Greek banks and foreign investors
Alpha Bank’s deal with Italy’s second largest bank, UniCredit, was a touch of optimism in the gloomy environment of very low expectations that currently dominates the Greek economy.
Based on the deal, Alpha Bank will sell its subsidiary in Romania to create the neighboring country’s third largest bank, in which it will own a 9.9% stake and from which it will draw guaranteed income without other obligations – a good alternative, as times are difficult for everyone, with hidden and overt threats, and no funds left for autonomous growth.
Very importantly, Andrea Orcel, group CEO of UniCredit, stated that the bank is interested in buying 9% of Alpha from the state-controlled bank bailout fund HFSF. Thus, with the entry of another major foreign investor into Alpha, the possible combinations of shareholders for acquiring a strategic stake in the bank increase and the bank’s prospects improve. Furthermore, Alpha Bank’s management and capitalization – which had been relatively behind – is strengthened.
The development is also interesting from a more general point of view. But first, let’s take a brief look at the recent past:
The banks dragged their feet for many years, while out of the 60 billion euros the state had paid, in the end it might only get back about 3-4 billion euros
In the coming months, a cycle will close that began with Greece’s debt crisis 15 years ago, when the country’s (according to the then conservative government) allegedly “shielded” banks came close to collapse. They were bailed out with ample funding from the Greek taxpayer. If we take into account the funds given to them to cover immediate capital needs, to finance gaps after the separation of many of them into “good” and “bad” banks, and the state guarantees for the consolidation of bad loans, the Greek banks were financed with more than 60 billion euros of public money. Of course they had to be rescued – that much goes without saying. But what followed their bailout was a series of paradoxes.
In the United States, the United Kingdom and the other countries of advanced capitalism, banks were nationalized, taken over by new management with hands clean of past sins, had their balance sheets restored and then were sold back to the private sector, with a twofold effect: (a) Strong banks were created and (b) states made a profit for their citizens by collecting more than they had spent on bailing them out.
In Greece, the bet of vested interests created a world first: The consolidation of the banks with tricks (with which the then socialist prime minister George Papandreou initially disagreed, but eventually accepted after two months) was left to the administrations that had destroyed them. Thus, the banks dragged their feet for many years, while out of the 60 billion euros the state had paid, in the end it might only get back about 3-4 billion euros. This is how the 15-year cycle ends.
So, now that this cycle is (sort of) ending, the Alpha Bank-UniCredit deal is sending some hopeful broader messages. Let me explain: If it turns out that big, strong European banks are interested in acquiring shares in Greek systemic banks, this will add vitality to the latter not only directly (with fresh capital) but also indirectly, through the strengthening of their credibility, trust and independence against spoiled, self-interested centers of power and corruption. This would be something strategically important.
Therefore, one cannot help but share the hope of the Central Bank Governor Yannis Stournaras, who told Reuters two weeks ago that the shares of Greece’s state-controlled bank bailout fund HFSF in the banks will be bought by large European banks and/or good strategic investors. May this hope come true, and the Alpha Bank-UniCredit agreement be a first positive step with more to follow.
