Greece rejects bankruptcy scenarios, reassures key banking sector stability

13:31, July 15, 2011      

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By Maria Spiliopoulou

The Greek government on Thursday strongly rejected persisting scenarios of a bankruptcy, reassuring on the key stability of the banking sector as international credit rating agencies step up pressure on the debt-laden country.

Fitch further slashed the credit ratings of five Greek banks, namely National Bank, Eurobank, Alpha Bank, Piraeus Bank and ATEbank, on Thursday from B+ to B- with a negative outlook, following the downgrade of Greece's credit rating to CCC, a notch before default, the previous day.

"The coming days will be critical," acknowledged Greek Prime Minister George Papandreou during a cabinet meeting Thursday in a reference to the ongoing talks in the European Union (EU) over the terms of the release of further aid to Greece to overcome the debt crisis.

Strongly dismissing talks of a Greek bankruptcy by local and international media and opposition parties, he criticized "people who play with words, on purposely confusing terms of credit rating agencies with difficult situations for the real economy."

Papandreou was referring to the vivid discussion over an imminent "selective default" in Greece.

Athens has categorically rejected any talk of any form of default since the crisis broke out in late 2009.

The euro zone member avoided default twice so far, last spring and this July, securing the assistance of EU partners and the International Monetary Fund in exchange of harsh austerity and reform measures.

Due to heavy recession and delays in the implementation of the plan though, Greece remains in critical condition, while European counterparts have failed to reach an agreement on the role of private holders of Greek bonds to the second aid package to Greece.

With international credit ratings agencies warning recently that any private sector involvement could be considered as default, Greek Deputy Prime Minister and Finance Minister Evangelos Venizelos tried to ease the agony of Greek people once again on Thursday while addressing the parliament.

"There is no such risk of a Greek bankruptcy. The term 'selective default' should not be translated in a populist, irresponsible way. It refers to a temporary rating of Greek bonds by agencies and is not a real situation," he stressed.

Furthermore, Venizelos reassured that the Greek banking system is fully supported by the European Central Bank and will not face any problems of liquidity, amidst fears that a "selective default" on payments by the Greek state for some weeks or months could turn into a real default if the Greek financial sector collapses.

In a further reassuring sign, at the same time the Finance Ministry announced that the Greek state extends the guarantee on bank deposits of up to 100,000 euros (141,540 U.S. dollars) per depositor and bank account that would expire by year end 2011 to January 2016.

The Greek official repeated once again a plea for broad national unity amidst difficult times, as opposition parties stepped up verbal attacks against the socialist government of leading the country to default due to false policies to address the crisis over the past 12 months.

According to Greek media reports on Thursday, the government is seeking a solution that will ease the debt burden through a longer repayment period and a reduction in interest rates on loans, but under heavy pressure by creditors, markets and credit rating agencies examines the consequences of a short "selective default."

Source: Xinhua
 
 
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