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Louka Katseli to bankers: You should give more credits

01 February 2010 / 17:02:10  GRReporter
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In the midst of the global financial crisis, last year Greek banks received €12-€13 billion state aid. They invested about €4 billion in order to increase their capital base, and the rest they returned to the state through purchasing government securities. Nothing from the €4 billion, which remained in the banks, was invested in the real economy. This information were reported by the Minister of Economy, Development and Merchant Navy Louka Katseli during the conference "The banks and the economy - the next step", organized by the Apogevmatini newspaper. Therefore, according to Minister Katseli banks are now in debt to the real economy and should start giving more loans to private businesses.

Louka Katseli admitted that the most urgent task right now is the rehabilitation of public finances, which will restore confidence in the Greek economy. "We should not allow viable companies that have financial problems right now to perish, and households who cannot pay their loans to remain on the periphery of economic life," the minister said, in order to try and protect the Bill of unpaid credits. "IMF is canceling public debt of a large group of countries. We are talking about a temporary measure for the cancellation of debts of a limited number of establishments for a limited portion of their debts accumulated only throughout the economic crisis," she said.

The Minister said that currently there is great interest in investing in Greece and there are at least 5 major international corporations, which want to invest immediately. Over the next month the ministry will make official reports. But the requirement of investors is easier procedures for establishment and licensing of private business. Right now 12 steps are required, in order to establish a company in Greece and the government will merge them into a single one. From the second half of 2010 the government will introduce new regime for foreign investments in Greece. ESPA gives €26 billion to Greece. Only 3% out of this money has been used. Next week the Ministry of Louka Katseli will submit a facilitated procedure for applying for money from the program to parliament.

"It is difficult to assess what will be the duration of the recession and when recovery will begin," admitted Panagiotis Tomopoulos, legal adviser to the Bank of Greece. He said that recently the Bank of Greece and the IMF have conducted a joint assessment of the state of the banking sector and it has shown that Greek banks are viable enough to withstand much greater crisis than that one which is expected in 2010. "As a supervisor, we are obliged to assure Greek citizens that there is no danger for their investment in the banks. A key feature of banks is their presence in Southeast Europe. 10 percent of their funds are invested in the region. In 2009 investments of Greek banks in the region have increased by 4%--in other words, our neighbors have confidence in our banking system," said Panagiotis Tomopoulos.

According to Iliyas Plaskovitis, Secretary of the Ministry of Finance, the credit ratings of Greece are moving predictably, however, this does not apply to the spread index, where there are large shocks. Is not very clear whether the agencies influence the spread index or it influences the agencies. "What the Greek government should do is to calm the markets and to provide greater transparency of their actions and make their intentions crystal clear," said Iliyas Plaskovitis.

"Certainly gains will not be as they were before and this means that banks will have to cut their costs," said Pavlos Milonas, the chief director and strategic advisor to the National Bank of Greece. According to him Greek banks have invested in Southeastern Europe very early. In early 2009, countries in the region were in a state of crisis and now they are exiting this state, which helps Greek banks as well.

According to Gikas Hardouvelis, economic adviser of Eurobank, bank profits will fall and 2010 will be the worst of all. "We experienced the global crisis easier because it came from the banking sector. But it caught up with us slowly and found us quite unprepared. Greece's problem is that it is living well, but depending on credit. The biggest problem of the Greek economy is its low competitiveness, and public finances come second," said the economist at the forum. He argues that the auction of securities last week has shown that there is an active market speculation against the Greek state. Despite the successful tender, the spread-s skyrocketed again. Gikas Harduvelis explains this only with speculation. According to him, nobody dares to challenge the hedge funds because they have lots of money and are capable of many things. Without having corresponding capital you cannot cope with them.

Tags: Economy Greece Credit rating Spread index Davos World Economic Forum
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