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2016 will be a year of recovery and regrouping | :00:00. | :00:22. | |
and the tough period of crisis for the country was over. | :00:23. | :00:25. | |
and the tough period of crisis for the country is over. | :00:26. | :00:27. | |
Whether he is right will depend in part on Greece's banks. | :00:28. | :00:30. | |
They are sitting on bad debts worth 100 billion euros | :00:31. | :00:32. | |
and they still cannot let customers freely withdraw their money | :00:33. | :00:35. | |
My guest today, Louka Katseli, is the chair of one of the country's | :00:36. | :00:48. | |
largest banks, and its oldest, the national bank of Greece. She also | :00:49. | :00:50. | |
used to be a government minister. Louka Katseli, welcome to HARDtalk. | :00:51. | :01:24. | |
Thank you very much, it's a great pleasure to be here. Is Alexis press | :01:25. | :01:31. | |
right that the worst is over, and to use his words, that in five years | :01:32. | :01:34. | |
time Greece will be deserving of its history and its people -- Alexis | :01:35. | :01:39. | |
Tsipras. We need to be optimistic and we are all optimistic that | :01:40. | :01:44. | |
following the very turbulent years we have had over the past six years | :01:45. | :01:49. | |
that there is hope and that we can make it work, that there can be a | :01:50. | :01:54. | |
restart for Greece, and that growth camera zoom. As you said correctly, | :01:55. | :02:00. | |
a lot will depend on the banks, but not only. A lot will depend on | :02:01. | :02:09. | |
political certainty, economic certainty, and investment | :02:10. | :02:12. | |
promotion. The challenges are ahead of us, there are many challenges, | :02:13. | :02:17. | |
but I want to be and I am optimistic that Greece will have a restart. But | :02:18. | :02:23. | |
you are sitting there at the top of one of the, as I say, the country's | :02:24. | :02:31. | |
biggest banks with huge, very weak situation. We know capital control | :02:32. | :02:36. | |
had to be imposed last summer. How fragile would you say your bank is | :02:37. | :02:41. | |
now? Actually all Greek banks, because I'm also the chair of the | :02:42. | :02:49. | |
Hellenic Greek Association, all four creek banks, which are under the | :02:50. | :02:54. | |
guidance of the ECB, are coming out of the recapitalisation process | :02:55. | :03:03. | |
solvent and very strong. Quarter one... Core tier one. That is a | :03:04. | :03:10. | |
buffer, our own equity capital relative to the risk weighted assets | :03:11. | :03:16. | |
of each bank. This is an indicator of capital solvency for all European | :03:17. | :03:21. | |
banks. The Greek banks following the recapitalisation come out of this | :03:22. | :03:24. | |
process is very strong and the solvent. That doesn't mean that they | :03:25. | :03:31. | |
don't have major challenges to address. | :03:32. | :03:34. | |
Already mentioned one, which is kind of addressing the non-performing | :03:35. | :03:38. | |
loans that they have. But I would add to this two other major | :03:39. | :03:44. | |
challenges, one would be to re-establish trust with our | :03:45. | :03:49. | |
depositors so deposits can start flowing back to the Greek system and | :03:50. | :03:55. | |
the second major challenge is to channel liquidity to the real | :03:56. | :03:59. | |
sector. The problems we have had over the last six years because of | :04:00. | :04:03. | |
all the problems Greece has faced is that the real economy, good | :04:04. | :04:07. | |
enterprises, exporting companies and so on, haven't been able to have | :04:08. | :04:11. | |
access to the banking system at affordable rates. Let's deal with | :04:12. | :04:15. | |
one of those, the non-performing loans, the bad debts. Kostas carried | :04:16. | :04:23. | |
Yannis, with the private equity firm Apollo Global Management, said | :04:24. | :04:26. | |
unless we deal with the non-performing loans there is no | :04:27. | :04:30. | |
hope in Greece, such is the scale of the bad debts banks like yours are | :04:31. | :04:34. | |
sitting on. Let me put it in perspective. There are two reasons | :04:35. | :04:38. | |
why banks could have bad debts, one is that they made the wrong | :04:39. | :04:42. | |
decisions in the past and they lent to the wrong people. The second one, | :04:43. | :04:48. | |
which is more the case of Greece, is that the whole economy actually | :04:49. | :04:55. | |
shrunk so fast and incomes were reduced so much that people were not | :04:56. | :05:01. | |
able to pay back debts, debts to the banking sector, tax returns, social | :05:02. | :05:07. | |
