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When a young man entered a payday rental shop in Tbilisi on November 20 and took 19 people hostage, apparently brandishing a rifle and hand grenades, it looked like a simple robbery.

But the would-be robber, 31-year-old carpenter Levan Zurabashvili, did not ask for money. Instead, he called on the Georgian government to make several policy changes.

“First of all, gambling must be banned throughout Georgia,” Zurabashvili said as the scene played out on live TV. “Second, annual interest rates on bank loans must be set at no more than 7%.”

Some of the hostages interrupted with the argument that 7% was still far too high. “In the European Union, the rate is around 3%,” one man pointed out.

“Can I finish?” asked Zurabashvili.

His third and final call was for a 10 percent cap on drug company profits to drive down drug prices. “It’s mainly old people who buy medicines, and their pensions are only 250 lari” (about US$75), he said, explaining that banks are trapping seniors with expensive loans they need to cover medical bills , but cannot pay back.

debt addiction

Many Georgians listening to the attacker could not help but nod in agreement. In recent years, Georgians have slipped into the debt trap. About 80% of Georgian households owed bank loans totaling $5.5 billion (31% of GDP) in 2018, the latest year for which detailed figures are available from the National Bank. Unknown amounts are owed to subprime lenders.

This number puts Georgia at the top of the list of European countries in terms of the amount of consumer credit relative to the size of the economy, and significantly higher than neighbors Armenia and Azerbaijan.

While wealthy households can borrow to improve their financial flexibility, more and more debt is being taken on by the poorest Georgians, for whom it can exacerbate their precarious situation, a 2018 World Bank to learn found.

And the hostage of Zurabashvili had a point about the EU. In the richest European countries like France and Germany, banks offer household loans at an average interest rate of 4%, while in Georgia it’s a whopping 17%, according to the National Bank. Payday loan companies, like the troubled Zurabashvili, are offering even higher interest rates in exchange for lax credit checks, luring many Georgians into a debt trap.

While gambling is a major contributor to the debt problem – and it was later reported that Zurabashvili himself had gambling problems – his most resonant claim was related to seniors and their medical debt.

Given the country’s meager pensions, older Georgians – unless they are supported by their children – usually only have to borrow money for their daily needs. About half of retired Georgians have bank loans. And the institution that has a virtual monopoly on distributing annuities, Liberty Bank, also charges borrowers a whopping 31% annual interest rate on annuities.

Because of their stable, albeit small, income, Georgia retirees are often the only members of poor families who are even eligible for a loan. This means they borrow money and pay for their own medicines on behalf of the whole family. On average, Georgian pensioners spend between 65 and 80 lari ($20-25) a month on debt servicing, Mikheil Svanidze, a Tbilisi-based sociologist, told Eurasianet.

On the day of Zurabashvili’s attack, he had tried to buy medicine for his mother but could not afford it, the mother, Lamara Tereladze, told reporters. “He was upset that he couldn’t buy me my meds … and probably had a few drinks too, and he did what he did,” she said told the local news site Formula. Tereladze said that she and her son also took out loans from several banks to pay for medical treatment for Zurabashvili’s father, who has since died. They spend most of their income paying off those loans, she said.

“This boy [Zurabashvili] was right about everything,” said Tsitsino Alaverdashvili, an 85-year-old from Kakheti in eastern Georgia. Alaverdasvili makes his living selling sunflower seeds, hand-knit socks and churchkhelas – a traditional sweet made from grapes and nuts – on the street in the tourist town of Sighnaghi. Alaverdasvili suffered a heart attack in the summer, and the state health insurance fund only paid part of the treatment. “The rest I had to borrow from a bank or get from relatives,” Alaverdashvili told Eurasianet. “Now I have to sell stuff on the street to pay back the bank and buy medicine.”

Pandemic Debt

While debt was a significant concern for financially vulnerable Georgians prior to 2020, with the arrival of the Covid-19 pandemic The country’s entrepreneurs were also hit.

2019 was the best year for Nika Vacheishvili’s small business, an elegant little guesthouse and winery in the Ateni Gorge, about 60 miles south of Tbilisi. “The hotel was fully booked every day, people also came here for weddings and birthday parties,” Vacheishvili told Eurasianet.

