Greek PM urges banks to regroup to cope with crisis
ATHENS (Reuters) - The Greek government on Thursday urged the country's lenders to seek alliances to better cope with the debt crisis and resume funding its ailing economy.
"The Greek banking system can and must take strategic regrouping steps," Prime Minister George Papandreou told a cabinet meeting, according to an e-mail from his office.
There has been intense media speculation that bank mergers are in the offing, involving the country's biggest lenders National Bank, Eurobank, Alpha Bank and Piraeus.
Finance Minister George Papaconstantinou also urged lenders to regroup, in a speech earlier on Thursday at a bankers' conference. "Now is the time to see the great moves that will safeguard the future of the banking system," he said.
Papaconstantinou voiced optimism of meeting or even beating targets for slashing Greece's budget deficit in 2010 agreed in an EU and IMF bailout, and said the socialist cabinet would sign off on a controversial pension and labour reform bill on Friday before submitting it to parliament for approval.
CREDIT STRESSES
Greek banks, which have rapidly expanded in eastern Europe over the past years, are struggling to preserve capital through Greece's deepest recession in nearly four decades.
Earlier this week, Alpha Bank, Greece's third largest, dismissed media speculation that it was seeking to merge with another bank to cope with the country's debt crisis.
Credit expansion to businesses and households has frozen in April compared with the previous month, Bank of Greece data showed on Thursday.
Greek lenders have lost wholesale access to fund their operations and have become dependent on funding from the European Central Bank.
About 10 billion euros out of the 110 billion euro ($148 billion) EU/IMF bailout have been set aside for a fund to safeguard Greek banks' liquidity.
National Bank of Greece, the country's biggest lender said on Thursday it plans to sell 15 billion euros worth of mortgage-backed covered bonds.
National Bank's chairman and head of Greece's bank association Vassilis Rapanos told the bankers' conference that the country's lenders faced big challenges but remained resilient and would not shrink their presence in southeast Europe.
OPTIMISTIC ON BUDGET TARGETS
Greece plans to cut its budget deficit to 8.1 percent of gross domestic product (GDP) in 2010, down from 13.6 percent in 2009, to meet its bailout conditions.
"We have the well-founded hope and are optimistic that the budget targets will be achieved or even be exceeded," Papaconstantinou told the bankers' conference.
He said the government had cut the budget deficit by 40 percent in the first 5 months of 2010. "We have overcome the hardest part," Papaconstantinou said.
"Tomorrow we are approving the framework of a major pension reform for the public and private sector... we will also adopt a new framework for labour relations," he said.
The reforms have sparked protests by unions, including a general strike planned for June 29.
(Writing by Alister Doyle and Ingrid Melander; Editing by Ruth Pitchford)