«The degree of the banking sector’s effectiveness is defined by its ability to offer top-quality services at the lowest cost possible.» This quote from outgoing Bank of Greece governor Lucas Papademos’s annual report to the bank’s shareholders last Monday puts in a nutshell the major problems faced by Greek banks. First, there is a problem in the quality of services, including the products on offer, their pricing, distribution networks, and the speed and quality of servicing clients. Second, there is a problem in operational cost, which includes administrative, payroll and other costs. The decline in the profitability of banks, which began in 2001 and continued in the first quarter of 2002, has also brought to the forefront the management’s call for a reduction in operational costs, most of which involved payroll costs. There has been some progress in this area; operational-cost growth slowed down to 7 percent in 2001and payroll costs were cut for a third year in a row, dropping to an average of 1.4 percent of a bank’s assets from 1.7 percent in 1998. Assets per employee increased from 1.6 million euros in 1998 to 2.3 million in 2001. These developments, remarks Papademos in his annual report, reflect banks’ efforts to cut their operational costs, a highly positive development given the need to retain their competitiveness within the eurozone. He also calls for an expansion in the banks’ assets. These are not problems that concern just the top managers; they are of concern to all bank employees. Listening, a few days ago on some radio show, to Dimitris Kousselas, president of the bank employees’ federation, OTOE, defending their 48-hour strike called for tomorrow and Thursday, one got the impression that bank employees live in penury. Kousselas went on at length about the banks’ «thirst» for high profits. He said that since they could not maintain the profit levels achieved in 1999 and 2000, mostly thanks to the stock market, banks refuse to give pay raises. He added that, even though bank profits fell by 30 percent, they are still very high and that the employers’ insistence on granting only limited pay rises is unjustified. One could easily gain the impression that high profits for banks would be occasion for sadness on the part of Kousselas. The paradox is that OTOE’s call for a strike has mostly been supported by employees in banks where the State still has a strong stake. In these banks, the employees’ pension funds are among the main shareholders; so one would assume that they would care a lot about profitability, competitiveness and expanding market share. Kousselas ought to know that profitability and viability go together. Isn’t OTOE aware of the fact that there are banks worrying not only about profitability but also about capital adequacy? One wonders how long it has been since the top unionists have worked at a bank and how capable they are of selling the new financial products; in short, how aware they really are of the actual problems of the people they represent. We learned recently that Santander Central Hispano, one of the biggest European banks, will lay off 14,000 people this year, on top of the 11,000 it fired in 2001, because of declining profits. When a fire breaks out at a neighbor’s house, you should prepare for it to come your way.