Louka Katseli

:00:00. > :00:22.2016 will be a year of recovery and regrouping

:00:23. > :00:25.and the tough period of crisis for the country was over.

:00:26. > :00:27.and the tough period of crisis for the country is over.

:00:28. > :00:30.Whether he is right will depend in part on Greece's banks.

:00:31. > :00:32.They are sitting on bad debts worth 100 billion euros

:00:33. > :00:35.and they still cannot let customers freely withdraw their money

:00:36. > :00:48.My guest today, Louka Katseli, is the chair of one of the country's

:00:49. > :00:50.largest banks, and its oldest, the national bank of Greece. She also

:00:51. > :01:24.used to be a government minister. Louka Katseli, welcome to HARDtalk.

:01:25. > :01:31.Thank you very much, it's a great pleasure to be here. Is Alexis press

:01:32. > :01:34.right that the worst is over, and to use his words, that in five years

:01:35. > :01:39.time Greece will be deserving of its history and its people -- Alexis

:01:40. > :01:44.Tsipras. We need to be optimistic and we are all optimistic that

:01:45. > :01:49.following the very turbulent years we have had over the past six years

:01:50. > :01:54.that there is hope and that we can make it work, that there can be a

:01:55. > :02:00.restart for Greece, and that growth camera zoom. As you said correctly,

:02:01. > :02:09.a lot will depend on the banks, but not only. A lot will depend on

:02:10. > :02:12.political certainty, economic certainty, and investment

:02:13. > :02:17.promotion. The challenges are ahead of us, there are many challenges,

:02:18. > :02:23.but I want to be and I am optimistic that Greece will have a restart. But

:02:24. > :02:31.you are sitting there at the top of one of the, as I say, the country's

:02:32. > :02:36.biggest banks with huge, very weak situation. We know capital control

:02:37. > :02:41.had to be imposed last summer. How fragile would you say your bank is

:02:42. > :02:49.now? Actually all Greek banks, because I'm also the chair of the

:02:50. > :02:54.Hellenic Greek Association, all four creek banks, which are under the

:02:55. > :03:03.guidance of the ECB, are coming out of the recapitalisation process

:03:04. > :03:10.solvent and very strong. Quarter one... Core tier one. That is a

:03:11. > :03:16.buffer, our own equity capital relative to the risk weighted assets

:03:17. > :03:21.of each bank. This is an indicator of capital solvency for all European

:03:22. > :03:24.banks. The Greek banks following the recapitalisation come out of this

:03:25. > :03:31.process is very strong and the solvent. That doesn't mean that they

:03:32. > :03:34.don't have major challenges to address.

:03:35. > :03:38.Already mentioned one, which is kind of addressing the non-performing

:03:39. > :03:44.loans that they have. But I would add to this two other major

:03:45. > :03:49.challenges, one would be to re-establish trust with our

:03:50. > :03:55.depositors so deposits can start flowing back to the Greek system and

:03:56. > :03:59.the second major challenge is to channel liquidity to the real

:04:00. > :04:03.sector. The problems we have had over the last six years because of

:04:04. > :04:07.all the problems Greece has faced is that the real economy, good

:04:08. > :04:11.enterprises, exporting companies and so on, haven't been able to have

:04:12. > :04:15.access to the banking system at affordable rates. Let's deal with

:04:16. > :04:23.one of those, the non-performing loans, the bad debts. Kostas carried

:04:24. > :04:26.Yannis, with the private equity firm Apollo Global Management, said

:04:27. > :04:30.unless we deal with the non-performing loans there is no

:04:31. > :04:34.hope in Greece, such is the scale of the bad debts banks like yours are

:04:35. > :04:38.sitting on. Let me put it in perspective. There are two reasons

:04:39. > :04:42.why banks could have bad debts, one is that they made the wrong

:04:43. > :04:48.decisions in the past and they lent to the wrong people. The second one,

:04:49. > :04:55.which is more the case of Greece, is that the whole economy actually

:04:56. > :05:01.shrunk so fast and incomes were reduced so much that people were not

:05:02. > :05:07.able to pay back debts, debts to the banking sector, tax returns, social

