Greece’s third bailout from Europe thankfully will be smaller than the €86 billion that was earmarked.
The European Central Bank's 'stress test' of the shattered Greek banking sector showed that the country's banks needed less recapitalisation than at first thought.
The ECB test results announced on Saturday showed the Greek banks need an injection of €14 billion into their accounts to cover unpaid loans, mainly as the Greeks seem to have gone off the idea of repaying their individual and corporate borrowings.
Provision specifically for bad loans needs to be raised by €7 billion, a drop in the Aegean when added to the €107 billion already marked as in default, so the total requirement for new money will be around €25 billion.
"It shows that the European Stability Mechanism (ESM) programme was adequately funded for this purpose and that the maximum lending programme for Greece will be less than the €86 billion initially envisaged," said a man in a suit.
The ESM already has €10 billion sitting there to be transferred to the Greek banks and wants to encourage investors to join in the fun so it does not have to come up with the €15 billion balance.
The next stress test will be on Portugal’s banks with Novo Banco recently trying to raise cash from assets transferred from BES when it went bust last August.
Many argue that the Novo Banco asset sale should be for the benefit of those BES investors who were ripped off, lied to and cheated by CEO Ricardo Salgado and his managers.
The Bank of Portugal has a different opinion as its Governor Carlos Costa needs to maximise the liquid assets at Novo Banco before it finally is sold off at a price to get him off the hook for his ill-planned rescue.
Costa is unlikely to succeed as Novo Banco is weak and worth currently around a third of the €4.9 billion he needs to realise to repay the Resolution Fund and the taxpayer.
