Greece may use 11 billion euros ($15.2 billion) of international aid earmarked for banks to reduce the nation’s debt, adding momentum to the government’s planned return to international bond markets.
Greece has used 25 billion euros of a 50 billion-euro European bank-rescue package to bolster its biggest lenders. Some 14 billion euros went to restructure smaller banks. The remaining 11 billion euros may not be needed should Greek banks find private investors, Finance Minister Yannis Stournaras said.
“If, at the end of the day, all capital needs that might arise are covered by the private sector, then this 11 billion can be used simply to repay debt,” Stournaras told reporters today in Athens. He called the leftover money a “very safe buffer for the Greek banking system.”
Greece may hire banks to sell bonds this year as it weans itself off 240 billion euros in emergency aid granted since early 2010, when investors shunned the nation’s debts because of alarm over a budget deficit that was five times the European Union limit. The government plans to sell 2 billion euros of bonds by mid-year, according to three officials.
“They might start with an exchange or a tap of an existing bond,” said Lyn Graham-Taylor, a fixed-income strategist at Rabobank International in London. “For the first new issue, they’ll probably be looking at a syndication. You don’t want to take any risks of failing.”
Greece, whose debt load is close to 180 percent of gross domestic product, or about 326 billion euros, has narrowed its budget deficit as part of the terms of the rescue program. The government and EU predict that Greece will emerge in 2014 from six years of recession.
Last month, Alpha Bank SA and Piraeus Bank SA (TPEIR) raised 2.95 billion euros in new capital from foreign investors in the latest sign Greek lenders are bouncing back from the sovereign-debt crisis. Piraeus Bank is Greece’s second-biggest lender by assets and Alpha Bank the fourth largest.
Legislation approved by the Greek parliament on March 31 includes hundreds of economic measures including changing the way banks are recapitalized.
Stournaras said today that the goal of the bill’s banking provisions is “to maximize the use of private-sector participation in banks’ capital in order to safeguard” the unused 11 billion euros from Europe “so they can form a buffer.”
Once the European Central Bank completes an assessment of European lenders by the end of this year, Greece will learn whether it can use leftover money from the bank-aid fund to reduce debt or refinance it, said a Greek government official, who declined to be named in line with policy.
To contact the reporter on this story: Jonathan Stearns in Athens at firstname.lastname@example.org