The government celebrated the €3.5 billion it received from the sale of the state’s holdings in banking institutions, “forgetting” that €46 billion had been given.
for their recapitalization
Last Monday in the Parliament, the political scene was reminiscent of something from “The thief is calling”. In the film based on Psatha’s play, the unscrupulous swindler son-in-law of an honest general embezzles funds from the organization to which his father-in-law appointed him along with other “buds”. And when the honest accountant exposes his abuses, the crook gets angry and messes with him, calling the accountant crazy, a fraud, a communist and “against the regime”…
Something similar happened at the meeting of the Committees on Economic Affairs and Production and Trade on the subject of the sale of public holdings in banks through the Financial Stability Fund (TFS). In the role of the accountant, imagine a report by the Center for Planning and Economic Research (KEPE), the largest and by no means left-wing center for economic studies in Greece, and the head of the Finance Department of SYRIZA, Nikos Pappa, pointing out that with the privatization of the banks, the public was permanently burdened with losses of 42 billion euros. In the role of the impostor son-in-law, imagine Finance Minister Kostis Hatzidakis and the central banker Yiannis Stournaras fighting with sophistry to convince that the KEPE does not know what it is saying and the public even gained 3.5 billion euros from the privatization of the banks .
The K. Hatzidakis he expressed it crudely and without evidence, even expressing his regret for the KEPE report, while the central banker said it by constructing a novel, far-fetched, unsubstantiated argument by adding apples to oranges: the numbers from the theoretical benefit of the public from the PSI, the dividends of the Bank of Greece to the public – they have nothing to do with the commercial banks that were supported – even the nominal profits of the public from the CoCos, e.g. of Piraeus which were zeroed out on the spot with the reverse split carried out by the bank’s management on the eve of the last consecutive increase in share capital, in April 2021.
However, the reports of G. Starfish they clothed the lie Hatzidakis with the prestige of the position of the central banker. Now all the pro-government mass media are repeating the new “truth”: the public did not lose but gained from the privatization of the banks, KEPE does not know what is happening to it and glory to the Mitsotakis government.
The crucial question, however, is why Hatzidakis and Stournaras… are so keen to hide the public losses from the rescue and privatization of the banks?
Indifference to the public
In the autumn of 2023, after the return of Greece to the investment grade by the houses DBRS and Fitch, the government of the ND decided to put forward the process of returning to the private sector the banks in which the public still had a participation. This process, for better or worse, was inevitable because the European Central Bank wanted it, because this is the orthodoxy in the eurozone. SYRIZA would do the same, obligatorily, limiting the losses of the public as much as it could. ND, however, is not interested in the public sector.
The HFSF, based on a plan it had announced at the beginning of 2023, planned to proceed with the sale of the state’s banking holdings by the end of 2025. In the summer of 2023 it became known that the government would proceed in the last quarter of the year with the sale of the shares of Eurobank, where the government had a small percentage, and 20% of the shares of the National Bank. Indeed, on October 3, Eurobank bought the 1.5% of its shares still held by the public and at a price that was considered good: at 0.95 of their book value, a price that was considered very satisfactory given that the shares of European banks were then to 0.80. On the same days, Moody’s calculated in its report on Greece that the government will not be able to get more than 3-4 billion euros from the privatization of the banks.
And on November 4, KEPE, on the occasion of Moody’s analysis, published a report with a similar methodology which concluded that the public could raise between 3.1 and 5.58 billion euros, i.e. a small fraction of the 46 billion . euros that he had given in total through the HFSF to the banks. Consequently, the privatization of the banks would mean losses ranging from -91.3% to -93.5% or the loss of 9.3 euros for every 10 euros invested.
The KEPE wrote them not to be in opposition but out of a desire for Anglo-Saxon orthodoxy and good administration. The losses of the Greek state from the privatization of the crisis-supported banks were so overwhelming that in the name of the public interest there had to be transparency and accountability: specific amounts that the state gave to each bank and how much it took back and to be evaluated by its stakeholders public but also university what happened in Greece compared to what happened in other countries and to come up with improvement proposals, so that the Greek public does not write such large losses again.
Transparency, accountability and the planning of alternative policies – we learn from our mistakes – were in fact, according to KEPE, of an urgent nature because:
01 The privatization of Greek banks is a unique case in the world where it is done with such great losses for the public. In the USA the same happened but the government came out with a profit of 12.4% and in England with a small loss (-17%).
