October 2, 2008 / 1:08 PM / 11 years ago

Greece to guarantee all bank deposits, official says

ATHENS (Reuters) - Greece’s government will guarantee all bank deposits in the country, a senior finance ministry official said on Thursday, even as the finance minister said the nation’s banking system remained completely safe and solvent.

Greece’s cabinet met on Thursday to discuss ways to insulate the country’s financial system from the global crisis, amid media reports that worried savers were withdrawing savings from banks.

“The government will guarantee all bank deposits, whatever the amount,” the official, who spoke on condition of anonymity, told Reuters. Greek laws currently guarantee deposits of up to 20,000 euros ($27,890).

Greek bankers contacted by Reuters estimated the value of deposits in the financial system at around 230 billion euros — roughly equivalent to Greece’s annual gross domestic product (GDP).

The parliament of fellow euro zone country Ireland defied opposition from London and misgivings in Brussels by passing legislation on Wednesday to guarantee all deposits in Irish-only banks. This has already triggered an inflow of cash from British banks.

A European Commission spokesman said it was not aware of any move by Greece to guarantee all deposits. The measure would need approval from Greece’s 300-seat parliament, where Prime Minister Costas Karamanlis saw his New Democracy party cut to just 151 members this week after he expelled a critic from its ranks.

“SAFE AND SOLVENT”

Finance Minister George Alogoskoufis, speaking after the Greek cabinet meeting, publicly reiterated his faith in the solidity of the country’s banks.

“In recent days some citizens, influenced by unfounded rumours, showed nervousness as far as our country’s banking system is concerned,” he told reporters.

“Greece’s banking system is completely safe and solvent and I want to emphasise that citizens’ deposits in all the banks that operate in the country are absolutely secure.”

Alogoskoufis presented a draft bill to parliament on Thursday aimed at sheltering Greek borrowers from the impact of the global crisis. It made no mention of covering all deposits.

Under the bill, banks will not be allowed to seize from accounts money owed to them by customers, while lenders will not be allowed to repossess houses for debts of less than 20,000 euros.

Also, banks will not be allowed to auction off properties at less than their registered tax price — a government estimate based on a property’s size and location.

Earlier on Thursday, Greece’s fourth-largest lender, Bank of Piraeus (BOPr.AT), said that it was on track for positive results in the first nine-months, in response to market speculation that its profits would be hurt.

Piraeus President Michael Sallas also moved to put down media reports that the bank was facing liquidity problems in the wake of the global credit crunch, as the Greek banking sector was not exposed to so-called “toxic bonds.”

“Piraeus has high liquidity, above the level required by the Bank of Greece, while our deposits are increasing on a daily basis,” Sallas said in the statement.

Editing by Daniel Flynn, Andy Bruce and Stephen Nisbet

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