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Anastasia Balezdrova

"The low and worsening liquidity of the Greek banks in South East Europe is a trend that has begun over the past years and is expected to continue," said General Manager of Alpha Bank Artemis Theodoridis. "The liquidity that the banks will provide in the near future will flow into the Greek market alone, to the detriment of the subsidiaries in the Balkans," he added, defining the trend as "a secondary damage" due to the problems of the Greek banking sector.

Theodoridis presented his report during a forum organised by the Hellenic Federation of Enterprises on "Funding sources for the new model of development". In his speech to the participants, the governor of the Bank of Greece said that the banks would finance only sustainable old and new companies, and especially those that export their production abroad.

"After the reform in the sector and the recapitalisation, we have in Greece fewer but stronger banks with guaranteed liquidity. However, in the near future, funding will be limited and the volume of approved loans must be reasonable," said Provopoulos.

Instead, he recommended that the companies should resort to alternative ways of funding:

1. By internal financing, i.e. by reducing the profits of their shareholders with the promise that they will obtain added value in the future.

2. Those commercial companies that have a long-standing and stable cooperation may require additional commercial loans from their partners abroad.

3. By raising funds from the capital markets. "In 2013, major Greek companies were able to obtain significant amounts by issuing corporate bonds. These funding sources will increase in line with the gradual improvement of the confidence in the Greek economy, on the part of both Greece and foreign countries," said Provopoulos.

4. By using the co-financing and guaranteeing programmes, offering resources of the Structural Funds of the European Union and the European Investment Bank. According to the governor of the Bank of Greece, it is assumed that the structural funds, the bond markets, the stock exchange and the European Investment Bank can cover a large portion of the shortage of funding of the economy.

George Provopoulos added that the banks could not return to the mass lending that was typical of the pre-crisis years and that they should not do so. He urged the owners of unsustainable companies to reorganise them, team them up or merge them with other companies and seek collaborators abroad. "After the banking sector reform, a reform in companies is now urgent as the improving business environment and the stability will lead to economic growth with solid foundations," stressed Provopoulos.

He acknowledged that the cost of funding in Greece is still the highest in the euro area and much higher than that in the other countries of South Europe. According to strategic manager of the National Bank of Greece Pavlos Milonas, its average value is 5.5%.

One of the main problems is the lack of bank liquidity. The situation worsened mainly due to the export of deposits totalling 90 billion euro in the period when the risk of Greece ending up outside the euro area was real. At the same time, the bankers indicate that loans in "red", which are between 30% and 32% of the total number of loans, will probably increase by 20 billion euro this year.

The manager of Piraeus Bank, Michalis Salas, stated that the problem could be solved "through providing a final tax amnesty for the Greek companies and citizens who will pay only a certain amount." According to him, this will create the calmness needed by investors. At the same time, Salas believes that the measure will bring to the state funds 7-10 billion euro which will cover the budget deficit for the next two years.

Michalis Salas also said that the need for the introduction of new tax legislation with lower tax rates is more than pressing for achieving economic growth. He pointed out that the reduction of the public debt to manageable levels is essential for overcoming the crisis and could be achieved within one year, provided that the government implements the reforms and meets its obligations to the lenders. According to Salas, this can be achieved through extending the payment period in combination with a further reduction in the interest rates on loans.