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.
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