National Bank of Greece (NBG) Governor Theodoros Karatzas denied yesterday that the government had decided not to renew a bond convertible into National shares. Karatzas was in Sofia, Bulgaria, part of a delegation of leading Greek businessmen. The government’s purported decision was reported yesterday by an online news site, www.reporter.gr. The site had added that the government would not keep the shares, which represent a stake of about 6.9 percent in the bank, but would sell them, along with others it controls, offering, in total, about 10 percent of National. «Even if the State, for reasons of liquidity, wishes to raise capital, it has no reason to sell these shares at such a low price,» a top National manager told Kathimerini. The bond, which matures on July 15, was issued in 1999. At the time, one National share was worth 27,912 drachmas or 78.18 euros, at the then rate of 357 drachmas per euro. Yesterday, National’s shares rose a considerable 7.34 percent, to close at 14.04 euros, or 4,784.13 drachmas per share at the irrevocably fixed rate of 340.75 drachmas to the euro. National Bank officials yesterday made it clear that the bank is not going to buy back these shares and strike them off, as it has done before. On the other hand, a sale of 10 percent of National’s shares would give a further boost to the government’s privatization program, rekindled by the merger of state refinery Hellenic Petroleum with private Petrola. What needs to be found is a willing partner for National Bank and better conditions on the Athens Stock Exchange. The latter, recently on the rebound, yesterday closed at 1,839.69 points, a six-month high. If a merger took place in the Hellenic Petroleum-Petrola manner, it would also satisfy both those who call for privatizations and those opposed to them, since the effects of the merger will not become apparent until later. Close collaborators of Karatzas said yesterday that the issue of the share-convertible bond is still very much an open matter. They emphasized, however, that a sale of a big chunk of National under the present circumstances is impossible. They said two outcomes were likely: Either DEKA, the state portfolio management company, will renew the bond or it will pay back the investors and keep the 6.9 percent stake in NBG. The latter move would increase direct state participation in National Bank to 21.07 percent. However, if one also adds the shares held by National Bank group companies and pension funds – which are still under the control of the Economy and Finance Ministry – the State’s direct and indirect holdings rise to over 40 percent, (in fact, to about 46 percent), as Kathimerini reported in mid-April. Economy and Finance Minister Nikos Christodoulakis is under intense pressure to find revenues and present a balance somewhat resembling the estimates he has submitted to the European Commission, that is, with only a small deficit. This pressure may lead the government to reissue the convertible loan, even though conditions are definitely unfavorable. The government, in any case, has entered the entire amount of the bond onto its books as part of the public debt. Due to the drop in the price of shares, DEKA would face losses of many hundreds of millions of euros if it paid the investors back.