contributions and so on. The debt situation in Greece and the | :05:08. | :05:11. | |
non-performing loans are very much tied to the overall state of the | :05:12. | :05:15. | |
economy. Indeed, but there's no sign when you look at it, we have | :05:16. | :05:19. | |
forecasts that the economy is going to contract again this year. If | :05:20. | :05:23. | |
you're waiting for the tied to rise and lift the boats, you'll be | :05:24. | :05:29. | |
waiting a long time. First of all we hope, and all the expectations are | :05:30. | :05:34. | |
that growth will start resuming by the end of this year, 2016. We have | :05:35. | :05:41. | |
a small shrinkage in 2015, less than we expected, thank God. But in 2016, | :05:42. | :05:49. | |
over the second quarter, the second half, we are expecting growth to | :05:50. | :05:53. | |
slowly resume. You're absolutely right that you cannot wait for the | :05:54. | :05:59. | |
economy to start moving, but we should keep in mind that once the | :06:00. | :06:02. | |
economy starts moving then people will be able to start repaying. On | :06:03. | :06:07. | |
the other hand, we need to be proactive and deal with it and | :06:08. | :06:12. | |
manage the bad debt. I can tell you what we're doing. I want you to tell | :06:13. | :06:16. | |
me but in terms of how much bad debt you've got, on your loan book, how | :06:17. | :06:21. | |
much would you describe as bad? Most of the banks on average have between | :06:22. | :06:28. | |
35% and 45% as bad debt. What about you? 43%. 43% of the loans you are | :06:29. | :06:35. | |
sitting on our bad? They are non-performing loans, which means | :06:36. | :06:40. | |
there are delays in payments. Some of them are delays below 90 days, | :06:41. | :06:46. | |
some of them are above 90 days. OK. Let me say a few things, because | :06:47. | :06:51. | |
this is a major challenge for us, what we're doing, it depends very | :06:52. | :06:55. | |
much whether it is corporate loans or whether they are mortgages or | :06:56. | :07:00. | |
consumer loans. All Greek banks have established special units within | :07:01. | :07:03. | |
each bank to deal with their non-performing loans. Effectively a | :07:04. | :07:08. | |
bad bank within it. Exactly, within the bank. And now there is new | :07:09. | :07:13. | |
legislation which is being promoted, both by the government in | :07:14. | :07:17. | |
collaboration, close collaboration with the ECB and the bank of | :07:18. | :07:23. | |
Greece. Which is that you can sell some of those bad loans on? | :07:24. | :07:26. | |
Exactly. Some of these bad loans, especially the non-performing | :07:27. | :07:30. | |
consumer loans, can be sold to third parties or can be transferred to | :07:31. | :07:34. | |
third parties to be collected. Others are being dealt with and I | :07:35. | :07:38. | |
would say right now the majority of these loans are being dealt with | :07:39. | :07:42. | |
within the banks, and with good results. In other words, even the | :07:43. | :07:45. | |
national bank of Greece over the last months, we've had good results | :07:46. | :07:52. | |
in managing it. How do we manage it? Through new products, through | :07:53. | :07:55. | |
restructuring of these loans. Basically you've still got customers | :07:56. | :07:59. | |
that can't pay you back. That's right, but it depends what you do | :08:00. | :08:03. | |
and how you restructure the loans so they can pay something back. We know | :08:04. | :08:09. | |
that they can't pay what their obligation was five years ago or | :08:10. | :08:14. | |
three years ago, but we can assure that they start paying back. What | :08:15. | :08:18. | |
each bank wants is not to lose the connection with the debtor, so that | :08:19. | :08:24. | |
the debtor continues to service this loan depending on his income and | :08:25. | :08:30. | |
ability. You paint a picture that almost sounds quite rosy of running | :08:31. | :08:34. | |
a bank in Greece the way you're talking, but you have capital | :08:35. | :08:37. | |
controls, what happens if capital controls are lifted? I assure you | :08:38. | :08:42. | |
the situation isn't rosy. You are sitting there and if you are told | :08:43. | :08:46. | |
that you have to allow your customers to take money out if they | :08:47. | :08:50. | |
want to, what would happen? I think by now, whoever was to take his or | :08:51. | :08:57. | |
her money out has done so. So capital controls could be lifted? My | :08:58. | :09:01. | |
sense is the capital controls need to be lifted and as soon as the they | :09:02. | :09:07. | |
lifted the better it will be. From your point of view if they were | :09:08. | :09:14. | |
lifted tomorrow... This was our position at the Hellenic Bank | :09:15. | :09:16. | |
