The Wall Street Journal reports that after many years of economic and political turmoil, Greece is a breath away from liberation from the regime of bailout memorandums, although it must still implement reforms such as privatisation and freeing up the energy market.
Mujtaba Rahman, the head of Eurasia Group’s European division, noted that Europe politically has a strong interest in Greece exiting the programme, and that this means that the results will not imperil the exit. Theoretically, Greek banks are now capable of supporting the real economy, he says, but reality may prove different.
The WSJ report notes that Greece’s four systemic banks had a satisfactory performance in the ECB stress tests, which is an important step in completing the bailout programme. The National Bank of Greece, Alpha Bank, Eurobank, and Piraeus Bank have adequate capitalisation to shield them from adverse scenarios, and the 20bn euros from the programme earmarked for possible recaps can now be used for other purposes, the report said.
According to the stress test results, under the most adverse scenario, the four banks would lose about 15.5bn euros in capital by 2020. The banks’ capital base is enough to cover those losses. The IMF has in the past disputed the view of European creditors that the banks do not need further recaps, arguing that there should be a 10bn euro cushion.
Greek banks have the highest rate of non-performing loans in the EU, nearly 50 percent, the WSJ report notes.