Greek banks will merge to combat financial crisis

Greece's second and third largest lenders, Eurobank and Alpha Bank, Monday announced plans to merge in order to better withstand the country's acute financial crisis. The widely anticipated move would create Greece's biggest bank, and will see a €500 million (Dh2.6 billion) investment from a Qatari investment fund, Paramount Services Holding Ltd., officials from the two banks said. The deal was immediately welcomed by the country's Socialist government and caused shares to surge on the Athens Stock Exchange. The banking sector as a whole closed the day 27 per cent higher with National Bank of Greece, the country's largest lender, posting a 29 per cent gain. The benchmark General Index in Athens ended 14.4 per cent higher at 1,006.59, rebounding past the 1,000-point threshold just one session after falling to a 15-year low under 900 points. Greece is in the throes of a major financial crisis, and only avoided bankruptcy after two international bailouts agreed over the past two years, worth a combined total of €219 billion. The country remains cut off from bond markets because investors demand prohibitively high rates to lend it money over the long-term — the yield on the ten-year bonds is at 18 per cent, compared with the benchmark German rate of 2.18 per cent. The Greek central bank and government have repeatedly urged banks to consolidate, arguing it will afford them greater protection from the fallout of the crisis. "The decision by the two banks to proceed with a merger is a positive development," Finance Minister Evangelos Venizelos said. "This initiative demonstrates that today's crisis could serve as a corrective opportunity and provide a boost in the financial sector as well as in the real economy."