ECONOMY

Fears global woes may last longer

The current global credit crunch will last much longer than originally thought but the Greek economy is relatively well shielded against its impact, a leading banker said yesterday. «The extent of the problem in the USA is now clear. Excessive debt, overvalued assets and weak balance sheets of household and financial institutions emerge as the core of the problem… (which) will last much longer than we initially thought,» Takis Arapoglou, president of the National Bank of Greece (NBG), the country’s largest lender, told the bank’s annual general meeting. He said the «cleansing» process will require additional injections of liquidity, perhaps new write-offs in bank portfolios and, necessarily, «stability in realty prices.» Arapoglou said Greece was less vulnerable because it retained the characteristics of a relatively closed economy. «Domestic demand is the main component of growth, supported by strong business and public investment, while private consumption is fueled by an increase in employment and the strengthening of real incomes,» he said. Arapoglou said the Greek financial sector’s high capital adequacy and zero exposure to high-risk products was an additional positive factor for the national economy. «The prospects of maintaining healthy rates of credit expansion are particularly favored by low real interest rates,» he said. Strategic advantage Arapoglou said NGB possessed strategic advantages, particularly those of high liquidity and its presence in the dynamic markets of Southeastern Europe, including Turkey, where it acquired Finansbank in 2006. «NBG is among the few remaining banks internationally with surplus direct liquidity, as the loans/deposits ratio remains under 100 percent.» However, Arapoglou said that neighboring countries’ economies were «clearly more vulnerable» under the present circumstances and would need to bolster their competitiveness, carry out structural reforms and show discipline in the application of monetary and fiscal policy. «The macroeconomic prospects of Southeastern Europe and Turkey remain favorable; nevertheless, the high current account deficit will remain the Achilles heel of Southeastern Europe and Turkey in 2008.» Arapoglou said NBG’s first-quarter results showed that NBG was in line with targets in its 2007-2009 business plan, with a 30 percent average annual profitability growth rate. Finally, Arapoglou said the recent decline in NBG’s share price was limited compared to other European peers, while the strong fluctuations were due to sales in the derivatives market. Separately, Goldman Sachs cut the price targets of all major Greek banks.