Bad debt sale will test Greek banks’ recovery

The European Union has approved plans to cut bad loans at Greek banks by up to 30 billion euros after it ruled that the government-backed scheme did not violate state aid rules.

The Hercules Asset Protection Scheme aims to bring down the amount of bad loans, without distorting the market through government subsidies. The European Commission said in a statement on Oct. 10 that it had found"Greek plans aimed at supporting the reduction of non-performing loans of Greek banks to be free of any state aid".

Banks in Greece have been working to reduce a pile of about 75 billion euros in bad loans, the legacy of a financial crisis that shrank the country's economy by a quarter.

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