Greece May Nationalize Some Bank Stakes on Debt Writedown, Papandreou Says
Greek Prime Minister George Papandreou said the government will likely buy shares in some Greek banks as a result of a planned writedown of the country’s debt and a European accord to recapitalize lenders.
“Probably some of the bank shares will be nationalized,” Papandreou told reporters today in Brussels after a 10-hour European summit. “After restructuring, we will then take it back out on to the market.”
Papandreou didn’t give any details on the banks that would be targeted in any nationalization program or the size of any potential shareholdings.
European leaders persuaded bondholders today to take 50 percent losses on Greek debt and set a deadline of mid-2012 for banks to have core capital reserves of 9 percent. Lenders are expected first to tap the market to make up any capital shortfall before resorting to public funds from either governments or the euro region’s bailout fund.
“Greek banks will come out of this with a very clear picture, being reorganized in a way so that they can be viable banks with no problems as far as the Greek debt risk,” Papandreou said.
Europe’s banks will need to raise 106 billion euros ($148 billion) in fresh capital under the tougher rules being introduced in response to the euro area’s sovereign-debt crisis, with Greek lenders needing to find 30 billion euros of the total, the European Banking Authority said.
Reworked Package
The writedown is part of a reworked second international aid package for the country that will include 130 billion euros in new public funding. Greece received an initial bailout of 110 billion euros in May 2010 from other euro area nations and the International Monetary Fund.
European leaders were prepared for a “total insolvency” of Greece if bondholders resisted the 50 percent writedown put on the table, Luxembourg Prime Minister Jean-Claude Juncker told reporters.
To contact the reporter on this story: Jonathan Stearns in Brussels at jstearns2@bloomberg.net
To contact the editors responsible for this story: James Hertling at jhertling@bloomberg.net
Greece's Prime Minister George Papandreou
Jock Fistick/Bloomberg
George Papandreou, Greece's prime minister.
George Papandreou, Greece's prime minister. Photographer: Jock Fistick/Bloomberg
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