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Thursday, 19 May 2011

The financial situation in Greece is deteriorating; Greek savings’ money is fleeing to Cyprus, Germany and other countries

Now the Arabian Spring has morphed from “breaking news” to “business-as-usual” and the “length” of Dominique Strauss-Kahn is considered common knowledge, the Greek’s financial problems return full-sized to the newspapers.

Today I share a handful of articles that were printed in Dutch and German newspapers.

The Dutch newspaper De Volkskrant ( writes that the Greek government is in a hurry to privatize public property (link in Dutch). Here are some pertinent snips of the article, accompanied by my comments.

Greece hired advisers to counsel the sale of public property . The country announced this today (May 19, 2011) after the IMF sharply critized Greece for the lack of pace in reducing its indebtness. 
Greece promised to privatize for €50 bln in public property. Deutsche Bank and the Greek National Bank advise the government on its sale of a 34% stake in OPAP, the largest gambling company in Europe.Other counselors are HSBC, BNP Paribas, Credit Suisse, Ernst & Young, Rothschild & Sons and Citigroup. 
In total Greece will be counseled in 15 privatizations. Among others, these are: the sale of natural gas company DEPA, the auction of various air frequences [for radio and television – EL] and the national railroad company OSE.
The funny thing with this list of counselors for Greece is, that it are partially the same banks that are large owners of Greek sovereigns. The following table is based on data coming from a Business Insider article: Here Are The Banks Most Exposed To Greek Sovereign Debt

Exposure in bln Euro (estimate)
Exposure as % of tangible Net Asset Value
Deutsche Bank
€2.0 bln
€0.8 bln
BNP Paribas
€6.0 bln
Credit Suisse
€0.4 bln

Especially BNP Paribas and Deutsche Bank are – with an exposure of €6.0 bln (12% NAV) and €2bln (7% NAV)– not the banks you expect to wait in patience until Greece gets the best price for its public properties. Therefore it puzzles me why these banks are associated in this Greek public property sale.

A few days ago, I wrote that I was opposed to the idea of a public property sale, when it would concern islands, national treasures and other properties that mean a lot for the national pride of Greece, but would only deliver token Euro’s. However, I don’t see many problems in the above mentioned public sales. The most important thing is that the Greeks are not forced to sell these items for unfair prices, just because they are put under pressure.

That the Greek financial problems also stretch out to the inhabitants of Greece, can be read in the next article in De Volkskrant: 
An indebted Greek? He won’t pay in the meantime (link in Dutch)
The non-payment by houseowners and entrepreneurs in Greece is soaring. According to the official figures, more than 10% of the debtors didn’t pay his bills for more than three months. At two French-own: ed Greek banks, the figures for non-payment are even much higher. 

The problems on the Greek housing market are presumably much higher, according to insiders in Athens. Greek banks try to let houseowners pay a little part of their loans, in order to keep them out of the books for non-payment. 
Two Greek banks owned by French parent companies are very pessimistic on the Greek market. The Geniki Bank suffered from non-payments and defaults on up to 28% of its loan portfolio. At the large Greek banks (National Bank, Piraeus and Alpha Bank) ‘only’ 8-10% of the debtors do not pay their bills in time. Experts doubt, however, if these banks have their books in order. 
The French / Greek Geniki Bank has – in comparison to other Greek banks – a much larger provision for setbacks: €800 mln. Emporiki Bank, that is owned by French Crédit Agricole, has €1 bln in its slush fund. 
The financial buffers that the fully Greek banks arranged are much lower. The National Bank, 20 times bigger than Geniki bank has only €1bln as provision money. Piraeus bank, 10 times bigger than Geniki has only €600mln. Less than Geniki itself.

When is it the time to say that the Greek emperor doesn’t have any clothes? I guess… now?! Or to be honest: in 1996 when the preparations for the Euro began in Greece?!

But now it is too late to kick Greece out of the Euro zone, as all kind of Dutch and American pundits are screaming.

The facts are:
  • The Greek houseowners and entrepreneurs are defaulting at a large scale. 
  • The Greek banks aren’t in any way prepared for defaulting houseowners and entrepreneurs. 
  • The Greek banks aren’t in fact prepared for anything. 
  • The whole country is in fact bankrupt. 
  • There is no way that whatever Euro loan coming from the ECB / IMF / European Union will prevent this or stop this. 
  • Greece can’t leave the Euro and adopt the Drachme again; at least not for three years.
So what can be done? Let the country partially default on its debt and help it to pick up the pieces, while keeping it in the Euro zone at the same time. It will cost the taxpayers money any either way, so better make use of it in a smart way.

That Greece is bankrupt and a lot of Greek people are bankrupt too, doesn’t mean that there is no money at all in Greece. Please read this story from Deutsche Welle-World (

Greek savers stash cash abroad amid euro fears 
The Greek government estimates some 30 billion euros have been transferred out of the country since early 2010. It's money banks in Germany and other countries can profit from, but tact or subtlety aren't always a given. 
With fears of a Greek exit from the European common currency looming large, Greek citizens have transferred an estimated 30 billion euros ($43.2 billion) to foreign bank accounts for safekeeping.
Greek Parlamentarian Panagiotis Nikoloudis, head of a government committee on money laundering, told reporters in Athens in March that "even nuns have sent money abroad."
The Greek government is offering a reduced tax rate of 8 percent on funds brought back into the country, but most of money remains firmly lodged in Cyprus, Switzerland and Great Britain. 
Even German banks are looking to profit from Greek capital outflows.The Stadtsparkasse Munich savings bank, for example, recently hung out storefront signs in both German and Greek offering consultations with Greek-speaking staff, Germany's Bild newspaper reported Wednesday. 
Meanwhile the Greek government is planning to issue a bond aimed at members of the Greek Diaspora. It hopes to help plug the 340-billion-euro hole in its finances by soliciting investment from people of Greek origin in Europe, the United States and Australia.
The bonds are expected to run between three and 10 years, offering below-market interest rates, Greek Finance Minister George Papaconstantinou told the Greek daily newspaper Eleftherotypia in January. 
I am not very symphatetic to the idea that European citizens (other than Greek) pay a lot of taxes to keep Greece afloat, while the rich/wealthy Greek citizens are stashing their money in safe, foreign banks. 

I can't blame the Greek citizens for doing so.In their situation I would probably do the same. However, I think that the European Finance ministers should demand from Greece that this stashed-away money will be returned partially (by putting a special tax on it), before tax money from other European citizens is used to fill the Greek financial potholes.

As far as the Diaspora bond is concerned: If I would be (f.i.) Pete Sampras or Jennifer Aniston and the Greek government would approach me with such a bond offer, I would probably respond: “No, thank you. I rather play in the Greek national lottery. Then at least, I will have a chance to get my money back”.

That is how bad it is with Greece. And that is a real shame.

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