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October 2012 was a crucial month in the history of Greek banking. What had been delayed for years happened within 30 days. Alpha Bank bought Emporiki Bank from Societe Generale. The National Bank of Greece and Eurobank announced their merger. Piraeus, which had already bought the Agricultural Bank of Greece, announced the acquisition of Credit Agricole’s share in Geniki Bank. So, the new consolidated banking sector of Greece, the creation of which was not implemented for many years, has formed with the free fall of deposits in Greek banks and with the panicked withdrawal of foreign financial institutions from the country being the catalysts of the transactions.
    The consolidation has determined the size of the three large banks hereafter. According to the Executive Director of Alpha Bank, Artemis Theodoridis, the conglomerate between the National Bank of Greece and Eurobank will control 36% of the market, Alpha Bank will hold 29% and the market share of Piraeus will be less than 15%. "Their market share will be big enough in order for them to be viable without violating competition principles at the same time. The consolidation, however, will not solve the basic problem of banks – their capitalization and the return of deposits," said Artemis Theodoridis, who spoke at the conference "The Future of Banking in Greece" organized by the Financial Times.
    "Greek banks have lost 30 billion euro as a result of the PSI and 100 billion euro from the outflow of deposits," the president of the Hellenic Financial Stability Fund Panagiotis Thomopoulos recalled. He announced that the voluntary investigation of Greek banks under the due diligence method has been completed and the results show that there are almost no cases of over-lending, the banks are being managed well, but some improvements can be made related to risk management, for example. "We as well as the Troika want a working banking system in Greece. It should be managed by professionals," said Panagiotis Thomopoulos.
    The European Financial Stability Facility will provide 50 billion euro for the recapitalization of Greek banks but other sources have to secure the remaining capital. He stated that the return of deposits and the involvement of private investors in the recapitalization of banks was a crucial condition for banks to be independent of the lending by the European Central Bank. "Unfortunately, there is bureaucracy in Greece and it delays the reforms. And unless they are put into practice, neither will investors come, nor will deposits return. I do not expect it to happen earlier than 2015," concluded the head of the Hellenic Financial Stability Fund.
    Artemis Theodoridis from Alpha Bank is optimistic that deposits will begin to return in 2013 and focuses on the negative publicity they are currently receiving. "Banks have lost 35 billion euro due to the PSI and the government has gained the same amount after the debt haircut. Today, banks need 40 billion euro for the recapitalization. European politicians have realized the error in the model and the recapitalization money for Spanish banks was not deducted from the debt. This fact is being ignored and the emphasis is only on the conviction that banks recapitalize from the taxpayer's pocket. Bankers are being demonized. Few people remember that Greek banks do not hold toxic products. Few people remember that Greek banks have successfully expanded into neighbouring countries. But public attention focuses only on how much public money is being spent on the recapitalization," Artemis Theodoridis shared his impression.
    He cleverly sets the goal of the banks, which is that they have to proceed from restructuring to resurrection and one of the conditions for this is their independence of the political system. "There are still two members appointed by the state on the board of directors of each bank. So far, they have not interfered in our daily work and our decisions on whom to lend to. That should continue in the future as well," stressed the representative of Alpha Bank. In his opinion, debt restructuring should calm down. "There were three months between the PSI1 and the PSI2 and 10 months later, a buyback of the debt followed. This distracts the markets," he said.

"There is no future for the banking sector in Greece without sustainable reforms. It is not the cause but a victim of the crisis, which the public sector has caused and has led to the complete macroeconomic destabilization of the country. Some time ago, Eurogroup president Jean-Claude Juncker had said that he was not concerned about Ireland because its economy was very flexible but about Greece. Unfortunately, he is right - Ireland will emerge from the memorandum within two years but we will not. Our development model was based on the growth of consumption and now, we have to switch to the Irish model of development - growth based on investment and production. In terms of mathematics, the crisis had been expected because we consumed more than we produced," George Zanias, president of the National Bank of Greece and the Hellenic Bank Association, said at the forum.
    He emphasized the success of Greece during these three years of financial stabilization: "We have reduced the deficit and the reduction for this year is 11% and next year, we will have a budget surplus. This year alone, we have reduced labour costs by 15% and we will reach the ultimate goal in 2013. We have implemented the pension reform - without it, the pensions in 2050 would have been 25% of GDP whereas we now pay less than 12.5%. The introduction of the single payroll table has reduced the public sector wages by between 30 and 50%."

     However, George Zanias did not omit to mention the failures of the country in reforms, the most significant being the tax reform that has been delayed for 36 months now. "If the tax reform was effective we would have reduced tax rates as well. However, we can immediately reduce insurance contributions and this will have a positive impact on the competitiveness of firms and the rebalancing of the Greek economy," said the president of the National Bank of Greece. In his opinion, privatization could attract the attention of investors, but the business climate in Greece must be improved before that. "The Greek economy is now over-regulated; it is the most regulated economy in the European Union. If this changes the prices of goods and services will fall," concluded George Zanias.
     Eurobank’s chief economist Gikas Hardouvelis spoke about the European frameworks of the economic crisis. "For many years, we as economists have been stating that open borders are not enough to have a single currency. Today, European leaders understand the need for common rules for all countries too. Unfortunately, markets look five, ten years ahead, while politicians look three months ahead. The crisis is a matter of cohesion as well – very different economies should be aligned and synchronized. As the economy of the United States, which is entirely based on the market," he said.