THE ROW over interest rates continued yesterday, with the co-op bank angrily rejecting accusations that it is responsible for high lending rates, and the government coming under repeated fire over the lack of liquidity in the banking system.
The Pancyprian Co-operative Confederation put out a statement yesterday rejecting outright the claim that borrowers are being hit by higher lending rates than necessary because the co-operative banks have chosen not to reduce their deposit rates.
Co-operative Central Bank General Manager Erotoklitos Klorakliotis told CyBC that several months ago, the co-operative banks had sounded the alarm over the high deposit rates of 7.0 and 8.0 per cent being offered by some commercial banks – probably a reference to new arrivals Eurobank and Piraeus Bank – saying then that this would drive up lending rates in order to cover the cost of funds. “Some people didn’t listen – or chose not to listen – then”, he said. Having kept their rates relatively low, the co-operative banks lost “more than €400 million in deposits”, and only now are getting those depositors back after the commercial banks decided to reduce their deposit rates. “There is free competition in the market”, he added.
DISY Vice President Averoff Nephytou yesterday accused the government of using “spin” to present a positive image of its actions, and repeated his view that it should “at long last” take advantage of the cheap money available from the European Central Bank (ECB), saying: “We are committing a crime against the economy by stubbornly refusing to draw on cheap money that would enable small and medium-sized companies, as well as households, to borrow at 3.0 per cent rather than being forced to borrow at 7.0, 8.0, 9.0 or even 10 per cent. Such cheap loans would avoid a situation where small businesses are in danger of going bust simply because they cannot afford loans which would allow them to survive this difficult period.”
Speaking to the press after receiving the Governor of the Central Bank of Greece, Finance Minister Charilaos Stavrakis was asked why the government is not taking advantage of cheap money from the ECB in order to inject more liquidity into the banking system, to encourage banks to lower their lending rates.
Stavrakis said that the government is doing exactly that by pursuing a policy of enabling the banks to use municipal bonds and secondary loans as security for ECB loans. “At the moment the agreements for secondary loans to municipalities, town councils and semi-governmental organisations covering a total of €1 billion are being amended to allow the commercial banks and co-op banks to use them to draw on cheap liquidity from the European Central Bank”, he said.
“The issue is, however, that this liquidity should not aggravate other significant indicators such as the public debt, the deficit, public accounts and the real economy. This is the delicate balance we are trying to maintain – to help the banking system, but not at the expense of the taxpayer or the public sector economic indicators.”
The government already has plans to issue a €1 billion foreign bond in June, in order to address existing public financing needs of about €2.5 billion over the next 10 months.
