ECONOMY

Banks told to loosen the purse strings

The goverment called on banks yesterday to support households and businesses by ensuring that money keeps pumping into the economy. In a meeting with the heads of Greece’s five largest banks, Economy and Finance Minister Yiannis Papathanassiou said lenders need to finance companies whose medium-term prospects remain sound but are experiencing short-term difficulties due to the crisis. The minister admitted that a targeted 10 percent annual credit expansion rate is likely to be missed this year despite the government’s 28-billion-euro support package. Based on Bank of Greece figures, credit expansion is expected to slow in 2009 to an annual pace of around 8 percent, added the minister. After years of 4 percent growth, Greece’s 250-billion-euro economy appears likely to stall this year. Brussels forecasts Greece’s 2009 growth at just 0.2 percent, its worst performance since 1993, while the country’s central bank sees zero growth. The package provides capital injections via the sale of preferred shares to the state, guarantees on bank debt and liquidity support via special government bonds. Bank shareholders have already approved 2.62 billion euros in capital injections via the sale of preferred shares, roughly half of the total amount allowed under that part of the scheme.