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October 15th, 2008, 05:09 PM
Greece pledges billions to support banks
ATHENS, Greece: Greece on Wednesday pledged up to €28 billion (US$38.5 billion) to help its banking sector weather the financial crisis.
Finance Minister George Alogoskoufis said the measures were part of a wider effort in the European Union — worth over €1.7 trillion (US$2.34 trillion) — to prop up lenders and get credit markets working again.
"With a combination of state guarantees, participation of the state and an increase in liquidity which will reach €28 billion, we will help the banking system overcome the credit crunch," the minister said after a cabinet meeting.
The minister stressed that the measures were temporary and that the government aimed to not burden taxpayers. He repeated that the Greek banking system was safe.
"Our aim is not to save banks and financial institutions ... but to shield the Greek economy from this crisis, which is unprecedented on an international level," Alogoskoufis said while outlining the plan.
He said the funds would be available "with two main aims: to provide liquidity ... and to shore up the capital base at financial institutions."
Under the rescue package, up to €8 billion (US$11 billion) will be issued in bonds to boost liquidity. Banks will also be allowed to ask for up to €5 billion in state capital in exchange for shares, the minister said.
In return for the capital injection, the state will get preferred shares with voting rights, a seat on the management board, and a veto on the bonuses paid out to managers.
The state will also provide up to €15 billion worth of guarantees on banks' three to five-year loans until the end of 2009.
The measures are meant to boost banks' capital to make it easier and cheaper to raise money on the interbank market. It will also help them fulfill capital requirement rules.
Greece has already increased its guarantee for bank deposits to €100,000 (US$136,080) for at least three years through legislation, while Alogoskoufis has made a political commitment to guarantee all bank deposits in the country.
The government has repeatedly said Greek banks are not at risk from the crisis.
Alogoskoufis said that legislation would be introduced in Parliament "as soon as possible, because some of the measures require legal changes."
The minister said the rescue package would not have an impact on the government deficit.
ATHENS, Greece: Greece on Wednesday pledged up to €28 billion (US$38.5 billion) to help its banking sector weather the financial crisis.
Finance Minister George Alogoskoufis said the measures were part of a wider effort in the European Union — worth over €1.7 trillion (US$2.34 trillion) — to prop up lenders and get credit markets working again.
"With a combination of state guarantees, participation of the state and an increase in liquidity which will reach €28 billion, we will help the banking system overcome the credit crunch," the minister said after a cabinet meeting.
The minister stressed that the measures were temporary and that the government aimed to not burden taxpayers. He repeated that the Greek banking system was safe.
"Our aim is not to save banks and financial institutions ... but to shield the Greek economy from this crisis, which is unprecedented on an international level," Alogoskoufis said while outlining the plan.
He said the funds would be available "with two main aims: to provide liquidity ... and to shore up the capital base at financial institutions."
Under the rescue package, up to €8 billion (US$11 billion) will be issued in bonds to boost liquidity. Banks will also be allowed to ask for up to €5 billion in state capital in exchange for shares, the minister said.
In return for the capital injection, the state will get preferred shares with voting rights, a seat on the management board, and a veto on the bonuses paid out to managers.
The state will also provide up to €15 billion worth of guarantees on banks' three to five-year loans until the end of 2009.
The measures are meant to boost banks' capital to make it easier and cheaper to raise money on the interbank market. It will also help them fulfill capital requirement rules.
Greece has already increased its guarantee for bank deposits to €100,000 (US$136,080) for at least three years through legislation, while Alogoskoufis has made a political commitment to guarantee all bank deposits in the country.
The government has repeatedly said Greek banks are not at risk from the crisis.
Alogoskoufis said that legislation would be introduced in Parliament "as soon as possible, because some of the measures require legal changes."
The minister said the rescue package would not have an impact on the government deficit.