The early end to the proposed merger between National Bank of Greece, the country’s largest commercial bank, and Alpha Bank, the largest private bank, shows clearly how difficult it is to successfully complete such a mega-merger. To that extent, an old question is brought back to the forefront: Should big Greek banks seek to merge with another domestic bank, or actively look for a linkup with a large foreign bank? The failure of the National-Alpha Bank merger should not come as a surprise given the complexity of the experiment. Power struggles and clashes of personalities are normally observed in the implementation of such mergers and sometimes succeed in derailing such projects. However, the heart of the problem lies elsewhere and reflects the structure of the Greek banking system. Both banks, like the other large Greek banks, are universal commercial banks, that is they offer more or less the same line of services and products. This means that there is a great deal of overlap and few complementarities. By definition, universal banks should look for economies of scale if they want to be competitive and to enhance shareholder value. This, in turn, entails a painful cleanup process. It is this process, involving cost cuts and doing away with unnecessary power structures, which gives rise to problems and sometimes creates havoc, burying entire projects. This does not mean that the marriage of two domestic universal banks cannot succeed. It may succeed but for this to happen the societal and regulatory framework have to be merger-friendly, and this is not clearly the case in Greece. Yet local banks have to ask themselves the same question: What do they do next, given the fact that they now operate in a more demanding and competitive banking landscape? Most of them continue to rely heavily on volatile trading income, which represents a much larger share of their total revenues than in their European peers. They know retail banking has a lot of growth potential, especially mortgage and consumer lending, and every bank tries to position itself in those areas. At this point, loan growth seems to put to rest concerns about price wars, but history shows this is inevitable once growth slows down and net interest margins get hit. Asset management and investment banking are two other promising areas, but Greek banks do not have the expertise to develop new products. Bankassurance is another promising area but it is difficult to succeed without new products and without bringing together bankers and insurers. Corporate banking holds little promise as large Greek corporations can easily access euromarkets or are actively sought by large foreign banks for clients. Does it all mean that Greek banks are destined to die if they failed to secure a linkup with a large foreign bank? Not at all. In addition to the above-mentioned promising areas which can produce double-digit growth for Greek banks in the next few years, local banks enjoy another advantage. They have not done enough to reduce operating costs and become leaner. This means they have a lot of room left to slash costs, however difficult, become more competitive and enhance their shareholder value without having to enter into an agreement with a foreign bank they have misgivings about. All in all, large local banks can prosper with or without a merger with another domestic or a strategic alliance with a large foreign bank, provided they have a clear strategy. This strategy should aim at exploiting available opportunities in promising areas, perhaps via agreements with selected foreign banks, and reducing operating costs. The Alpha-National merger saga showed how difficult it is to merge two large domestic universal banks. This does not mean, however, that a linkup with a large foreign bank is the only way to survival. Getting slimmer and growing organically is another alternative, as is a strategic alliance with a large foreign bank that enhances shareholder value. Greece is part of this very paradoxical evolution in modern European history. With prosperity came a new immigrant population, and Greece now faces all the dilemmas of multicultural societies. These issues are not going to go away.