ATHENS – New Greek Prime Minister and Radical Left SYRIZA leader Alexis Tsipras’ vow to end austerity, stop privatizations and take control of the country’s banks has seen the gains the institutions made in share sales last year wiped out with $11.4 billion of losses in three days.
Coupled with a near-run record withdrawal of deposits in the run-up to the Jan. 25 elections, along with nearly 80 billion euros in bad loans created when austerity ordered by international lenders left many Greeks unable to pay credit cards, bank loans and mortgages, Greek banks are teetering.
While Tsipiras has said he wants to strike a balance between reversing big pay cuts, tax hikes, slashed pensions and worker firings ordered by the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) and seek debt relief while staying in the Eurozone, the markets and investors are telling another story.
The nation’s stocks and bonds slumped and the Athens Stock Exchange Index fell 15 percent in three days while bond yields, the interest that would have to be paid on borrowing, has soared to 2012 levels when the country was in the midst of a crushing economic crisis and as it was just beginning to recover.
While bankers tried to maintain before the election, even as billions of euros were being withdrawn, that they had everything under control, an unidentified source told Bloomberg that the amounts being yanked out by frightened investors – there were charges during the campaign from the New Democracy Conservatives of former Premier Antonis Samaras that SYRIZA would seek to confiscate deposits – soared almost beyond control.
The losses took Greek stocks down 48 percent since a high in March of last year despite nearly 50 billion euros in recapitalization funds shot into the banks from 240 billion euros ($272 billion) in two bailouts from the Troika.
Piraeus Bank trades at less than 1 percent of its 2007 share price and Alpha Bank has lost 97 percent since its high that year. National Bank of Greece, valued at about 23 billion euros ($26 billion) in 2007, has now a market capitalization of 3 billion euros.
The figures were compiled by the Bloomberg news agency which said the flurry of losses essentially eliminated the $11.5 billion raised in additional share sales in 2014 as the banks were still trying to recover from 74 percent losses investors were hit with by a previous PASOK Socialist administration which was the first to fall into line under the Troika.
Almost as soon as Tsipras said he would confront the Troika and demand new terms, including the possibility of walking away from more than half the debt, new fears emerged about an exit from the Eurozone – a so-called Grexit – and worries that a default could even topple the financial bloc and rattle markets from Wall Street to Tokyo.
Almost as soon as he took office, Tsipras’ plan to radically change Greece’s deal with the Troika, and as some of his ministers were readying to stop privatizations begun by Samaras, such as in Piraeus harbor and the country’s electrical system Public Power Corporation (PPC), banks began bleeding losses and there was a record 44 percent sell-off in the Greek stock market.
“Tsipras is not at all pro-market, but the government owns a big chunk of shares in the major banks,” Vassilis Patikis, head of global markets at Piraeus Bank, told Bloomberg.
“Although they have no voting rights, there’s a fear that the new government will try to regain these rights and control the banks. That possibility is really hitting sentiment. It’s not nationalization, but it’s pretty close,” he said.
The government-owned Hellenic Financial Stability Fund, created in 2010, is the biggest shareholder in Greece’s four largest banks.
Greek lenders face “risks of a potential change of management,” Maria Kanellopoulou, an analyst at Euroxx Securities in Athens told the news agency.
Despite all that, Deputy Prime Minister Yannis Dragasakis said the new government “will respect the rights of private investors in Greek banks” and will meet with Eurobank’s biggest shareholders on Jan. 30.
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