Eurozone leaders acknowledged on Monday what has become increasingly obvious to everyday Athenians: Greek banks need a bailout, too.
Among its many proposed measures, the new accord between Greece and its European creditors calls for an overhaul of Greece’s rickety banking system, including money to replenish capital and, if needed, to close insolvent lenders.
Despite the tentative deal, the European Central Bank, which has been keeping Greek banks propped up for months with emergency loans, declined on Monday to provide additional cash. The central bank’s Governing Council is waiting for the Greek Parliament to ratify the deal before taking on any more risk from Athens. Parliament must approve at least some of the measures by Wednesday for the deal to move forward.
The Governing Council’s decision on Monday means that Greek banks may not reopen this week as planned and could soon run out of cash. The Greek government said Monday that banks would remain closed through Wednesday. Analysts expect them to stay closed much longer.
In any case, central bank aid is simply a stopgap measure to keep the banks alive until they can regain the confidence of their depositors. Before the Greek banks can operate with any semblance of normalcy, they must recover from an economic slump that returned with vicious force this year, leaving them with piles of bad loans and portfolios full of Greek government bonds whose value is questionable.
“They are in a perfect storm,” said Diego Iscaro, senior economist at the market research firm IHS Global Insight. “They are being hit by the fact that the economic situation has deteriorated so much in the last few months.”
SOURCE: JACK EWING
The New York Times