Greece Bailout Plan Includes Support Fund for Domestic Banks
By Jonathan Stearns and Sandrine Rastello
May 2 (Bloomberg) — Greece’s bailout plan includes a support fund for domestic banks, which may face an increase in bad loans as the economy contracts, officials from the European Union and the International Monetary Fund said.“The objective of the fund will be to ensure that the Greek banks are well capitalized at all times,” Servaas Deroose, deputy director general of the European Commission’s economic and financial affairs department, told reporters in Athens today. “Injections will, as always, be subject to tough conditions.”The so-called financial stabilization plan is part of an unprecedented bailout from the EU and IMF valued at more than 100 billion euros ($133 billion). The rescue includes budget cuts on the part of Greece worth 30 billion euros. The commission, the EU’s executive arm, estimates the Greek economy will shrink about 4 percent this year and by almost half that amount in 2011, before growing in 2012. The package for Greece foresees the country’s budget deficit falling to 8.1 percent of gross domestic product this year from 13.6 percent in 2009.“The Greek banking system is actually quite well capitalized,” Poul Thomsen, the IMF European Department deputy director, said in Athens. “But, clearly, with this dramatic program, the contraction in nominal GDP, we do expect to see an increase in non-performing loans.”
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