Top Greek banks announce merger

Greece's second and third-largest lenders, Eurobank and Alpha Bank, are to merge as banks in the recession-hit eurozone member come under pressure to consolidate.Under the terms of the agreement, Alpha Bank shareholders will hold 57.5 per cent of the merged lender and Eurobank shareholders 42.5 per cent. 

Reuters/John Kolesidis

The merger will create a bank with assets of 150 billion euros, 80 billion in deposits and 2,000 branches in southeastern Europe.

The government had been calling on banks for months to pool their resources to help bolster the recession-hit economy.

Meanwhile, Greece heads into a key EU-IMF evaluation of its ailing finances this week amid growing uncertainty over a crucial debt rollover, bickering among its European peers, and signs that its fragile recovery is beginning to stall.

Senior representatives from the European Union, the International Monetary Fund and the European Central Bank will finalise a scheduled quarterly audit needed to unlock the latest portion of Greece's first rescue loan agreed last year.

After 15 months of austerity, the situation in Athens still looks bleak. Finance Minister Evangelos Venizelos last week said output will likely contract by more than 4.5 per cent in 2011, up from a 3.5 per cent forecast.

The public deficit, the source of the country’s economic woes, is also running dangerously high, coming in at 14.69 billion euros in the first half of 2011 compared to a target of 16.68 billion for the entire year.

To make up the shortfall, the authorities on Thursday are to increase sales tax for food at restaurants and hotels by ten points to 23  .

In July, the EU approved 109 billion euros in fresh aid for Athens and another 50 billion from private sector groups, mainly banks and insurance companies, who agreed to rollover some of their Greek government bonds.

Greek accumulated public debt totals around 350 billion euros, or 155 per cent of GDP, way above the EU limit of 60 pe rcent and at a level that many analysts believe will mean it cannot ever be repaid in full.

The EU-IMF audit entering its final phase on Monday will determine whether Athens will receive next month a sixth tranche of funds under its original bailout, set in May 2010 at 110 billion euros.