Greek banks may not need all of EU/IMF aid-cenbanker

ATHENS, March 17 Sat Mar 17, 2012 3:10pm EDT

ATHENS, March 17 (Reuters) - Greek banks hard-hit by the country's debt swap might not need all the aid earmarked by the EU and IMF to help them weather the crisis, central bank chief George Provopoulos was quoted as saying on Saturday.

The European Union and International Monetary Fund have set aside some 50 billion euros to recapitalise and support the lenders, the biggest private holders of Greece's debt.

The banks all took part in the largest debt restructuring in history this month that saw bondholders lose as much as 74 percent on their investments.

"The recapitalisation of the banks will be completed by September 2012," Provopoulos told To Vima newspaper. "I believe that the available amount will not need to be fully exhausted."

Provopoulos said he still hoped there would be mergers in the Greek banking sector after Alpha Bank on Wednesday scrapped plans to tie up with rival Eurobank in what would have been Greece's biggest bank merger in decades.

The merger fell through after the debt swap inflicted a bigger hit on their portfolios than expected, with Eurobank particularly affected as its exposure to Greek sovereign bonds was roughly double.

"It's possible that we will see mergers. After its recapitalisation the banking sector will be much healthier and stronger," Provopoulos said ahead of the publication on Monday of the central bank's monetary policy report.

He warned once again that for Greece to leave the eurozone would be like "opening the gates of hell."

"Fortunately the decisions by the Eurogroup and successful completion of PSI (debt swap) are making this scenario distant and give Greece the chance to enter, with hard work, a virtuous circle," he said.

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Comments (1)
CiucciNeri wrote:
In order to avoid a greek disorderly default the EU has lent so far to Greece, through various programs such the EFSF,etc, approx 240 bn euros.
By doing so the EU has put the country in a vicious circle
The present austerity measures imposed to Greece to rein its public deficit, prevent the economic growth and this makes it harder to collect the tax revenue necessary to reduce the public deficit. At the same time the amount of interests that Greece must pay on its sovereign bonds is not lowered because debts are cancelled with the proceedings of other debts ( from the EFSF ).
Under these conditions for Greece will be extremely difficult to mend its economy and the country will always be dependent on the EU bailouts in order to avoid a disorderly default.
For how much painful this could be, the EU should draw the conclusion that only the forgiveness of part of the greek national debt can solve radically the problem.

Mar 18, 2012 4:13pm EDT  --  Report as abuse
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