02 The problem of the tight embrace of the public with the banks is still here, to the extent that 50% of bank capital consists of deferred tax – usually air – and in case the banks soon make losses, the public will have to reinforce them again with funds and shift the burden back to the taxpayers.
They sell out and celebrate
The KEPE report mentioned these institutions, which are inexorably implemented by the governments in the USA and England, but are unthinkable for the ND government. It was published in days of market turmoil over the HFSF’s refusal to disclose the price Unicredit had just offered for 9% of Alpha Bank, fueling rumors that it was problematically low.
Then, by intervening, the head of the SYRIZA sector, N. Pappas, asked for a debate on the privatization of the banks in the Parliament, on the occasion of the KEPE report, but the government refused. Instead, he proceeded with a massive privatization of the banking system, in some cases even giving away the public’s bank holdings at a “bargain price”.
For example, according to the estimates of market players, 9% of Alpha Bank in Unicredit was given at a bargain price, at a price of 1.39 per share. It was even lower than the 1.5 euros per share that had been leaked by the Italians when the HFSF still refused to disclose the price of the offer and it was rumored that they did not consider the price satisfactory, hoping to raise it in the open tender process. Alpha Bank shares were finally traded at 0.52 of their book value, well below European levels.
At a bargain price, 22% of the shares of National Bank were also given, at a price of 5.30 euros per share, or 0.64 of its book value.
Only 27% of Piraeus shares, at €4 in March, were given a deemed fair valuation based on European averages, at 0.8 of their book value.
In each of these privatizations, K. Hatzidakis celebrated the alleged new great success, the confidence of foreign investors and the huge returns, while the central banker confirmed the return of Greek banks to normality. After everything was completed, K. Hatzidakis and G. Stournaras went to the Parliament to answer N. Pappas five months late.
In the discussion that took place, N. Pappas, also referring to the KEPE study, asked the minister, among other things, why he rushed to sell almost all of the public’s bank holdings within five months. “When the bank price target estimates from all international analysts are 30% to 50% above current prices, why did you rush?” he asked, demanding accountability for the HFSF’s choices.
In response, K. Hatzidakis argued that this was the right economic moment and referred to the recovery of the investment grade – Moody’s did not give it – to the high growth rates – they landed at 2% in 2023 -, while he argued that the privatization of the banks by themselves are a movement to return the economy to normality.
The saddest
The HFSF gave Piraeus Bank 19.68 billion euros for capital, financial gap (for the banks Agrotiki, Geniki, Cyprus) and CoCos. He got back 1.35 billion, i.e. a loss of 18.33 billion euros.
To the National for capital and financial gap (for FBBank) he gave 9.38 billion. He got back 1 billion, but he has another 18% of its share capital that will be sold more expensively, maybe close to 1.26 billion, i.e. the loss will reach 7.12 billion euros.
He gave Eurobank 10 billion euros for capital and a financial gap (Postal Savings Bank). He got back only 93.65 million, i.e. a loss of 10 billion euros.
He invested 3.96 billion euros in Alpha Bank. He got back 293 million, so a loss of 3.66 billion euros.
The market is talking about too much haste
“Is Pappas right?” asked Documento market players. “Most likely, yes” they answered us. “It is a fact that the government showed too much haste. If he waited a few more months, say until the banks published their 2023 results that showed high profits, he could give them away at better prices. As he will give at better prices, possibly over 8 euros, the 18% of the National Bank that he has kept. I think they sold the banks one by one because they thought that with this they would get investment grade from Moody’s and the way would be opened for the upgrading of the Greek stock market. This is what the ND consistently seeks,” they concluded.
The Mitsotakis government can take its decisions with the aim of upgrading the Greek stock market, for the benefit of the few large listed companies, and not be interested in the public interest. He absolutely does not want the voters to understand that the privatization of the banks that he advertises as alleged achievements mean losses of 42 billion that they will pay through indirect taxes. That’s why it makes white black.
But the truth is different: the HFSF put a total of 46 billion euros in the banks. He gets or will get back around 3.5 billion euros, so the loss of the public reaches 42.5 billion euros.
The privatization of the Greek banks is done with world record damage which is paid by the taxpayers and this does not change no matter how many sophistry Hatzidakis and Stournaras concoct.
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