:05:08. > :05:11.contributions and so on. The debt situation in Greece and the

:05:12. > :05:15.non-performing loans are very much tied to the overall state of the

:05:16. > :05:19.economy. Indeed, but there's no sign when you look at it, we have

:05:20. > :05:23.forecasts that the economy is going to contract again this year. If

:05:24. > :05:29.you're waiting for the tied to rise and lift the boats, you'll be

:05:30. > :05:34.waiting a long time. First of all we hope, and all the expectations are

:05:35. > :05:41.that growth will start resuming by the end of this year, 2016. We have

:05:42. > :05:49.a small shrinkage in 2015, less than we expected, thank God. But in 2016,

:05:50. > :05:53.over the second quarter, the second half, we are expecting growth to

:05:54. > :05:59.slowly resume. You're absolutely right that you cannot wait for the

:06:00. > :06:02.economy to start moving, but we should keep in mind that once the

:06:03. > :06:07.economy starts moving then people will be able to start repaying. On

:06:08. > :06:12.the other hand, we need to be proactive and deal with it and

:06:13. > :06:16.manage the bad debt. I can tell you what we're doing. I want you to tell

:06:17. > :06:21.me but in terms of how much bad debt you've got, on your loan book, how

:06:22. > :06:28.much would you describe as bad? Most of the banks on average have between

:06:29. > :06:35.35% and 45% as bad debt. What about you? 43%. 43% of the loans you are

:06:36. > :06:40.sitting on our bad? They are non-performing loans, which means

:06:41. > :06:46.there are delays in payments. Some of them are delays below 90 days,

:06:47. > :06:51.some of them are above 90 days. OK. Let me say a few things, because

:06:52. > :06:55.this is a major challenge for us, what we're doing, it depends very

:06:56. > :07:00.much whether it is corporate loans or whether they are mortgages or

:07:01. > :07:03.consumer loans. All Greek banks have established special units within

:07:04. > :07:08.each bank to deal with their non-performing loans. Effectively a

:07:09. > :07:13.bad bank within it. Exactly, within the bank. And now there is new

:07:14. > :07:17.legislation which is being promoted, both by the government in

:07:18. > :07:23.collaboration, close collaboration with the ECB and the bank of

:07:24. > :07:26.Greece. Which is that you can sell some of those bad loans on?

:07:27. > :07:30.Exactly. Some of these bad loans, especially the non-performing

:07:31. > :07:34.consumer loans, can be sold to third parties or can be transferred to

:07:35. > :07:38.third parties to be collected. Others are being dealt with and I

:07:39. > :07:42.would say right now the majority of these loans are being dealt with

:07:43. > :07:45.within the banks, and with good results. In other words, even the

:07:46. > :07:52.national bank of Greece over the last months, we've had good results

:07:53. > :07:55.in managing it. How do we manage it? Through new products, through

:07:56. > :07:59.restructuring of these loans. Basically you've still got customers

:08:00. > :08:03.that can't pay you back. That's right, but it depends what you do

:08:04. > :08:09.and how you restructure the loans so they can pay something back. We know

:08:10. > :08:14.that they can't pay what their obligation was five years ago or

:08:15. > :08:18.three years ago, but we can assure that they start paying back. What

:08:19. > :08:24.each bank wants is not to lose the connection with the debtor, so that

:08:25. > :08:30.the debtor continues to service this loan depending on his income and

:08:31. > :08:34.ability. You paint a picture that almost sounds quite rosy of running

:08:35. > :08:37.a bank in Greece the way you're talking, but you have capital

:08:38. > :08:42.controls, what happens if capital controls are lifted? I assure you

:08:43. > :08:46.the situation isn't rosy. You are sitting there and if you are told

:08:47. > :08:50.that you have to allow your customers to take money out if they

:08:51. > :08:57.want to, what would happen? I think by now, whoever was to take his or

:08:58. > :09:01.her money out has done so. So capital controls could be lifted? My

:09:02. > :09:07.sense is the capital controls need to be lifted and as soon as the they

:09:08. > :09:14.lifted the better it will be. From your point of view if they were

