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The government has again put the banks to the wall

29 November 2012 / 23:11:50  GRReporter
2919 reads

Victoria Mindova

The government refuses to disclose details of the buyback process of part of the Greek debt before the end of the transaction. Uncertainty is part of the government's strategy to attract more investors, a government official who wished to remain anonymous told GRReporter.

The Ministry of Finance and the Public Debt Management Agency refuse to comment on their expectations for the participation of investors in the process. They are not providing information about the end price they will offer to investors to buy back part of the government bonds. Initial information indicated that the purchase price would be 35 cents per euro debt. Now it seems it will be subject to negotiation with investors and will be known after the end of the process, which is expected to begin early next week and to last about five days.

The issue of another debt relief for Greece was the main topic during the meeting of representatives of the board of the Union of Greek Banks with the Minister of Finance Yiannis Stournaras and the head of the Public Debt Management Agency Stelios Papadopoulos. After the meeting, the financiers explained that the aim of the talks was to explain the Ecofin decision. However, it remains an open secret that the main concern of the bankers is how to reduce the losses from the buyback of the bonds.

They are also reluctant to give official information about whether they will take part in the process, but according to the online edition, the result of the buyback of the bonds will be the full nationalization of the Greek financial institutions.

The edition claims that the buyback will cost the four major banks in the country (National Bank of Greece-NBG, Eurobank, Alpha and Piraeus) eight billion euro. "With these parameters, I do not think there will be investor interest in the new bonds. This will lead to the complete nationalization of the Greek banking system," the internet media cites the opinion of a local banker.

The biggest concern remains that if private shareholders lose the banks and the state takes the control over them, the loan policy will not be determined by market principles but in accordance with political interests. Such a practice has buried public finances in recent decades and now, analysts are worried that the time is coming for the financial institutions as well.

Whatever the results of the buyback and recapitalization of the banks, the government is determined to appoint special commissioners for banking supervision. According to Alpha Bank, they will be selected with the consent of the supervisory Troika, the International Monetary Fund, the European Central Bank and the European Commission and will monitor whether the loans are granted according to market principles and without the intervention of external political factors.

Tags: EconomyMarketsBanksBondsBuyback
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