Greek Banks Suspend Merger Talks

The New York Times

April 8, 2013

By NIKI KITSANTONIS

 ATHENS — Shares in National Bank of Greece and Eurobank plummeted 30 percent Monday after the two banks suspended merger talks because they were unable to raise the required capital.

 The move followed reports that the international lenders overseeing a bailout of Greece had feared the creation of a megabank that would be too big to fail. It came as concern grows in Europe about the threat posed by large banks in small countries in the wake of the banking crisis in Cyprus.

The new bank would have been the biggest in Greece, with assets of around 180 billion euros, or $234 billion. Greece’s gross domestic product was around 190 billion euros last year and is expected to contract 4.5 percent in 2013.

The Bank of Greece, the country’s central bank, said late Sunday it had received letters from Eurobank and National Bank of Greece saying they had been unable to ensure that 10 percent of their share offerings would be taken up by the private sector, in accordance with the country’s agreement with its foreign creditors.

Authorities have not ruled out the eventual resumption of talks to complete the merger. The deal was announced in October and talks were at an advanced stage. A state banking support fund is to decide whether the merger should proceed once the recapitalization of Greece’s four main banks — National Bank of Greece, Eurobank, Alpha Bank and Piraeus Bank — is completed, probably by the end of April.

 Deposits at all Greek banks are guaranteed, the central bank’s statement added.

 National Bank of Greece took over 84.3 percent of Eurobank in February through a share swap as part of a broader plan to bolster Greece’s banking sector, which has been shaken by bad loans and a private debt write-down last year.

 On Sunday, Finance Minister Yannis Stournaras reported “significant progress on many levels” in discussions over Greece’s compliance with the terms of its 130 billion euro international bailout, and said he expected negotiations could be completed “in the next few days.”

 Mr. Stournaras said there would be no further austerity measures such as cuts to pensions and salaries. He said he hoped to conclude talks with the so-called troika of international lenders — the European Central Bank, the European Commission and the International Monetary Fund — before an informal meeting of euro zone finance ministers in Dublin on Friday, when Greek progress in economic reforms is to be examined.

 The two sides are also close to agreeing on the number of installments with which Greeks will be permitted to pay off debts to the state, a Finance Ministry official said, referring to some 55 billion euros in outstanding tax and social security payments. The official spoke on customary condition of anonymity.

 The troika has yet to respond to Greek requests to soften a contentious property tax, which was introduced in 2011 as an emergency source of revenue.

 The mood in the Greek government’s talks with the troika over the weekend appeared to be calmer than it had been at the end of last week, when Mr. Stournaras reportedly challenged officials pushing for more austerity to “take the keys to the ministry and give them to Tsipras.” That was a reference to Alexis Tsipras, who leads the main leftist opposition party, Syriza, which opposes the bailout.

 A meeting on Sunday between Prime Minister Antonis Samaras and the foreign envoys, during which he emphasized that austerity-weary Greeks are unable to take more pain, appears to have helped ease the tensions.