:09:15. > :09:16.lifted tomorrow... This was our position at the Hellenic Bank

:09:17. > :09:20.Association right from the beginning, as soon as capital

:09:21. > :09:24.controls are lifted the better it will be for the resumption of normal

:09:25. > :09:29.transactions. If they hadn't been imposed with the bank still be

:09:30. > :09:34.there? The point is, the reason why they were imposed, was at that time,

:09:35. > :09:40.in July, the risks were so high that people had withdrawn already and

:09:41. > :09:43.were withdrawing money from the banks continuously, the programme

:09:44. > :09:48.finished, there was a high level of uncertainty. A lot has changed since

:09:49. > :09:53.July, and that's what allows us to be more optimistic. OK, we have this

:09:54. > :09:58.situation where there was a slow bank run, 50% of bank deposits in

:09:59. > :10:04.Greece withdrawn since 2010 Dobbie you're saying now remove these

:10:05. > :10:10.capital regulations. People can't take out more than 50 euros a day at

:10:11. > :10:14.the moment. Look, right. Lift them tomorrow, is that the message? I

:10:15. > :10:19.would say lift them as soon as Greece moves from the LA, emergency

:10:20. > :10:23.liquidity assistance, to normal ECB assistants. That could be sometime?

:10:24. > :10:29.Possibly the next couple of months. We have so much in the next couple

:10:30. > :10:36.of months, not least a review of the bailout by the troika, by Greece's

:10:37. > :10:41.creditors. Absolutely. Over the month they will be loaded months.

:10:42. > :10:46.What are the milestones? The first one I think is the evaluation and a

:10:47. > :10:53.successful evaluation of the first phase of the end though you, the

:10:54. > :10:57.third end of you. And this of course presupposes that the pension reform

:10:58. > :11:00.goes through parliament with no problem, that is the first

:11:01. > :11:06.milestone. Before you go on from that, that is significant. So that

:11:07. > :11:10.people can understand, because it is the first big hurdle, the government

:11:11. > :11:15.wants to reform pensions again. It has a majority of three MPs and a

:11:16. > :11:20.population who are hacked off with the last pension reforms, what is

:11:21. > :11:26.the chance of the next age of reform is getting through? If you ask my

:11:27. > :11:34.opinion I think it will be passed, I think it will go through Parliament

:11:35. > :11:37.-- reforms. There is a maturity across all Parliament members that

:11:38. > :11:45.pension reform needs to be completed. It's not easy. There are

:11:46. > :11:49.special groups that are affected. It's the second, as you said,

:11:50. > :11:54.pension reform. Let's not forget that pensions have already been

:11:55. > :11:59.slashed in Greece 70% since 2010. The adjustment has been enormous. So

:12:00. > :12:05.the pension reform as it is now, and the proposal on the table, is one

:12:06. > :12:11.which, if there are some revisions, and if it does not presuppose

:12:12. > :12:16.further pension cuts, then I think there is a very good chance it will

:12:17. > :12:22.go through Parliament. And what the troika, the IMF, the ECB are pension

:12:23. > :12:29.reforms that effectively mean a cut of 1% of GDP. Is that too much? The

:12:30. > :12:34.point is how do you achieve that and who bears the brunt? And all the

:12:35. > :12:40.technicalities of the proposal. As we always know, the resistance or

:12:41. > :12:44.the ease with which it passes through Parliament depends very much

:12:45. > :12:48.on the precise provisions. Indeed, the pressure from the troika, the

:12:49. > :12:52.creditors, is that it is on pensions because they don't want it loaded on

:12:53. > :12:58.those earning because it pushes more people outside the legal market. But

:12:59. > :13:02.they know very well already, and there is a clear understanding on

:13:03. > :13:07.the part of the EU institutions that main pensions have already been cut,

:13:08. > :13:14.have been slashed lots. So they will be on their side as well an attempt

:13:15. > :13:19.to find a solution which will not hurt again those who have already

:13:20. > :13:23.been hurt -- there will be. You think pension reforms... I think

:13:24. > :13:28.there is a high probability that pension reform will go through with

:13:29. > :13:38.revisions of course, relative to the current proposal, but my sense, and

:13:39. > :13:43.my reading of the talk is that at the end there will be a compromise.

