As Greek banks hammered, Athens urges EU to give Cyprus more time

Following broader losses in Europe, shares on the Greek bourse were down 2.1% early Tuesday.

ATHENS, Greece – Banking stocks in Greece were hammered Tuesday before Cypriot lawmakers rejected a bailout plan, while government officials here urged eurozone countries to give the Mediterranean island more time to come up with a viable solution.

Shares on the Athens Stock Exchange fell 3.85 per cent to 923.43. Banking stocks plummeting by 9.58 per cent, in the first trading session since Cyprus announced its doomed plan to seize a part of bank deposits.

There were no signs of bank runs in Greece, but conservative Prime Minister Antonis Samaras called an emergency meeting with partners in the government coalition to discuss the crisis.

Moments before the Cypriot vote was announced, Socialist leader and coalition partner Evangelos Venizelos strongly indicated that Russia, a financial ally of the island, could play a key role in resolving the emergency.

“It was a major mistake to place such pressure on Cyprus,” he said.

“A solution must be found with Cyprus remaining in the eurozone … but it may involve countries outside the eurozone because of the scale of Cyprus’ economy is the size that it is.”

After a public holiday Monday, Greek branches of the Cypriot lenders the Bank of Cyprus, Laiki Bank and Hellenic remained closed Tuesday and Wednesday. Trading in the shares of Bank of Cyprus and Laiki was also suspended for two days on the Athens Stock Exchange.

It was unclear how the vote in Cyprus would affect plans to push through the purchase by local lenders of Cypriot bank operations in Greece. Those operations have estimated combined deposits worth €13 billion ($16.8 billion) and loans totalling more than €20 billion ($25.9 billion), with more than 300 branches and more than 4,500 staff.

A Greek treasury bill auction went ahead as planned Tuesday, raising €1.3 billion ($1.68 billion) in 13-week loans at an interest rate of 4.05 per cent, unchanged from a Feb. 12 sale.

Greece has strong ties with Cyprus, which is majority ethnic Greek. With an economy more than 11 times larger than that of Cyprus, Greece has been surviving on rescue loans for past three years as it struggles to make its national debt sustainable.

Public activity at Greek banks appeared normal Tuesday following repeated assurances by government officials that all deposits in the country were safe.

Greece went into recession in late 2008, with deposits falling from a high of €237 billion ($306.77 billion) to €150 billion ($194.16) in June last year. Bankers fear the Cypriot turmoil could stifle a modest return of money to Greek banks of around €17 billion since the election.

But for Dionysis Kandioto it no longer matters.

“If I had any savings left, it would be relevant,” he said, holding up a giant Cypriot flag at a small demonstration near Greece’s parliament.

“All I can do is show my support for people going through a hard time in Cyprus. What they do, is up to them.”


Raphael Kominis in Athens contributed.