Talks on banks’ social security

A new round of discussions, with the involvement, for the first time, of Prime Minister Costas Karamanlis, gets under way today on solving the hot potato issue of funding banks’ huge social insurance liabilities. Despite a denial by government sources yesterday, it is hard to escape the conclusion that the scheduled meeting between Economy and Finance Minister Giorgos Alogoskoufis and Takis Arapoglou, the president of National Bank (NGB), the country’s biggest, coming hard on the heels of other contacts, will avoid touching on the issue. The matter is considered pressing, as listed firms this year will have to log their unfunded social insurance liabilities on their balance sheets according to the requirements of International Financial Reporting Standards. The liabilities of some of them, particularly Emporiki Bank, are so large that they are projected to seriously erode their capital base. A first round of intensive deliberations before Christmas, involving chiefly the Hellenic Bank Association (EET) and the Federation of Bank Employees’ Unions (OTOE) ended in deadlock. Banks themselves appeared without a common position on the issue, the main stumbling block being Arapoglou’s stand that NGB has no funding liabilities. Yesterday, Alogoskoufis met with EET and Alpha Bank President Yiannis Costopoulos, after a contact with Emporiki Bank CEO Giorgos Provopoulos over the Christmas holiday. According to sources, Bank of Greece Governor Nicholas Garganas is particularly concerned at the prospect of a protracted deadlock on the issue and its repercussions on the banking system, the stock market and the economy at large, and is urging a concerted approach. So far, the government has avoided being directly involved, saying it will contribute its financial share to a solution but otherwise urging the other two parties to seek a deal. Meanwhile, prices of bank stocks have continued to climb on the Athens bourse, after an excellent performance in 2004. According to analysts, investors have been pricing in a solution of the social insurance problem, and intensive rumors of restructuring deals in the sector are fueling their interest. They argue that that after several years of stability, the sector has accumulated strength and is ready for a new round of realignments. Arapoglou recently dispelled such suggestions, however, saying that banks were unlikely to have strong interest in business deals in good times.