“After years of economic and political turmoil, Greece is finally within striking distance of freeing itself from the bailout regime,” according to an article in the US-based “Wall Street Journal” (WSJ), which noted that the country’s creditors are aiming to complete the final review of the Greek programme by the end of May.
In May 5 article, the paper reported that Greek banks managed to ‘pass’ recent stress tests with satisfactory results, though noting that the government still has to deliver a number of reforms, including in the energy market and on its privatisation agenda, before the program can be completed.
The article cites Mujtaba Rahman, managing director for Europe at Eurasia Group, a consultancy, who said that Europe’s strong political interest in Greece exiting the programme meant that “today’s results were never going to jeopardise the programme exit.”
“In theory Greece’s banks should now be in a stronger position to support the real economy, but the practice could still prove different,” he added.
Greece’s biggest banks received a clean bill of health from Europe’s regulators on Saturday, an important step toward the completion of an eight-year bailout program that has strained the country’s economy.
The “stress tests” carried out by the European Central Bank on National Bank of Greece, Alpha Bank, Eurobank Ergasias and Piraeus Bank showed that the lenders “had sufficient capital to cushion them against a hypothetical severe economic downturn,” the article said.
“According to the results of the stress tests—carried out following European Banking Authority’s methodology used across the region—the four banks would lose around 15.5 billion euros, or 9 percentage points, of their capital by 2020 under an adverse economic scenario. The banks’ capital bases would cover these needs.
“Subsequently, some 20 billion euros remaining from Greece’s bailout funds that was earmarked for potential recapitalisations could instead be used to tackle other needs such as debt relief,” it added.