500 million Euro Shortfall - Banks Against Giving Back To The State

German Logo of the ECB. (Photo credit: Wikipedia)

A new 'black hole' of 500 million euros turned up during the government's financial staff's meeting with the European Commission (EC), European Central Bank (ECB) and International Monetary Fund (IMF) Troika, after which the country's international lenders asked that this shortfall be covered through either a new extraordinary contribution or application as of this year of the cuts in holiday benefits to civil service employees and pensioners.

One report from the state news agency said that the shortfall concerns the obligation of domestic banking institutions to return this year to the state the sum of 500 million euros. The sum must be returned in the form of dividends and concerns the state reinforcement, through preferential shares, that the banks had received in 2008.

Financial staff sources said that the Troika heads asked that the 500 million euros not be returned to the state, which drew reactions from finance minister Yannis Stournaras and alternate minister Christos Staikouras, who argued that this money represented revenues included in the 2012 budget. Indeed, on September 7, Staikouras, in a letter to central Bank of Greece (BoG) governor George Provopoulos and chairman of the Hellenic Banking Association George Zanias, had asked for the payment of the 500 million euros by the banks.

The Troika initially responded to the Greek objections by proposing that either a new extraordinary contribution be imposed or that the holiday benefits of the civil servants and pensioners be effective as of this year, so as to cover the 'black hole' with an immediate fiscal yield. The Troika proposals were rejected by the Greek side, after which the Troika counter-proposed either a new cutback in salaries or the imposition of an extraordinary contribution on banking employees. The counter-proposal was also rejected by the financial staff, and remains open.

While commenting on objections raised by the EU-IMF troika to a sum of 555 million euro to be paid back by banks under a law passed in 2008 for money put up by the state as guarantees during the credit crisis, PASOK party press spokeswoman Fofi Gennimata described it as being "inconceivable".

On its part DHMAR or the Democratic Left party, termed it as politically and morally unacceptable.

The Greek Communist Party or KKE, on the other noted that "the public debt, which was the cause that led to the imposition of the memorandums and to the people shouldering the consequences of the capitalist crisis, was inflated by the tens and hundreds of billions of euros that ended up in different sections of plutocracy".

As for the other open issues in the negotiation of the package of 13.9 billion euros, sources said the discussion is focusing chiefly on the measures for 2014, with the Troika insisting on 9 billion euros in measures for 2013 and the financial staff saying it was trying not to diverge greatly from the 7.8 billion euros foreseen by the budget in additional measures for 2013.

(Combined Reports - AMNA)