Vacheishvili and his family had moved from Tbilisi to Ateni in 2010, where dramatic cliffs hang over a vineyard and seventh-century basilica. They built a house, started a farm and started making wine. Eventually the winery grew into a thriving tourist destination and wine production grew from 100 bottles to 4,000 bottles a year.

They outgrew their home, which was being converted into a guest house, and took out a loan to build a 19-room hotel and two smaller loans to buy goats, expand their restaurant, set up a conference room, and build hiking trails to build. The new hotel opened last year. “It was fully booked immediately. Even the bank couldn’t believe how well we were doing,” he said.

But then the pandemic hit and Vacheishvilis, like many other Georgians hoteliers and restaurateurs, were on the verge of bankruptcy. With the nation on lockdown, “we have absolutely nothing to do except maybe sell a few bottles of wine here and there and we have three loans to pay back,” Vacheishvili said.

The state intervenes

As part of its economic crisis relief program, the government is taking on 6% of the monthly debt payments for small and medium-sized hotels. This help, along with his salary as a university professor, is helping Vacheishvili to meet his obligations for the time being, but the aid program ends in March. “I’m trying not to panic now,” he said. “I’m going to panic in March.”

Ahead of the 2018 presidential election, billionaire leader of the ruling Georgian Dream Party, Bidzina Ivanishvili, said: saved up to 600,000 defaulting borrowers across the country, with his private charity footing the bill for a total of $1.5 billion in outstanding debt. The bailout, which has been criticized as vote-buying, was meant to wipe the slate clean for struggling borrowers.

The government tried too curb the worst excesses of the payday loan industry by halving the maximum allowable interest rate (from 100% to 50%) and capping penalties for late payments. These measures cleared much of Georgia’s bad debt, but the following year the debt started to mount again.

Then COVID-19 struck. With furloughs, layoffs and business closures, many Georgians, including business owners like Vacheishvili, went under or were about to go under.

In its attempt to mitigate the economic crisis, the Georgian government is not behaving very differently from ordinary Georgians. The state is also in a debt frenzy this year, take out loans by international financial institutions to meet their obligations, mainly social security payments.

By the end of 2020, national debt is projected to reach a record $8.4 billion, which is almost 60% of gross domestic product. According to Georgian law, this is the maximum that the state can borrow. Though richer economies like Japan and the US have far higher debt-to-GDP ratios, local analysts are concerned about rising debt as Georgia’s economy shrinks and its currency weakens pejorative.

“The tax system is becoming increasingly vulnerable in the face of potential future economic shocks,” said the local branch of Transparency International, the watchdog on corruption and good governance. wrote in a recent report.

Robin Hood

With debt becoming an increasingly hot topic in Georgia’s national conversation, Zurabashvili’s demands appealed to a huge audience. Many saw him as a hero who stood up for the poor and spoke the truth to the powerful. However, others have argued that the modern Robin Hood was insane and possibly intoxicated when he performed his famous act.

However, his act became more and more ridiculous as the day progressed. Some of the hostages simply excused themselves and left, with no resistance from Zurabashvili, and he eventually turned himself in. Police claimed the successful conduct of a “special operation” and disarmed Zurabashvili, who found his guns to be toys.

Supporters soon began signing petitions asking for a pardon for Zurabashvili and raising money for his bail. Others watched these efforts with anger and disbelief. Some warned against glorifying crime.

“Romanticizing the kidnapping […] is unacceptable”, Ombudsman Nino Lomjaria told reporters on the day of the attack. “We have a parliament to make social and political demands, to argue and to fight.” The incident should serve as a lesson for politicians to keep in touch with voters and understand their needs, she added.

Zurabashvili will now undergo psychiatric evaluations pending his trial, which is due to begin this month. His mother tearfully begged the nation for forgiveness for his son. “I condemn what he did. I want to apologize to everyone who was put under pressure by Levan that day,” she said after her son’s arrest. “Please forgive him and forgive me.”

This article was funded by a grant from the U.S. Department of State. The opinions, findings and conclusions expressed herein are those of the author[s] and do not necessarily reflect those of the State Department.

Giorgi Lomsadze is a Tbilisi-based journalist and author of Tamada stories.

This article first appeared on Eurasianet here.