The Best of GRReporter
flag_bg flag_gr flag_gb

Eurobank is urgently seeking a strategic investor

26 July 2013 / 19:07:25  GRReporter
2306 reads

Victoria Mindova

Brussels is planning to gradually sell the fourth Greek strategic commercial bank, which is Eurobank, in order for the recovery of the financial sector of Greece to continue as stated by senior sources from the European Commission. They are members of the supervisory mission which has been monitoring the performance of the bailout to Greece and they have been visiting Athens almost every month since 2010.

The lenders are talking about "gradual privatization" of the bank, which could be interpreted as a sale in parts or as a split of the bank into a "good" and a "bad" part before being launched in the market. The goal is to find a long-term strategic investor but, according to the message of the European officials, it seems that Eurobank might be offered to smaller candidates if no interest is shown by major financial institutions.

"The recapitalization of Greek banks has been completed better than we expected," a European Commission representative told journalists after the announcement of the new lenders’ report on the economic situation in Greece.

So far, the European mechanism has allocated for the rescue of the Greek banking sector 27.5 billion euro for the recapitalization of the four largest commercial banks and 15 billion euro for the rescue of three cooperative banks and five smaller financial institutions.

Under the recapitalization programme, the three major Greek banks have raised alone from private investors 3 billion euro which exceed 10% of the total amount required for their rescue. Europe emphasizes that this amount is actually significantly higher than expected and that this will probably have a positive impact on the supervisors’ evaluation. Currently the banks are implementing a rescue strategy that will ensure the effectiveness of their activities in the coming months.

"The re-capitalisation of the four core banks has been completed and will help support the economic recovery and maintain the protection of the deposits," said the same sources from the European Commission.

The representatives of the lenders’ Troika have emphasized that independent supervisors of the activity have been appointed in all core banks to monitor the granting of new loans on the basis of economic and financial criteria, thus avoiding the bad practices which we know from the past, namely the granting of large loans, due to political pressure, to insolvent candidates.

The next step for the National Bank of Greece, Alpha Bank, Piraeus Bank and Eurobank is to submit to the lenders, the Ministry of Finance and the central bank their restructuring plans by the end of this September.

The European supervisors do not exclude the probability of the Greek banks requiring a new cash injection following BlackRock’s updated report on the level of bad loans in the domestic banking system. Meanwhile, yet another stress test of the European Central Bank in collaboration with the European Banking Authority (EBA) has been enforced, which should establish the sustainability of the financial institutions by the end of this year. Whether the Greek banks will receive additional aid and its amount will be clear at the beginning of 2014.

The economy

The lenders state that Greece is implementing the financial programme as planned but the funding provided by it will be insufficient. It is expected that the hole in the financing of the Greek economy will amount to four billion euro by the end of 2014. The representatives of the Troika see three possible options to escape from the present situation.

The first involves the granting of a new loan but it has not yet been widely discussed. The second option is for Greece to cover the gaps in the budget by partially using the unutilized amount of approximately seven to eight billion euro of the 50 billion euro allocated for the banks. The third option, which would be appreciated by the lenders, is for Greece to enter the free markets to finance its budgetary needs alone, without having to renegotiate new terms and to obtain additional loans.

By the middle of this year, Greece had obtained a total of 210 billion euro in financial aid from Europe and the International Monetary Fund. The second bailout to Greece will end in the middle of 2014. The European officials who have been closely monitoring the development of Greece emphasize its apparent progress from the spring of 2010, when it adopted the Memorandum of financial support, to today. However, there are still significant challenges facing the Greek government.

The problems in the public sector and healthcare are the most serious. According to the lenders, the difficulties in the privatization programme are surmountable. They hope that the new launch of the national gas company DEPA in September will attract new investor interests. There are no concerns regarding the status of foreign debt either.

"The debt of Greece has remained unchanged since December 2012, when it signed the second Memorandum of financial support. There is no reason for concern," they tried to calm the voices speaking about a new haircut of the foreign debt. Brussels stresses that the state of the Greek debt will be reviewed as early as April 2014 when, perhaps, only a restructuring of the payments instead of a further reduction of the obligations will be considered.

Tags: EconomyCompaniesTroikaLendersGreeceCrisisBanks
SUPPORT US!
GRReporter’s content is brought to you for free 7 days a week by a team of highly professional journalists, translators, photographers, operators, software developers, designers. If you like and follow our work, consider whether you could support us financially with an amount at your choice.
Subscription
You can support us only once as well.
blog comments powered by Disqus