The Greek banks have been bailed out with billions exceeding 90% of country's GDP since 2008. When citizens suffer from heavy taxes, unemployment strikes the Greek society, Greek economy faces deep recession and Greeks sink in poverty, it appears that Greek governments do have money, but only for the banks. Billions were given in bailouts, but no one knows where the money went and how they were exploited. The only thing that is certain is that they didn't go where they should go: to the real economy.
by Vangelis Triantis
In October 2008, the situation in Greek economy was far away from today's picture. The Greek economy was growing and the first signs of the global financial crisis appeared shyly. The then minister of finance, George Alogoskoufis, announced a bailout package of 28 billion euros for the banks in order to face competitiveness problems, in other words, to face liquidity problems and secure the deposits. Next to him was sitting the governor of the Bank of Greece, George Provopoulos, whose role was crucial for the formation of today's Greek banking map and is responsible for a series of banking scandals which came out to publicity.
Only 11 billion from this bailout package were used by the Greek banks, but this was just for a start. In 2010, Papandreou administration approved the rest 17 billion through the 3845/2010 law. Little later, another 25 billion euros approved through the 3072 law, from which 21.8 billion were used. The banking sector was continuously asking for support. In private conversations with government officials, top bankers were claiming that they should be supported, otherwise the banking system would collapse and the Greek economy would suffer serious damage. In 2011, Papandreou administration approved another 30 billion, through the 3965 law, under some requirements this time. The total amount reached at 49.8 billion since 2008. This was only the one side of the bank bailouts.
The crisis which eventually hit the Greek banking system, continuous downgrades of the Greek economy from rating agencies and the exclusion from markets, were facts which changed the then status. For years, banks were addicted to easy money, borrowing cheaply from ECB and lending at quite high interests in Greece. Through this way they were making huge profits. However, things have changed in 2009 as crisis hit the Greek economy for good. Thousands depositors were sending money abroad and Greek banks were running out of deposits. The banking sector collapse was very close, or at least, this view was promoted by the bankers.
BoG and ELA
In order to stimulate liquidity for the banking system, Bank of Greece (BoG) started a program under the name Emergency Liquidity Assistance (ELA), in order to provide liquidity for the banks. Specifically, banks were giving guarantees of the Greek Public to receive liquidity which was less than the guarantees' nominal value because both ECB and ELA were not giving then, neither now, the whole guarantee amount. From then, BoG was able to provide liquidity for the banks, initially with 15 billion. Subsequently, were given another 30 billion, therefore 45 billion in total. Another 30 billion were given through the 4031/11 law and 30 billion through the 4056/11 law, elevating the total amount at 105 billion euros.
More simply, the total amount of Greek state guarantees given to the Greek banks since 2008 to date, reached at 154.8 billion euros. This is a huge amount for the Greek banking system, but it's not the only one because banks were greedy. Under the PSI program, the banks received another 50 billion, from the 130 billion of the second bailout package for Greece, in order to be recapitalised. This amount together with the 154.8 billion, elevated the total amount of state loans and guarantees at 204.8 billion euros, which is more than 90% of Greece's GDP.
Where did the money go?
The question now is: where did the money go? More than five years since the beginning of the global financial storm, the banks received billions in bailouts in the form of loans and guarantees, without any positive impact on the real economy. The banking system still facing big problems and bank loans are very rare. The market is more frozen than ever and the bailouts were not effective for the recovery of the real economy. No one knows the way that all these billions were exploited and no one gives an answer.
Kiriakos Tompras, president of the movement "Hipervasi" said to HotDoc: "They [the banks] took 310 billion in total, to secure their capital adequacy, liquidity and cover of deposits. However, even today they are unable to guarantee deposits and we are asking, where did the money go", and "... the BoG and Ministry of Finance should explain to us where did the money go because if we had a money flow to the real economy, then we should have growth".
The truth is that the banks used the money they received from the Financial Stability Fund (FSF) to reduce their exposure to ECB and ELA, instead of financing the real economy. At this moment, banks' exposure to ECB and ELA has reduced at 75 billion, without, however, the complete withdrawal of Greek state guarantees, while at the same time, ECB is pressing for further reduction of the Greek banking system's exposure. The banks however, state that they still hold EFSF (European FSF) bonds which they can use if necessary. Therefore, Greek state guarantees are, essentially, still active.
"Holes", mishandling and frauds
A serious matter which needs clear answer is whether all that money were used by the bankers to cover their banks' holes, i.e. losses from bad directing and bad managing. During stress tests for the Greek banks, for example, the foreign portfolios were not examined at all, where there seem to be offshore companies which they belonged either to bankers or to other people close to them. Investigations from the HotDoc, Reuters and NY Times have bring to publicity many cases which smell scandal.
A characteristic example is Piraeus bank. Some other companies of the bank CEO Michalis Sallas, were receiving loans from the Marfin-Popular bank which they were used to raise Piraeus' stock capital. Specifically, according to the answer of the Central Bank of Cyprus to Irini Charalampidou, MP with the Cypriot party AKEL, this case concerns three companies based in Cyprus: KAEO Enterprises, Shent Enterprises and Benidver Investments. KAEO Enterprises belongs personally to Sallas, while the other two have recently transferred to his two children.