Association right from the beginning, as soon as capital | :09:17. | :09:20. | |
controls are lifted the better it will be for the resumption of normal | :09:21. | :09:24. | |
transactions. If they hadn't been imposed with the bank still be | :09:25. | :09:29. | |
there? The point is, the reason why they were imposed, was at that time, | :09:30. | :09:34. | |
in July, the risks were so high that people had withdrawn already and | :09:35. | :09:40. | |
were withdrawing money from the banks continuously, the programme | :09:41. | :09:43. | |
finished, there was a high level of uncertainty. A lot has changed since | :09:44. | :09:48. | |
July, and that's what allows us to be more optimistic. OK, we have this | :09:49. | :09:53. | |
situation where there was a slow bank run, 50% of bank deposits in | :09:54. | :09:58. | |
Greece withdrawn since 2010 Dobbie you're saying now remove these | :09:59. | :10:04. | |
capital regulations. People can't take out more than 50 euros a day at | :10:05. | :10:10. | |
the moment. Look, right. Lift them tomorrow, is that the message? I | :10:11. | :10:14. | |
would say lift them as soon as Greece moves from the LA, emergency | :10:15. | :10:19. | |
liquidity assistance, to normal ECB assistants. That could be sometime? | :10:20. | :10:23. | |
Possibly the next couple of months. We have so much in the next couple | :10:24. | :10:29. | |
of months, not least a review of the bailout by the troika, by Greece's | :10:30. | :10:36. | |
creditors. Absolutely. Over the month they will be loaded months. | :10:37. | :10:41. | |
What are the milestones? The first one I think is the evaluation and a | :10:42. | :10:46. | |
successful evaluation of the first phase of the end though you, the | :10:47. | :10:53. | |
third end of you. And this of course presupposes that the pension reform | :10:54. | :10:57. | |
goes through parliament with no problem, that is the first | :10:58. | :11:00. | |
milestone. Before you go on from that, that is significant. So that | :11:01. | :11:06. | |
people can understand, because it is the first big hurdle, the government | :11:07. | :11:10. | |
wants to reform pensions again. It has a majority of three MPs and a | :11:11. | :11:15. | |
population who are hacked off with the last pension reforms, what is | :11:16. | :11:20. | |
the chance of the next age of reform is getting through? If you ask my | :11:21. | :11:26. | |
opinion I think it will be passed, I think it will go through Parliament | :11:27. | :11:34. | |
-- reforms. There is a maturity across all Parliament members that | :11:35. | :11:37. | |
pension reform needs to be completed. It's not easy. There are | :11:38. | :11:45. | |
special groups that are affected. It's the second, as you said, | :11:46. | :11:49. | |
pension reform. Let's not forget that pensions have already been | :11:50. | :11:54. | |
slashed in Greece 70% since 2010. The adjustment has been enormous. So | :11:55. | :11:59. | |
the pension reform as it is now, and the proposal on the table, is one | :12:00. | :12:05. | |
which, if there are some revisions, and if it does not presuppose | :12:06. | :12:11. | |
further pension cuts, then I think there is a very good chance it will | :12:12. | :12:16. | |
go through Parliament. And what the troika, the IMF, the ECB are pension | :12:17. | :12:22. | |
reforms that effectively mean a cut of 1% of GDP. Is that too much? The | :12:23. | :12:29. | |
point is how do you achieve that and who bears the brunt? And all the | :12:30. | :12:34. | |
technicalities of the proposal. As we always know, the resistance or | :12:35. | :12:40. | |
the ease with which it passes through Parliament depends very much | :12:41. | :12:44. | |
on the precise provisions. Indeed, the pressure from the troika, the | :12:45. | :12:48. | |
creditors, is that it is on pensions because they don't want it loaded on | :12:49. | :12:52. | |
those earning because it pushes more people outside the legal market. But | :12:53. | :12:58. | |
they know very well already, and there is a clear understanding on | :12:59. | :13:02. | |
the part of the EU institutions that main pensions have already been cut, | :13:03. | :13:07. | |
have been slashed lots. So they will be on their side as well an attempt | :13:08. | :13:14. | |
to find a solution which will not hurt again those who have already | :13:15. | :13:19. | |
been hurt -- there will be. You think pension reforms... I think | :13:20. | :13:23. | |
there is a high probability that pension reform will go through with | :13:24. | :13:28. | |
revisions of course, relative to the current proposal, but my sense, and | :13:29. | :13:38. | |