:13:44. > :13:48.OK, so the President, Professor, the professor of law and economics at

:13:49. > :13:53.Athens university says he can't see how the government can survive and

:13:54. > :13:55.avoid these reforms. He makes the point the government will face

:13:56. > :14:02.insurmountable problems early in the year.

:14:03. > :14:12.This government has riven that it could push through reforms no one

:14:13. > :14:20.thought they could. -- proven. Old lady, the brunt of them have already

:14:21. > :14:26.been... -- Already. Have already been implemented. There are three

:14:27. > :14:32.issues that remain on the table that remain difficult, one is the pension

:14:33. > :14:37.reform, and the other is the privatisation fund, that there needs

:14:38. > :14:47.to be discussion and compromise with the EU Constitution is and political

:14:48. > :14:50.compromise. -- and. That is because this government almost basically 50

:14:51. > :14:57.billion euros from privatisations and thus far it has in a million

:14:58. > :15:05.from leasing airports... -- been. There doesn't seem to be the will to

:15:06. > :15:10.go through with the proposals and promises. That is not right. The 50

:15:11. > :15:18.billion, it was the initial... That number was part of the first MOU,

:15:19. > :15:26.and the second MOU. It was not able to be achieved for many, across the

:15:27. > :15:32.years. First, because, difficulties... Rather than going

:15:33. > :15:40.back. Gladly tell you about now. What is interesting, and interesting

:15:41. > :15:52.to all political analysts. -- Let me. It has moved and is ready to

:15:53. > :15:58.move with port privatisation. We are just concluding as the National Bank

:15:59. > :16:08.of Greece the deal on... What about the pipeline, what will it raise?

:16:09. > :16:15.400 million. We're not talking about the scale of money is going to

:16:16. > :16:21.satisfy Greece's creditors, are we? Look, this is part of the programme,

:16:22. > :16:29.part of the third MOU. I am sure that over the next... Once the new

:16:30. > :16:33.fund has been established, these kinds of privatisation deals will go

:16:34. > :16:36.through... Now, whether it would be able, whether the conditions would

:16:37. > :16:42.be such to raise the funds... The reason it is critical and I am

:16:43. > :16:50.pushing it. In 2006 been... Let me put it this way. -- 2016. There will

:16:51. > :16:54.be the first review of this latest bailout. That will come up. It could

:16:55. > :17:02.take weeks or months, that is some of the warnings. That will depend on

:17:03. > :17:06.what Greece has done. But Greece has completed right now more than 80% of

:17:07. > :17:13.the implications under the MOU for the first phase. So we are on very

:17:14. > :17:18.good track. The thing that is surprising is how good track there

:17:19. > :17:28.has been from July until now. OK. That allows us to be thick that once

:17:29. > :17:31.the pension reform goes through Parliament that things will return

:17:32. > :17:37.to normal. -- optimistic. It doesn't mean there will not be problems. But

:17:38. > :17:43.the question now is a return to normalcy. You won't get it unless

:17:44. > :17:50.you have debt relief. That is what Christine Lagarde has said, it is

:17:51. > :17:55.unsustainable. Is that the next in? Once the first evaluation is

:17:56. > :17:58.completed successfully the negotiations will start on debt

:17:59. > :18:04.restructure. That is essential. Not so much, in my view, and allow me to

:18:05. > :18:09.put forward my own view, not so much that the numbers are unsustainable.

:18:10. > :18:16.Because under very optimistic growth scenarios, et, even the currents

:18:17. > :18:20.that could have been sustainable, for something different, that debt

:18:21. > :18:25.restructuring would give very positive signals to investors so

:18:26. > :18:31.they can start investing again... Christine Lagarde says the debt

:18:32. > :18:36.relief has to be well beyond what has been considered so far. I would

:18:37. > :18:42.agree with that. That is because, and he who are at the top of this

:18:43. > :18:48.bank, you will know, to bring investors back... -- and here you

:18:49. > :18:52.are. To bring them back, you talk about the economic certainty that is

:18:53. > :18:58.required, at the moment, because banks now can sell some of their

:18:59. > :19:04.debt, when you are considering who to sell it to, who is interested?