These companies received loans from the then Marfin Egnatia bank in order to participate in the increase of the stock capital of Piraeus bank. They owe, even today, 112.5 million euros in total. Guarantees were also given for these loans: a 7.2 million letter of guarantee from Piraeus bank and a 66.2 million collateral of stocks of Piraeus bank. However, the stockholders of these companies, i.e. Sallas family, never provided any personal guarantees, while little later, the Central Bank of Cyprus demanded a process for predictions concerning a total amount of 87.8 million euros.
Proton Bank, ATE and Marfin-Popular
The presence of Marfin-Popular bank in Cyprus is another case with the smell of scandal besides that of Piraeus bank. According to various statements to the Institutions and Transparency Commission of the Cypriot Parliament, the bank was used for loaning entrepreneurs and businesses which were serving Andreas Vgenopoulos* interests, with terms incompatible to the banking system rules. The money were used for the increase of the stock capital of MIG, among other things.
Another case is that of Proton bank and the entrepreneur Lavrentis Lavrentiadis, who seems that he used the bank in order to fund companies of his interests. Through this way, he managed to provide a false picture of healthy business activities, which was very far from reality, something which was revealed soon through the Proton bank scandal. There are also lots of questions about the stance of the BoG's governor, George Provopoulos, concerning the gaining of control of Proton bank by Lavrentiadis. As the HotDoc revealed, despite the negative propositions from other BoG executives, Mr. Provopoulos approved, eventually, the gaining of control of Proton bank by Lavrentiadis. The subsequent events, are more or less known. The bank collapsed and Lavrentiadis was put in jail, while the Greek people had to pay the cost for Proton bailout through a law from Evangelos Venizelos.
The case of the Agricultural Bank of Greece (ATE), was another big scandal. A [public] bank was deliberately downgraded in order to be sold at a ridiculous price to Piraeus bank.** With exception of the loans to the political parties, no one bothered to check the red loans of the bank: where did they go and under what terms?
An attempt to cover up?
Where did all the money go? No one bothered to check, despite the accusations and publication of scandals. On the contrary, ECB hired Oliver Wyman***, a US-based financial consultancy, which has repeatedly helped banks and governments to cover up the fact that various banks of eurozone were bankrupted, as for example last year in Spain and six years ago in Ireland.
Whether will continue to do this job in other eurozone countries, among them Greece, is something that no one can tell with certainty. What is certain is that in Greece, the banking system received bailouts equal to 90% of country's GDP, while the real economy is sinking without receiving any loans to stay alive.
Article from the HotDoc printed edition, Issue 40, Nov. 2013
(Translated by SCH)
** It is worth to remember the scandal of "selling" the healthy part of public bank Agrotiki to Piraeus Bank in July 2012. The governor of the Bank of Greece, George Provopoulos, had stated that it was a necessary action because the European Central Bank was about to cut the necessary amount of 6,3 billion euros and Agrotiki would have closed, so, many people would have lost their jobs. However, according to the bill concerning this "selling", the difference between assets and liabilities of Agrotiki Bank, was nearly 6,67 billion euros and should be covered exclusively by the Greek Financial Stability Fund, ie the Greek taxpayers! Which means that the "selling" was targeting only to assist a private bank (Piraeus) to eliminate a competitor (public bank Agrotiki), and secure its position in the "Too Big to Fail" category.
On 27 July of 2012 the big scandal of “selling” the healthy part of the public bank Agrotiki to the private bank Piraeus is finalized. Just three days before, on 24 July of 2012, Panagiotis Roumeliotis - ex-representative of Greece in IMF and currently vice chairman at Piraeus bank – in a statement to NY Times supports that: “We knew at the fund from the very beginning that this program was impossible to be implemented because we didn’t have any successful example...”. The statement was spread rapidly from the Greek media. With this “honest confession”, Roumeliotis says something that nearly everyone knows: that the IMF policies have been followed dogmatically since they have been unsuccessful everywhere they applied. The bankers are playing the card of IMF, knowing that nearly noone believes in its good intensions anyway, in an attempt to distract the pubic attention from the big scandal which is about to come three days later. However, it seems that during the next days this tactic was about to fail, since a significant part of the opposition in the Greek parliament as well as several indepentent Greek blogs and websites were speaking clearly about a big scandal refering to the “selling” of Agrotiki bank to Piraeus bank, while they were revealing all the details of this action, something which the mainstream media rushed to hide through a simple announcement. Next, as more and more people were focusing on the real scandal, Roumeliotis was called to testify to the authorities in order for his statement to gain officialy the appropriate importance, in a new attempt to distract the public attention. The official state was fully co-ordinated with the banking establishment to distract the public attention, while normally, the state authorities should have call the architects of the real scandal to give explanations about the fact that the healthy part of a public bank was given to a private bank with the money of the taxpayers and the “garbage” remains were loaded to them.