my reading of the talk is that at the end there will be a compromise. | :13:39. | :13:43. | |
OK, so the President, Professor, the professor of law and economics at | :13:44. | :13:48. | |
Athens university says he can't see how the government can survive and | :13:49. | :13:53. | |
avoid these reforms. He makes the point the government will face | :13:54. | :13:55. | |
insurmountable problems early in the year. | :13:56. | :14:02. | |
This government has riven that it could push through reforms no one | :14:03. | :14:12. | |
thought they could. -- proven. Old lady, the brunt of them have already | :14:13. | :14:20. | |
been... -- Already. Have already been implemented. There are three | :14:21. | :14:26. | |
issues that remain on the table that remain difficult, one is the pension | :14:27. | :14:32. | |
reform, and the other is the privatisation fund, that there needs | :14:33. | :14:37. | |
to be discussion and compromise with the EU Constitution is and political | :14:38. | :14:47. | |
compromise. -- and. That is because this government almost basically 50 | :14:48. | :14:50. | |
billion euros from privatisations and thus far it has in a million | :14:51. | :14:57. | |
from leasing airports... -- been. There doesn't seem to be the will to | :14:58. | :15:05. | |
go through with the proposals and promises. That is not right. The 50 | :15:06. | :15:10. | |
billion, it was the initial... That number was part of the first MOU, | :15:11. | :15:18. | |
and the second MOU. It was not able to be achieved for many, across the | :15:19. | :15:26. | |
years. First, because, difficulties... Rather than going | :15:27. | :15:32. | |
back. Gladly tell you about now. What is interesting, and interesting | :15:33. | :15:40. | |
to all political analysts. -- Let me. It has moved and is ready to | :15:41. | :15:52. | |
move with port privatisation. We are just concluding as the National Bank | :15:53. | :15:58. | |
of Greece the deal on... What about the pipeline, what will it raise? | :15:59. | :16:08. | |
400 million. We're not talking about the scale of money is going to | :16:09. | :16:15. | |
satisfy Greece's creditors, are we? Look, this is part of the programme, | :16:16. | :16:21. | |
part of the third MOU. I am sure that over the next... Once the new | :16:22. | :16:29. | |
fund has been established, these kinds of privatisation deals will go | :16:30. | :16:33. | |
through... Now, whether it would be able, whether the conditions would | :16:34. | :16:36. | |
be such to raise the funds... The reason it is critical and I am | :16:37. | :16:42. | |
pushing it. In 2006 been... Let me put it this way. -- 2016. There will | :16:43. | :16:50. | |
be the first review of this latest bailout. That will come up. It could | :16:51. | :16:54. | |
take weeks or months, that is some of the warnings. That will depend on | :16:55. | :17:02. | |
what Greece has done. But Greece has completed right now more than 80% of | :17:03. | :17:06. | |
the implications under the MOU for the first phase. So we are on very | :17:07. | :17:13. | |
good track. The thing that is surprising is how good track there | :17:14. | :17:18. | |
has been from July until now. OK. That allows us to be thick that once | :17:19. | :17:28. | |
the pension reform goes through Parliament that things will return | :17:29. | :17:31. | |
to normal. -- optimistic. It doesn't mean there will not be problems. But | :17:32. | :17:37. | |
the question now is a return to normalcy. You won't get it unless | :17:38. | :17:43. | |
you have debt relief. That is what Christine Lagarde has said, it is | :17:44. | :17:50. | |
unsustainable. Is that the next in? Once the first evaluation is | :17:51. | :17:55. | |
completed successfully the negotiations will start on debt | :17:56. | :17:58. | |
restructure. That is essential. Not so much, in my view, and allow me to | :17:59. | :18:04. | |
put forward my own view, not so much that the numbers are unsustainable. | :18:05. | :18:09. | |
Because under very optimistic growth scenarios, et, even the currents | :18:10. | :18:16. | |
that could have been sustainable, for something different, that debt | :18:17. | :18:20. | |
restructuring would give very positive signals to investors so | :18:21. | :18:25. | |
they can start investing again... Christine Lagarde says the debt | :18:26. | :18:31. | |
relief has to be well beyond what has been considered so far. I would | :18:32. | :18:36. | |
agree with that. That is because, and he who are at the top of this | :18:37. | :18:42. | |
bank, you will know, to bring investors back... -- and here you | :18:43. | :18:48. | |
are. To bring them back, you talk about the economic certainty that is | :18:49. | :18:52. | |
