The Greek credit sector has received a cheap liquidity boost this year of 40 billion euros from the European Central Bank that has flooded the market with cash aimed at supporting enterprises and households in the face of the pandemic.
The negative-interest funding by the Eurosystem and the increase in deposits, which has come to €14.5 billion since the start of the year, constitute the main weapons of banks and corporations in the liquidity battle against the economic recession.
The key instrument in the battle against the pandemic’s impact have been the programs of the Hellenic Development Bank – the Entrepreneurship Fund II and the Guarantee Fund – through which loans of €5.3 billion have been issued. Another €3.3 billion should be disbursed by early 2021.
Thanks to these instruments, local banks have so far issued €17 billion to date in 2020, recording a capital expansion to non-credit enterprises for the first time since 2010, at a rate of 8.5%, with the net flow to businesses in positive territory for 10 consecutive months.
Liquidity will also be boosted in 2021 by the resources from the Next Generation EU fund, which provides for loans of €13 billion. This will also leverage another €7 billion from banks for the financing of investment plans.
This combination constitutes a golden opportunity for the restructuring of the Greek economy with new, low-cost investments. As Eurobank Chief Executive Fokion Karavias told an online debate recently, banks, businesses and the state will need “to act swiftly to make the most of the benefits of the monetary policy that secures low interest rates throughout the duration of project realization.”
Bank officials explain that the majority of enterprises have utilized credit lines for drawing working capital so as to improve their cash flow ahead of the tough quarters of the new crisis.
Nevertheless, the loans issued to companies without any bad credit till end-2019 constitute a risk for banks, as the depth of the recession threatens the economy.