Greek Banks In Crisis Marathon Because Of Italy And Spain
Today’s Eurogroup meeting is critical, as the bailout package for Greece could be proved insufficient, threatening the entire planning, which primarily aimed at easing the pressures in Italy and Spain.
Greek banks have been at the centre of the vortex as they face the harsh consequences of this deterioration that disputes the effectiveness of PSI program,, the overall adequacy of the second aid package of €109 billion and Greece’s ability to meet its commitments under conditions of deepening recession and political instability.
These changes have raised tough requirements for a greater haircut in Greek government bonds at least by 50% and requirements for greater guarantees in PSI.
Greek banks hold about €60 billion government bonds, whose market values are less than 50%, while the audit of BlackRock on their loan portfolios, expected in two months, could burden their balance sheets with more than €12-14 billion.
European Commission officials close to Greek banking developments said that Greek banks are under the relentless pressure of the country’s fiscal problem. They noted that the financial system couldn’t avoid an extremely marathon, with sole allies the Financial Stability Fund and European
Central Bank.
But the FSF has no more than €1.25b, while the rest up to €30 billion depend on the adoption of July 21 agreement.
Moreover, BlackRock’s results are expected in early or mid-December, so bank will have to incorporate them in the balance sheets.
Information indicates that any facility to the Greek banks would depend on the implementation of the July 21 agreement.
This uncertainty has been identified at EU level and several proposals have been submitted to address the issue in collaboration with the ECB. These proposal have a nonnegotiable requirement that the stability of the Greek banking system would remain beyond any dispute. Otherwise, it could pose structural risks by distributing pressures in other countries.
Therefore, a possible intervention and use of a new EFSF is under examination to ease the pressures on banks and strengthen their capital adequacy.
At the Eurogroup meetings today and on October 13, and the European Summit on October 18, the discussion will focus on addressing the weak points of the July 21 agreement.
(capital.gr)