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The head economist of Eurobank EFG: Our bank in Bulgaria is stable

09 March 2010 / 15:03:22  GRReporter
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As far as it goes to the investment banks, in the whole world the job of the investment banks is to give advises to companies and governments how to issue bonds, how to sell stocks on the stock exchange. In the past 10 years, right after the year 2000 they had contacts with many European governments in order to show them ways in which their balances would look better than they actually are. They were in contact with the Greek government as well in order to make the so called securitizations (the purchasing of bad credits, their packing in offshore companies and their resale in tranches with very high ratings) which were made. It has happened with the blessing of the European Union and it was not anything illegal. Besides Greece this was also done by Italy and other countries. In 20054 this practice was stopped. Why all of a sudden this subject becomes so widely discussed? The subject became known because it is a political problem in the United States. Let me remind you that the international economic crisis started from the financial sector. It was caused by organizations which had granted a lot of credits, it had granted short term credits and had purchased toxic bonds. Most of all the investment banks and most of all Goldman Sachs. At the end of 2008 the American government spent 700 billion dollars in order to save these titanic banks. And it did save them and the plan worked out. However these banks have a much greater political influence. They finance the campaigns of senators and congressmen. They pushed the government to exit the program of the so called TARP (Troubled Asset Relief Program) and they managed to do it. According to me this was the biggest scandal in the United States in 2009. Now in 2010 the supervisors come, the government comes and they say: “What you are doing is a mistake. We saved you with the money of the American tax payers and now you wish to exit the system and with the money we gave you to grant high bonuses and so on”. What the world saw is an article in the “New York Times” who wanted to hit mostly Goldman Sachs because Goldman Sachs were the first ones to ask to exit from the TARP, they pushed a lot and they did and after them the rest of the 19 banks also exited the program. The newspaper used Greece in order to write another article and hit Goldman Sachs. It is not just Goldman Sachs. All the investment banks were doing the same. The reason, mostly in America, but also in Western Europe to get to the crisis was that while on paper these institutions had a lot of capital, they actually didn’t have any. And do you know why? Because they had found a way to get out of the essence of the law for the possession of capital. Legally their papers were in order, they were following the writings of the law, however not the spirit of the law. This did not happen in Greece, nor did it happen in Serbia, in Bulgaria or anywhere in our region. The banking sector is very active, it works in accordance with the writings, but also with the spirit of the law. We have capital. What we currently see when attacking Goldman Sachs and other investment banks have something to do with the past, because they caused the international crisis. It started from the financial sector mostly in America and in western Europe, it led to the collapse of the economies and we imported it in our region because we could no longer sell our products.

    - Let us remain for a while longer at the topic about the international markets. What could Greece do in order to restore the trust of the international markets and investors?

What Greece has to do is to do its job as it is supposed to. Some measures were announced, a three years program was announced which is supposed to decrease the deficit and lead to some growth. This program needs support. Some even further restriction of the expenses and increase in the taxes could be introduced. I has to come out and announce this program as it should be carried out so that no European would have any doubts in it. In this way the markets will be convinced. The markets as we know are sensitive and they over react. The media and most of all the English speaking media are particularly sensitive on the subject of the euro zone and their reactions are excessive as well. This is a reality which the Greek government has to realize. When you have in front of you markets which overreact you have to do something more than under the usual circumstances in order to convince them. It has to come up with a complete plan. It has to say: this is it, our European partners have to agree with it and then the markets will calm down and the spread index will fall down.

    - At the moment in the euro zone there is a great discussion regarding the financial support for Greece. What is your opinion?

Tags: Eurobank EFG Gikas Hardouvelis economic crisis
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