Greek Banks May Need More Cash

While insisting the economy shows all the signs of recovering – as he has previously said the last several years only to be proved wrong – Bank of Greece Governor Giorgos Provopoulos issued a caveat that the country’s banks – which have already received 50 billion euros ($68.06 billion) in recapitalization funds from the government, could likely need yet another injection.
Responding, or in some cases not responding, to questions from Greek Members of Parliament during a committee session, he acknowledged that certain banks may need some additional capital once the stress tests conducted by BlackRock Solutions are published because he doesn’t know what they will reveal about their loan portfolios.
That came before it was reported that he received an envelope containing two bullets and threats at his office the morning of Jan. 17, along with his daily mail. Staff members  contacted the counter-terrorism police
Last February, Finance Minister Yannis Stournaras also received at his office an envelope with containing threats and bullets, which were signed by the Cretan Revolution. Another group called 6th December had also mailed out bullets in the past.
Greek banks are suffering from record non-performing loans, which last year exceeded 43.8 percent for consumer loans and is so bad for mortgage defaults that a wave of foreclosures is set to begin after the government lifted a ban on seizing homes for non-payment.
Austerity measures imposed by the government on the orders of international lenders have left many people unable to make payments on loans, credit cards and mortgages as Prime Minister Antonis Samaras, who promised relief for indebted households, set aside a bill that would help them and has concentrated on helping banks.
His testimony came against the backdrop of a growing scandal surrounding the failed state-owned Hellenic Postbank involving some 500 million euros ($680 million) in bad loans. Provopoulos insisted he had done all he could to warn the authorities about the problem, leading to the arrest of 29 people, including the former chairman and vice chairman of the institution.
Provopoulos said there’s no reason for worry as he said the Hellenic Financial Stability Fund (HFSF) has a large capital reserve of  8.7 billion euros to cover any additional requirements. Eurobank has already announced it will go ahead with a two billion euro share capital increase, but it is not yet known whether it will be partly or fully covered by the HFSF.
Meanwhile, the status of the banks remains a secret as the government is negotiating with the country’s creditors, the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB), on whether or when to release the results of stress tests audits.
The Troika wants stricter terms requiring greater capital set aside while the banks want more lenient rules that will allow them to release some of their capital into the market, the newspaper Kathimerini said.
The ECB wants the funds not used for the recapitalization of the banks from the original 50 billion euros to be retained as a safety buffer for any future problems.
The government reportedly wants to utilize some of the unused monies to cover other needs, such as the bridging of the funding gap. Asked by New Democracy parliamentary spokesman Makis Voridis whether the HFSF surplus could be used for that purpose, Provopoulos wouldn’t answer.
The country’s banks were brought into deep difficulty when a former government – when current Deputy Premier/Foreign Minister Evangelos Venizelos was finance chief – stiffed investors and bondholders with 74 percent losses in a desperate, failed bid to write down the debt.
With a primary surplus – not counting interest on debt and a host of other obligations – being reached for the first time in a decade, and as Greece is in the seventh year of a deep recession with austerity measures creating record unemployment and deep poverty, Provopoulos said better days are coming.
While some analysts see unemployment soaring past the current 27.4 percent, he said it will drop, consumer consumption will begin to increase again, tourism will give a boost to the economy and the privatization program that has produced only a fraction of what it was targeted to bring in will show some improvement although there are no signs yet it will.
He issued another warning however, that social unrest and political instability – especially if the ruling coalition of Samaras’ New Democracy Conservatives and his partner the PASOK Socialists, are repudiated in May elections for the European Parliament and Greek municipalities.
Provopoulos said all political parties, including the major opposition Coalition of the Radical Left (SYRIZA) which opposes the big pay cuts, tax hikes and slashed pensions being implemented by the government on Troika orders should rally around reforms and stick to austerity.