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Greek banks exhausted by the crisis, the government forces them to grant more credits

24 March 2011 / 19:03:33  GRReporter
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The Stock Exchange reported the collapse of the Greek banks. Alpha registered losses of 2.8% on Tuesday this week, Eurobank - 2.5%, Marfin - a decline of one percent, Agricultural Bank - 1.2%, Postbank - 0.8% and Piraeus - 0.6%. The National Bank of Greece ended the day with 0.5%. The Athens Stock Exchange closed with losses of 1.42% and 1545 basis points. The problems with the revenue collection and the general hesitation about the role of the permanent mechanism for financial stability in the debt crises of the countries of the periphery of the euro area contributed to further aggravation of markets’ tension.

Meanwhile, last year’s balance is ready. The banks reported how they handled in 2010, during which the economic woes of Greece cut off their access to capital markets. "The strong capital base and liquidity protect the National Bank of Greece in order to be able to overcome the adverse economic conditions in 2011," said its Executive Director Apostolos Tamvakakis proudly. The positive result of the National Bank of Greece is bitter though because it decreased by 50% compared to the previous year. Tamvakakis, unfortunately, may be the only Greek banker, boasting that his bank registered 485 million euros profit before the extra taxes imposed by the government. After paying the extra profit tax, the National Bank of Greece’s profit dropped to 406 million euros.

Piraeus Bank registered losses because of the extra tax. According to the Greek edition of Kerdos, Piraeus’ profit for 2010 is 11 million before taxes. It drops to 4 million euros after taxes, and the extra tax is 24.3 million euros. Ultimately, the additional tax burden has turned the small profit of the Greek bank into a loss of about 20 million euros.

To avoid further difficulties, Marfin Bank announced it would increase its capital by 941.4 million euros. "The purpose of the corporation is to take advantage of investment opportunities offered and expected to occur by the end of 2011," reads the official message of the bank. The president of Marfin Andreas Vgenopoulos, quoted by Ta Nea, said that the privatization program of the socialist government would create significant investment opportunities in almost all sectors of the economy. Marfin has already benefited from the privatization in Greece by buying the legendary airline Olympic Air three years ago. It was established by the Greek tycoon Aristoteleos Onassis in the middle of the 20th century and he gave it to the Greek State later. It appears that the current owner of the best airline in Greece is trying to raise enough capital in times of crisis to be able to get on the privatization train.

While banks are wondering how to make both ends meet, the Ministry of Finance announced that the state will allocate another 30 billion euros as state guarantees, which will enable the financial institutions to receive the next funding by the European Central Bank. After the announcement of the decision, the Finance Minister George Papaconstantinou faced serious resistance from his colleagues in the Council of Ministers, who almost unanimously supported the idea that banks should not be given more guarantees and that they themselves should deal with the crediting issues in the current crisis.

The apparent underestimation of the problem about the funding of the banking sector by the political elite of Greece put Papaconstantinou in a difficult situation. Apparently he had to explain again that the pressure on the local financial institutions is the result of the overall economic impotence of Greece in this period. Almost all ministers and some deputy ministers stated their opinion on the support of the banking system, led by the Minister of Citizens Protection Christos Papoutsis. "Well, what is Greece doing? It is giving money to banks to accumulate property. So, they belong to the state," said Papoutsis, cited by Naftemporiki. Another great idea came from the Minister of Education Anna Diamadopoulou who concluded that if the state issue guarantees to finance the banks, then a share of their assets belongs to the public sector. The Vice Minister of Culture Telemachos Hitiris advised the banks to change their mindset and start putting more money in the market.

Tags: EconomyMarketsBanksCrisisPiraeus BankMarfin BankNational Bank of Greece
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