Government prodding lenders

The government promised yesterday to exert pressure on banks and ensure that they keep the lending tap running to businesses and consumers in a bid to stimulate slowing economic growth. The Finance Ministry anticipates the economy will expand by 2.7 percent this year, but economists have dismissed the forecast as unrealistic and place growth estimates lower. Economy and Finance Minister Yiannis Papathanassiou, who took charge of the ministry last week, will meet with representatives of the Hellenic Bank Association today and said it is time for banks to channel liquidity from the government’s support plan toward businesses and citizens. «It is time for everyone to take responsibility for their actions,» said the minister after the Cabinet meeting yesterday. All of Greece’s major banks have agreed to take part in the government’s 28-billion-euro liquidity support scheme aimed at keeping the economy adequately funded. However, banks have kept a tight grip on lending despite receiving funds from the program. «The government, in cooperation with the Bank of Greece, will hold regular, systematic and strict checks, so that the liquidity reaches the real economy,» added Papathanassiou. Recent data from the Bank of Greece indicate that the annual pace of credit expansion to households slowed to 14 percent in November from 15.1 percent in the previous month as loan growth to businesses also decelerated. The central bank wants the pace of credit expansion to stay above 10 percent in 2009. Meanwhile, Fitch Ratings told Reuters yesterday it might downgrade Greece’s sovereign credit rating in coming months in the absence of any meaningful reform by the government. The news comes one day after Standard & Poor’s downgraded Greek debt, citing a worsening fiscal deficit and grim economic outlook.

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