Salgado Calls for Spanish Banks’ Help in Greek Rescue
June 24th, 2011
European countries coordinated their efforts on Wednesday to ask the big banks and insurance companies, who are holders of Greek debt, to become involved in the second bailout of the country.
As main creditors, France and Germany led the concerted action on the eve of the Heads of State and Government of the EU Summit due to take place in Brussels yesterday and today. Spain participated in the initiative and financial vice president, Elena Salgado, called on the presidents and senior executives of the big Spanish banks to ask for their support in the rescue of Greece.
Markets fell on Thursday with the pressures on European banks to assume their share of the bailout, which would theoretically be voluntary. European shares fell hard and risk premiums increased in peripheral countries.
The purpose of these emergency meetings is to demonstrate that “bondholders should play a substantial role in preventing the insolvency of Greece,” according to the notice calling the meeting in Germany, quoted by Reuters in El Pais. It invites institutions to discuss the different alternatives with which the banks can contribute to the rescue. Germany has already been preparing its financial system for weeks to ensure such an operation runs smoothly without causing any “havoc on the benches”.
In Spain’s case, the Ministry of Economy on Wednesday called for the chief executives of large financial institutions, banks and savings banks, as well as management of other organisations, including insurance companies, to demonstrate their willingness to renew existing investments in Greek debt, reports Barron Inigo. Francisco Gonzalez and Angel Cano, President and CEO of BBVA, respectively, could not attend as they were in Mexico. Emilio Botin, Chairman of Santander, was also travelling in Brazil and Rodrigo Rato, President of Caja Madrid, was in London having meetings with investors in preparation for the IPO of Bankia. Senior executives attended in place of the Presidents in response to the urgent appeal of Elena Salgado.
German banks are the most exposed to Greek debt, with 22,700 million euros (according to data from the Bank for International Settlements). Firms such as Deutsche Bank, Commerzbank, West LB and insurers Allianz and Munich Re also participated in the informal meeting in Germany as well as the big French and Dutch banks and insurers.
The aim of the euro zone is clear in that banks’ involvement in the Greek restructuring should be voluntary, extending maturities or cutting interests, but always on a voluntary basis, in order that the credit rating agencies cannot further downgrade Greece’s solvency and hamper rescue efforts.
Although the Greek crisis and its impact on the euro zone will be the dominant issue of the summit, there is still no agreement on how to express the guarantees required by the International Monetary Fund (IMF). At the moment the latest rough draft of the European Council’s conclusions makes no reference to Greece. Leaders are seeking to ensure that Europe is ready to offer guarantees on the funds required by the IMF in order to disburse the fifth instalment of 12,000 million euros to Greece, according to community sources.
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