock more rescue money. Greek government officials have described the failure of restarting the auctions as being a "deal breaker" for lenders in the current round of bailout talks.

This is proving to be a thorny issue for the coalition government, led by the left wing Syriza party, that staunchly opposed bank repossessing homes when in opposition.

A number of senior party officials are still demanding an end to the auctions. Many of the protesters on Wednesday were former Syriza officials, who still have close ties with the party. But Prime Minister Alexis Tsipras, has little room, if any, to provide a solution to the problem.

Any further legislative action protecting defaulting loan holders could undermine efforts by Greek banks to reduce bad loans and start lending to the economy again. Also, bankers say that any further protection on homes is likely to prompt a rise in strategic defaulters, those who have the ability to pay back their loan but refuse to do so. About 20% of bad loans held by Greek banks are believed to be held by strategic defaulters.