Testifying before a Parliamentary committee investigating the bank loans given to political parties and media, former central bank governor George Provopoulos on Tuesday defended the legality of these loans, as well as the central bank’s actions as the crisis struck.
“My term coincided with the most serious post-junta crisis, thick with events, major uncertain conditions, with bank liquidity not secure and conditions of panic. My effort was to avert the danger for the country and prevent the gates of hell from opening. I took decisions that saved the country from cataclysm…we avoided the accident that would have led the country to collapse,” Provopoulos said during an eight-hour testimony.
On the bank loans given to political parties, he insisted that these followed legal guidelines, with the central bank monitoring that banks had the required capital, but denied knowledge of any individual loans. The loans were legal, though whether they were also a good idea was another matter, he added. The central bank had only intervened in order to ask banks to reclassify some loans as ‘high risk’ instead of low risk, he said.
Provopoulos blamed the entire political system for the continued economic crisis in Greece, noting that the country had never had a “business plan” and was always too divided to face the problems. When George Papandreou took over the government, the markets gave him time, Provopoulos claimed. When they saw that the response to the crisis was too lackadaisical, they reacted badly with negative results,” he said.
“I had warned them that the deficit will exceed 13 pct but they weren’t moved,” Provopoulos added, noting that the right policy mix could have arrested the country’s downward slide in two or three years, restricting the contraction to 15 pct instead of 17 pct of GDP.
On the decision to sell Proton Bank to subsequently jailed businessman Lavrentis Lavrentiadis, Provopoulos defended the Bank of Greece decision to approve the bank’s licence. While admitting that the central bank’s supervisory service had given a negative recommendation, “expressing some small reservations,” Provopoulos pointed out that the final recommendation in favour of the sale was signed by all. He said he had been responsible for the investigation that finally sent Lavrentiadis to jail.
“The Bank of Greece acts as a supervisor on the basis of the law and international rules. You can judge it from the results. The country navigated a storm, a “tsunami” and remained upright. No depositor sustained a loss. This is a major achievement. By exercising appropriate supervision, [the central bank] contributed and averted serious dangers,” he said.