As Cyprus is confiscating up to 80 percent of the bank accounts of depositors with more than 100,000 euros ($130,000) to meet demands of international lenders putting up a 10 billion euros ($13 billion) bailout, the head of Greece’s central bank has given assurances that deposits in Greek banks are safe.
That came as Greek banks expect to finish a recapitalization that was needed after they too were brought into difficulty when a previous Greek government imposed 74 percent losses on investors in a frantic bid to write down its debt. That nearly destroyed banks in Cyprus, which lost 4.5 billion euros ($5.76 billion) in their holdings as well as bad loans to Greek businesses that went belly-up in Greece’s crushing economic crisis.
“The recapitalization–which is expected for many months – will be completed soon, probably within weeks,” George Provopoulos affirmed during an interview on state-TV NET. Greece’s bailout stipulates banks must boost capital by the end of April – something unlikely to happen–but amid efforts to speed up the process, so that it could be completed by the end of May.
“I believe that Cyprus΄ solution is viable,” Provopoulos said, adding that even more austerity measures are expected to be imposed there but he doesn’t believe what’s happening in that country will splash over into Greece.
Provopoulos said that since the country΄s elections in June of 2012 that restored some stability, that 19 billion euros ($24.4 billion) have returned to Greek banks. He also confirmed reports in the Greek press the country΄s international creditors raised objections for the merger of Greece΄s two largest lenders National Bank of Greece and Eurobank. “I can΄t say for sure if the two banks will or will not manage to complete their merger,” he said.
The Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) which is the country’s lender of last resort said it is now fearful that the merger would create a bank too big for the state in relation to his size compared to the country’s Gross Domestic Product (GDP) which is what happened in Cyprus.
He said there would not be a confiscation tax on Greek bank deposits after the head of the Eurozone said the Cyprus model could be used in other countries. “This view is wrong,” Provopoulos said. “If there is a shortfall in revenues, this will be covered with fresh spending cuts,” he said, raising the possibility that Prime Minister Antonis Samaras could be forced to break another of his vows, not to impose any more austerity measures.
Provopoulos’ comments came as Athens readies for another visit of Troika inspectors who want to check progress on reforms before releasing a delayed 2.8 billion euros ($3.5 billion) loan installment. The envoys are demanding a faster pace, including privatization and the firing of 25,000 public workers this year.