Uncertainty puts recap at risk

Uncertainty puts recap at risk

The recapitalization of Greek banks, one of the most crucial processes currently under way, is at risk of failure unless the government and creditors reach agreement on the thorny issues that continue to divide them.

Piraeus Bank decided on Monday to keep open its book for two or three more days. The lender started building it last week and was supposed to close it yesterday, aiming at drawing 1.6 billion euros from private investors. Its decision to keep it open suggests that it is waiting for a resolution on the outstanding issues in talks between Athens and creditors.

Similarly, Eurobank had decided to open its book on Tuesday, but has now put it on hold for a few days. The managements of the other banks are also waiting to see developments on a political level before activating their capital increase plans.

Senior bank officials told Kathimerini that foreign investors are hinging their participation in the process on the release of a subtranche of 2 billion euros in bailout funds from the eurozone. They argue that the release of the funds would act as a safeguard confirming progress and the resolve of the Greek government in implementing the necessary reforms.

In contrast, if the money is not disbursed because the deadlock with creditors is not overcome, there is a genuine risk that the country will return to a state of instability, with grave consequences on the economy.

In that case, investors would not participate in the share capital increases and banks would only be recapitalized by the state, provided of course the European Stability Mechanism disburses the 10 billion euros set aside for that purpose.

Besides the crucial issue of foreclosures, another key area of disagreement between the government and its creditors is the management of the systemic banks. Some sources say that the recent recapitalization law includes clauses on the assessment of bank managers that were not in line with what the country had agreed with creditors, who have now asked Athens for adjustments.

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