What Should Be Done with Greek Banks to Help the Country Return to a Path of Growth?

The recapitalization of Greek banks is perhaps the most critical problem for the Greek state today. Despite direct cash infusions to Greek banks that have so far exceeded €45 billion, with corresponding guarantees of around €130 billion, credit expansion has failed to pick up. There are two obvious reasons for this failure: first, the massive exodus of deposits since 2010; and second, the continuous recession—mainly the product of strongly deflationary policies dictated by international lenders.


Following the 2012–13 recapitalization, creditors allowed the old, now minority, shareholders and incumbent management (regardless of culpability) to retain effective control of the banks—a decision that did not conform to accepted international practices. Sitting on a ticking time bomb of nonperforming loans (NPLs), Greek banks, rather than adopting the measures necessary to restructure their portfolios, cut back sharply on lending, while the country’s economy continued to shrink.


The obvious way to rehabilitate Greek banking following the new round of recapitalization scheduled for later this year is the establishment of a “bad bank” that can assume responsibility for the NPL workouts, manage the loans, and in some cases hold them to maturity and turn them around. This would allow Greek banks to make new and carefully underwritten loans, resulting in a much-needed expansion of the credit supply. Sound bank recapitalization with concurrent avoidance of any creditor bail-in could help the Greek banking sector return to financial health—and would be an effective first step in returning the country to the path of growth.


Mike Haluska Added Oct 11, 2017 - 11:31am
NOTHING should be done unless the Greek government gets its house in order.  Over half the population of Greece is riding the "government wagon" while fewer and fewer working Greeks are stupid enough to continue pulling the wagon! 
Arrbyy Added Oct 11, 2017 - 8:13pm
I'm not racist, so I won't be joining the gang that likes to bash Greeks for being Greeks. That doesn't mean that regular Greeks don't have some responsibility for their own situation. Caring is knowing. Regular people everywhere (victims of gangster Corporatocracy) don't care enough to know. People have been dumbed down by the police state and its allied institutions. Instead of reading, online or books, people are watching sports, playing video games, chasing Pokemon monsters or something else. And there's no law against it and shouldn't be. But there's always consequences.
Greeks haven't been, in my opinion, properly informed, nor have they informed and educated themselves. Which led to them not wanting what was in their best interests (materially and spiritually), namely a departure from the neoconservative, neoliberal EU, which, recall, stood by (and behind the scenes, as Michael Parenti points out, aided the U.S. in its murderous bombing campaign) while NATO destroyed relatively civilized Yugoslavia. Greeks insisted that they stay in the EU, but also insisted that the EU behave and stop abusing them (Germany and France mainly). Ha!
In their defence, regular Greeks couldn't do anything about traitorous Alexis Tsipras. They told him what they wanted (no more austerity and a refusal to help Europe destroy Greece), when he asked, and then he turned around and gave them the finger, soon after which he went to Israel to worship Netanyahu, revealing what he was really made of.
The EU - especially as its leaders enable NATO, which is trying to bring upon humankind a nuclear winter (and would, but for the fact that God is in the background and has other ideas about how things will play out), a gigantic crime - needs to simply dissolve.
Saint George Added Oct 12, 2017 - 3:59am
Economies run on sales. No income, no spending.
Wrong, zombunist. Economies run on PRODUCTIVITY, otherwise there's nothing to sell. Get it? Make something first; THEN sell it.
Dumbshit loaf of rat-turd.
George N Romey Added Oct 13, 2017 - 7:04am
A total jubilee for Greece.  It would teach the greedy bankers quite harsh if they were forced into massive write downs.