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These days the Greek bankerslook a lot like the captain of "Titanic", whose ship is sinking, but he orders the orchestra to play and calm down the passengers that nothing terrible will happen. They rarely appear in public, but when they do, they rush to convince the media and through them also the society that their business is going well and no matter how deep the recession is they will endure because they have sufficient capital available to develop steadily and do not have "openings" to the toxic financial products. Yes but not true. While officially this is the line followed unofficial information talks about mergers of banks in the first weeks of September.
    The core around which the Greek banking system will consolidate is naturally the National Bank of Greece, the largest commercial bank in the country. According to exclusive information on the Sunday edition of the newspaper "Vima" the government of George Papandreou is favorably disposed towards the upcoming bank mergers, and even encourages them. No, do not think that Greek banks have any problems. They do not have any problems, they are just tired of being "single" and have decided to mate in pairs and even triplets. In the public space are hovering many scenarios for the upcoming events in the Greek banking system without any of them have received any official confirmation.
    Last week, representatives of the triple from the International Monetary Fund, European Central Bank and the European Commission met with leaders of the National Bank of Greece, Alpha Bank, Eurobank EFG, Piraeus and the Agricultural Bank and also expressed the benevolence of the Executive director the International Monetary Fund Dominic Stror-Kahn towards the consolidation the Greek banking system. Although the negotiations between the Athens bankers are kept in complete confidentiality, for the experts who monitor the banking sector in the country the decisions are formed in several directions. One of them they call the parallel "love marriages" between the National Bank of Greece and Alpha Bank and between Eurobank EFG Bank and Emboriki. If these "romantic" relationships do not develop into something more, observers expect a "marriage of propriety" of the National Bank of Greece Bank with Piraeus, with Eurobank EFG or with the Agricultural Bank. Finally, the experts do not exclude also the formation of triple between the National Bank of Greece, one of the private banks Αlpha, Εurobank EFG or Piraeus together with Post Bank.
    Why however are so insistent the rumors of mergers of the Greek banks provided that all their official representatives refute them. Because if we follow the logic of the market, the Greek State has no chance to survive the crisis with a national banking system if its financial institutions are not broadened. Currently, the international markets have imposed a credit embargo on the Greek banks due to low credit rating of the country itself, which pulls down also the credit ratings of its banks. The situation is further compounded also by the ever-increasing fears that Greece will be obliged to reschedule the payments on external its debt. This fear also openly expressed over the weekend the Russian Finance Minister Alexei Kudrin at the Annual International Economic Forum in St. Petersburg. He expects a slight rescheduling, which will be accepted by the markets and called it "mini-bankruptcy.
    Through the mergers the banks will become stronger and will be able to serve as a line for supply with capital for the local economy and little by little lead it to growth. For this purpose however the Greek banks must definitely put aside the scheme in which they currently exist, to form a new system that exceeds the borders of Greece and which is the only chance for Greece to maintain its place in the eurozone, to regain its prestige in the European Union, counteract forever the rumors of rescheduling of debt and to maintain the standard of living, which the Greeks enjoyed in the past 20-something years. This seems to have finally understood also the economic team of George Papandreou, which, according to newspaper "Vima" is now convinced that with reforms only of the public sector, tax and insurance system the country will not exit the crisis. Cardinal changes are needed also in the banking system.
    Currently the biggest problem facing Greece is the isolation of its banking system by the global financial markets because this deprives it from capital flow, which is several times greater than the funds provided under the program ESPA. The return of the Greek banks in global financial market can be achieved only after the state itself is back in the market - something that at least for the moment is not expected. While this situation continues the future of the Greek banks will be uncertain, and the biggest nightmare of every banker in Athens will continue to be called the Fund for credit stability. As GRReporter  already explained the scheme for consolidation of the Greek banking sector, this is the fund that will deal with those banks that fail the stress tests and fail to increase their capitals either by raising the equity capital from existing shareholders or by bringing a new strategic shareholder. This fund will be managed directly from Washington under the strict eye of Dominique Strauss-Kahn - ie decisions about the future of the Greek banking sector will no longer be taken in Athens.
    This seems to be a nightmare not only for Athens bankers, but for the Greek Government as a whole, which together with the President of the Bank of Greece Georgios Provopulos presses the bankers in the summer to reach an understand what, with whom and how and from September to proceed to mergers. Of course, it is not about the merger of two banks which are in debt from which magically to be born a new stable one. Wonders in the financial world where everything is a matter of simple arithmetic do not work out. But the government of Papandreou hopes that at least one of the schemes that will remain after the consolidation of the banking sector will work and will be able to escape the hands of the Fund for credit stability.
    Certainly the merger of the banks will change the whole nature of the Greek financial market and it will differ radically from what we know now. With respect to mergers and consolidations the first to follow the banks are the insurance companies operating in Greece and which just like the banks suffer from liquidity problems. The private insurance market is facing dramatic changes which will occur in the second half of 2010 and especially in 2011. Experts say that the management of major international insurance companies like AXA, Allianz and Victoria and of the two national ones with state interests – the National insurance company, owned by National Bank of Greece and the Agricultural Insurance Company, owned by the Agricultural Bank are now looking for "partners" on the market.
    About the Greek private insurers, however, will tell you in our next story.