required, at the moment, because banks now can sell some of their | :18:53. | :18:58. | |
debt, when you are considering who to sell it to, who is interested? | :18:59. | :19:04. | |
Many people. First of all, we were very presently surprised to see that | :19:05. | :19:10. | |
with recapitalisation, systemic banks went out to open markets and | :19:11. | :19:16. | |
raised in two weeks about 6 billion from private investors, 4.5, and | :19:17. | :19:28. | |
then two through swaps. And, actually, there were people and | :19:29. | :19:30. | |
there were funds, both individuals and funds, who were having a | :19:31. | :19:37. | |
positive outlook on Greece. And they put their money in the Greek banking | :19:38. | :19:42. | |
system... OK. Are we talking hedge funds? Not only... Only the hedge | :19:43. | :19:47. | |
funds are hoping to take on the risk. That is not true. From the | :19:48. | :19:50. | |
National Bank of Greece more than 50% is raised from our own and | :19:51. | :19:56. | |
traditional partners. Is that because you have to discount it so | :19:57. | :20:00. | |
much? Certainly, we have discounted it. How much? You are effectively | :20:01. | :20:06. | |
cutting the value. You are absolutely right. To be able to | :20:07. | :20:10. | |
attract this amount of money we actually... The price can to 0.4... | :20:11. | :20:21. | |
0.5... -- came. Very low. 40%... That is right. 40% of what it used | :20:22. | :20:28. | |
to be. There was a meltdown, if you like, but at the same time, the | :20:29. | :20:34. | |
price was the market price, right, but they entered because they could | :20:35. | :20:40. | |
see that prospect as beneficial. And let me say another thing. | :20:41. | :20:43. | |
Immediately after we completed recapitalisation of the national | :20:44. | :20:49. | |
bank, we saw the Finansbank in Turkey... Every week... You are, | :20:50. | :20:56. | |
selling everything of. A successful investor has made the point that | :20:57. | :20:59. | |
Greece will not recover as long as it is a member of the risen because | :21:00. | :21:04. | |
the exchange rate is too high. -- off. -- the eurozone. I will not | :21:05. | :21:19. | |
agree. Being in it presents a constraint in that you do not have | :21:20. | :21:23. | |
the use of the exchange rate. On the other hand, for a country like | :21:24. | :21:26. | |
Greece, it is extremely important in terms of trust and credibility. | :21:27. | :21:34. | |
Now... Greece had and continues to have a competitiveness problems. | :21:35. | :21:41. | |
Because of the programme that we have had so far, price | :21:42. | :21:45. | |
competitiveness has gone down. As the prices have fallen, labour costs | :21:46. | :21:51. | |
have fallen... So it is regaining in terms of rice competitiveness. What | :21:52. | :21:59. | |
it needs to do, that is the major challenge. -- price. The National | :22:00. | :22:00. | |
challenge, if you us, we need to upgrade. -- national. | :22:01. | :22:14. | |
You set up a party, the social agreements party MOU -- Social | :22:15. | :22:22. | |
Agreement Party. Dennis Razak is that you are imposing tough welfare | :22:23. | :22:27. | |
cuts. have sympathy with that? Greece had | :22:28. | :22:39. | |
an austerity programme that was probably one of the harshest | :22:40. | :22:43. | |
austerity programmes that have been implemented. That is a fact. No | :22:44. | :22:52. | |
other country in Europe or elsewhere, following emerging | :22:53. | :22:56. | |
economies, has had such a drastic cut in income. Is the price too | :22:57. | :23:03. | |
high? The price was extremely high on the people of Greece and | :23:04. | :23:08. | |
continues to be extremely high. That is why there has been so much | :23:09. | :23:12. | |
political opposition in a quest for aid different package. -- a quest. | :23:13. | :23:26. | |
One that... Old on a second. -- Hold. A package that is more | :23:27. | :23:34. | |
equitable. The deal struck in July... Because, maybe, it is the | :23:35. | :23:38. | |
product of a crisis and an in-house in terms of negotiations, in my view | :23:39. | :23:45. | |
it is the most manageable one. -- impasse. Manageable in quotations, | :23:46. | :23:57. | |
both politically and economically. Why do I say so? First of all, it is | :23:58. | :24:00. | |
more reasonable. Less austerity attached to this particular | :24:01. | :24:04. | |
programme. You think programme. You think it can work | :24:05. | :24:06. | |
this time? I think it is more manageable. OK. Thank you for coming | :24:07. | :24:12. | |
on to HARDtalk. Thank you very much. Thank you. | :24:13. | :24:16. |