:19:05. > :19:10.Many people. First of all, we were very presently surprised to see that

:19:11. > :19:16.with recapitalisation, systemic banks went out to open markets and

:19:17. > :19:28.raised in two weeks about 6 billion from private investors, 4.5, and

:19:29. > :19:30.then two through swaps. And, actually, there were people and

:19:31. > :19:37.there were funds, both individuals and funds, who were having a

:19:38. > :19:42.positive outlook on Greece. And they put their money in the Greek banking

:19:43. > :19:47.system... OK. Are we talking hedge funds? Not only... Only the hedge

:19:48. > :19:50.funds are hoping to take on the risk. That is not true. From the

:19:51. > :19:56.National Bank of Greece more than 50% is raised from our own and

:19:57. > :20:00.traditional partners. Is that because you have to discount it so

:20:01. > :20:06.much? Certainly, we have discounted it. How much? You are effectively

:20:07. > :20:10.cutting the value. You are absolutely right. To be able to

:20:11. > :20:21.attract this amount of money we actually... The price can to 0.4...

:20:22. > :20:28.0.5... -- came. Very low. 40%... That is right. 40% of what it used

:20:29. > :20:34.to be. There was a meltdown, if you like, but at the same time, the

:20:35. > :20:40.price was the market price, right, but they entered because they could

:20:41. > :20:43.see that prospect as beneficial. And let me say another thing.

:20:44. > :20:49.Immediately after we completed recapitalisation of the national

:20:50. > :20:56.bank, we saw the Finansbank in Turkey... Every week... You are,

:20:57. > :20:59.selling everything of. A successful investor has made the point that

:21:00. > :21:04.Greece will not recover as long as it is a member of the risen because

:21:05. > :21:19.the exchange rate is too high. -- off. -- the eurozone. I will not

:21:20. > :21:23.agree. Being in it presents a constraint in that you do not have

:21:24. > :21:26.the use of the exchange rate. On the other hand, for a country like

:21:27. > :21:34.Greece, it is extremely important in terms of trust and credibility.

:21:35. > :21:41.Now... Greece had and continues to have a competitiveness problems.

:21:42. > :21:45.Because of the programme that we have had so far, price

:21:46. > :21:51.competitiveness has gone down. As the prices have fallen, labour costs

:21:52. > :21:59.have fallen... So it is regaining in terms of rice competitiveness. What

:22:00. > :22:00.it needs to do, that is the major challenge. -- price. The National

:22:01. > :22:14.challenge, if you us, we need to upgrade. -- national.

:22:15. > :22:22.You set up a party, the social agreements party MOU -- Social

:22:23. > :22:27.Agreement Party. Dennis Razak is that you are imposing tough welfare

:22:28. > :22:39.cuts. have sympathy with that? Greece had

:22:40. > :22:43.an austerity programme that was probably one of the harshest

:22:44. > :22:52.austerity programmes that have been implemented. That is a fact. No

:22:53. > :22:56.other country in Europe or elsewhere, following emerging

:22:57. > :23:03.economies, has had such a drastic cut in income. Is the price too

:23:04. > :23:08.high? The price was extremely high on the people of Greece and

:23:09. > :23:12.continues to be extremely high. That is why there has been so much

:23:13. > :23:26.political opposition in a quest for aid different package. -- a quest.

:23:27. > :23:34.One that... Old on a second. -- Hold. A package that is more

:23:35. > :23:38.equitable. The deal struck in July... Because, maybe, it is the

:23:39. > :23:45.product of a crisis and an in-house in terms of negotiations, in my view

:23:46. > :23:57.it is the most manageable one. -- impasse. Manageable in quotations,

:23:58. > :24:00.both politically and economically. Why do I say so? First of all, it is

:24:01. > :24:04.more reasonable. Less austerity attached to this particular

:24:05. > :24:06.programme. You think programme. You think it can work

:24:07. > :24:12.this time? I think it is more manageable. OK. Thank you for coming

:24:13. > :24:16.on to HARDtalk. Thank you very much. Thank you.