ATHENS Nov 23 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
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
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
"Loan sharks are usually the last stop for someone trying to
save their business from going under," said the official, who
refused to be named. "And once you enter into business with
them, you enter a spider web."
Dimitrios, who would not give his second name, agrees. "Loan
sharks are not clerks in banks," he said, stirring a cappuccino
in a central Athens hotel lobby, where he spoke to Reuters
through an interpreter. "They are men who lift weights and carry
guns. A lot of small businessmen turn to loan sharks. You think
it's an easy way out but then your throat gets cut."
THE WINDOW INSTALLER
A tall, large-framed man with a mass of gelled grey curls,
Dimitrios set up his window installation business 25 years ago
in an industrial zone just outside Athens. Before the crisis his
company had turnover of around 4 million euros a year, and made
a steady trade using imported materials from Russia.
But after a fire at his factory, the father of two says he
received only a third of the insurance money he should have,
triggering a long period of financial troubles.
The business was also badly hit by customers using
post-dated cheques. Greeks habitually date their cheques as much
as six months into the future. They may not have the money now,
they say, but they'll get it in a few months. The practice is
legal but economists and bankers blame it for contributing to
the country's plunge into bankruptcy.
According to credit databank Tiresias -- named for a blind
Greek prophet -- cheques worth 3 billion euros bounced in 2009.
That's 272 euros per person. Comparisons to other European
countries are hard to come by as almost none issue cheques in
the way Greeks do. But according to Schufa, Germany's main
credit bureau, there were 3.5 billion euros worth of arrears on
instalment plans in that country last year. Germany's population
is almost nine times bigger than Greece's.
The value of dud cheques in Greece slipped to 1.8 billion
euros in 2010, but the problem is growing again this year. By
September 1.65 billion euros of cheques had bounced, according
to Tiresias, which is used by the Greek government to track the
level of consumer debt.
Some banks recently stopped issuing cheque books, others
have stopped making loans. As traditional sources of credit dry
up, more people are likely to turn to loan sharks.
That's what happened to Dimitrios, who says a friend in his
neighbourhood put him onto his moneylender, saying he knew
someone who had talked of people who could help him out. "I
can't even bear to say his name," Dimitrios said of the lender
He wouldn't say how much he borrowed, but it was enough to
pay his 40 staff and buy supplies after post-dated cheques
totalling 1.5 million euros from his clients had bounced in
BALKAN CRIME RINGS
Evidence of loan sharks can be seen along the winding
streets of Athens' historic centre and the boulevards encircling
it, where poorly photocopied pieces of paper asking "Need cash?"
are stuck onto car windscreens and the city's yellow telephone
Shaking his head in dismay, the finance ministry official
says many have links to organised crime in the Balkans and
Eastern Europe. "Everything is fronted by Greeks and it's very
difficult to catch them," he said, adding that many sharks fake
bank procedures or bribe lawyers for their services.
When Romania and Bulgaria joined the European Union in 2007,
their criminal gangs gained easy access to Greece. The official
said the gangs' main activity is trafficking women and heroin
smuggling; lending cash is a side business. In a July report the
Organisation for Economic Cooperation and Development said human
trafficking contributes to the money-laundering business in
Greece, though it did not give figures.
A spokesman for the European Commission's representation to
Greece declined to comment, saying loan sharks were not in their
Friedrich Schneider, who tracks Europe's black market
economies as chair of the department of economics at Austria's
Johannes Kepler University, said loan sharking is a direct
consequence of Balkan-originated crime in Greece. But Schneider
puts the industry's annual turnover at around 5 billion euros,
half the Greek government's estimate.
Greek authorities blame the Balkan crime rings for the
proliferation of unlicensed pawn shops in greater Athens, an
area home to around half the country's 11 million people. In the
last two years their number has tripled to around 250 shops, the
finance ministry official said.
While legal pawn shops -- currently numbering around 90 in
greater Athens -- charge an interest rate of 3.75 percent a
month on pledges, illegal ones charge between 5 and 20 percent.
They appeal to the upper middle classes who have valuable
jewellery. The official said the upper middle classes are
attracted to unlicensed shops -- which are often in rundown
areas of town -- to escape the gaze of their neigbours.
"We have tax after tax, and people are left no options," the
official said. Loan sharks offer a 5 percent a month interest
rate, which seems low compared with the 12-15 percent interest a
year that banks and credit cards usually charge. But the power
of compounding works quickly -- a rate of 5 percent a month ends
up as 60 percent a year.
Most of the lenders deduct the interest before handing over
the loan. "So if you've asked for a 10,000 euro loan, you get
4,000 upfront. And most desperate people do not walk away from
cash on a table," the official said.
"I ended up paying back my loan 10 times," said Dimitrios,
adding that his moneylender would demand a 50 percent interest
on missed payments, dramatically increasing his debts. In a
sudden twist of fate, the moneylender died earlier this year of
a heart attack, ending the campaign of threats. Dimitrios is now
struggling to pay off bank loans he took out after his troubles
with the loan shark began.
With more cuts on the way in Greece, and the risk increasing
that the country will default or even exit the euro zone, the
loan shark industry is likely to grow.
"The middle classes are scraping the very bottom of the
barrel. All the money they stuffed away is gone," said Phaedon
Tamvakakis, managing director of Greek investment services firm
More painful austerity measures will mean a crisis "that is
no longer on an individual level. It will become a massive
phenomenon," Tamvakakis said, warning that an entire stratum of
Greek society could become impoverished.
This is taking a high emotional toll.
The health ministry says suicides are up 40 percent through
October from the same period last year, most committed by
middle-aged men. In a patriarchal society where fathers are
expected to be breadwinners and provide for their families, the
sense of personal failure and alienation is profound.
"Men experiencing a drop in income are especially affected
by depression, leading to suicide or even homicide," said John
Kyriopoulos, who heads the department of health economics at the
National School of Public Health.
Of those who use loan sharks, only 5 percent manage to pay
them back, according to the finance ministry official. But an
equal number commit suicide. Around 30 percent -- borrowers such
as Dimitrios -- pay part of their loans back.
"The time of the Olympics is over for Greece," Dimitrios
said, referring to the 2004 Games which boosted national pride.
"In Greece everything works the opposite of how it should. You
must beg banks to get a loan, and beg the police to deal with a
loan shark. I am a good man, but I am grateful my loan shark