By Yiannis Papadoyiannis & Sotiris Nikas
Over 4 billion euros in revenues has been credited to the state budget since 2008 stemming from the support the state has been providing to Greek banks since the start of the recession. These revenues derive from dividends, commissions and payments to the state by domestic lenders in return for assistance both in cash and capital.
The state assistance was granted to banks in 2008 in order to reduce the impact of the global financial crisis on the local credit sector, and although this was not primarily intended to bring profits to the state budget, the amount of 4 billion euros comprises a significant addition to budget revenues.
The European Commission report attached to the recently revised bailout agreement acknowledged that Greece’s state revenues from banks were one of the most important factors in the creation of a primary surplus.
Finance Ministry officials note that after 2008 and the law introduced by then minister Giorgos Alogoskoufis that triggered the state support to Greek banks, the cash assistance exceeded 140 billion euros at the peak of the crisis and mostly concerned the supply of collateral from the state to banks. Given that there has been no collateral forfeiture and banks are servicing all their obligations, the state has collected over 4 billion euros for its support.
The collateral of 140 billion euros did not constitute a cash injection from the state to the banks, but rather a written guarantee from the state thanks to which banks were able to draw vital liquidity from the European Central Bank. The Greek credit sector managed to handle the major flight of deposits during the crisis and the exclusion of domestic banks from international markets with the Eurosystem cash flow.
According to ministry figures, the total in collateral has dropped from a peak of 140 billion euros to 48.9 billion in the first quarter of 2014, as banks have returned some 90 billion of the collateral they had received from the state thanks to the improvement in liquidity conditions.