BoG Provopoulos: Banks must pull the plug on non-viable companies

“Greek banks must let weak companies fail,”  George Provopoulos, governor of Greece’ central bank Bank of Greece told the Financial Times and added that consolidation of the economy should be encouraged, if the country is to return to sustainable growth.

“Following such a deep crisis we need strong consolidation [of the economy]. The process has already begun but it needs to accelerate,” Provopoulos stressed. “I have urged the banks to aim for consolidation of other sectors [in the economy] so that they become more efficient and more competitive. This would be highly beneficial for the economy: it would pave the way for sustainable growth and, most importantly, for increased employment.”

The BoG governor stated that Greek banks should enforce mergers on weaker corporate names and even “pull the plug” on the weaker non-viable entities.

Provopoulos did not elaborate whether he pointed to small and medium enterprises or big corporations.

But the Financial Times gave the hint:

“A six-year recession has left deep scars in the corporate sector, yet only one large listed company, an Athens property developer, has been forced into bankruptcy.

Leading hotel chains and media groups still operate normally even though they are burdened with hundreds of millions of euros in unserviceable debts.” (read  interview and article here)

Would the banks dare “pull the plug” on powerful Greek media groups that have been proved to give loyal support to government’s austerity policies? I doubt it….

On the other hand, isn’t it bold to have banks decide on the existence of companies, when it was the Greek banks that were generously giving the one loan after the other in glorious economic times after 1999 and thus to anyone who had a name and an ID? These same banks that were “saved” with the “sacrifices of the Greek people” and the European taxpayers…