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Banks, Financial

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Categorized | Economy

Greece hires Lazard to advise on debt

Posted on January 31, 2015

Greek finance minister Yanis Varoufakis©Reuters

Greek finance minister Yanis Varoufakis

The Greek government has hired US investment bank Lazard to advise it on its debt burden as it prepares to enter talks with the troika of international lenders that has overseen its four-year bailout programme.

Since the far-left Syriza party won last weekend’s elections it has alarmed creditors and investors with pledges to freeze privatisations, rehire state workers and roll back reforms adopted by previous administrations as part of the bailout.

But on Saturday, Greek prime minister Alexis Tsipras issued a statement saying he was confident “we will soon manage to reach a mutually beneficial agreement, both for Greece and for Europe as a whole”.

    “No side is seeking conflict and it has never been our intention to act unilaterally on Greek debt,” Mr Tsipras said, adding that his approach “in no way entails that we will not fulfil our loan obligations to the ECB or the IMF”.

    The comments appeared to be a sign that Athens was moderating its position from the confrontational stance taken on Friday by its finance minister.

    Patience for Greece is running particularly thin in Germany. Chancellor Angela Merkel on Saturday ruled out the possibility of debt forgiveness for Greece’s new government, insisting that the indebted country should abide by the terms of its bailout arrangement. Speaking to the Hamburger Abendblatt newspaper, Ms Merkel said she did “not envisage fresh debt cancellation” for Greece.

    Wolfgang Schäuble, Germany’s finance minister, also warned Athens on Friday against trying to “blackmail” Germany with its financial demands.

    The hiring of Lazard indicates that the new government is preparing for bruising negotiations with the troika, which is made up of the International Monetary Fund, European Central Bank and European Commission.

    Without an extension of its EU bailout, which expires at the end of February, Greece’s banks could be cut off from ECB funding. The country’s four big banks were put on review for a potential downgrade of their credit ratings on Friday by Standard & Poor’s, capping a week in which their share prices fell sharply.

    Erkki Liikanen, an ECB governing council member, said that the ECB would cut any further lending to Greek banks if a deal was not reached by the deadline, adding: “Some kind of solution must be found, otherwise we can’t continue lending.”

    Yanis Varoufakis, Greece’s new finance minister, said on Friday that the country would no longer co-operate with the troika. He added that Greece was “working from the standpoint of the best possible co-operation with its institutional partners and the International Monetary Fund but not with a [bailout] programme that we think is anti-European”.

    Jeroen Dijsselbloem, chairman of the eurogroup of eurozone finance ministers, rejected the call by Athens for an international conference that would consider writing off part of Greece’s €315bn of debt, which last year amounted to 175 per cent of national output.

    He warned the new government against taking unilateral steps or ignoring arrangements with lenders, saying “the problems of the Greek economy have not disappeared overnight with the elections”.

    We — Germany and the other European partners — will now wait and see what concept the new Greek government comes to us with

    – Angela Merkel

    Lazard advised Greece on its original bailout in 2012. The US-listed investment bank has a long history of providing advice to over-indebted sovereign and municipal governments, including Argentina, Iraq, Ivory Coast and New York.

    Standard & Poor’s said on Friday that domestic deposits at Alpha Bank, Eurobank, National Bank of Greece and Piraeus Bank had decreased by €5.4bn to €213.3bn at the end of December, adding: “We expect deposit outflows to have likely accelerated in January.”

    Bankers familiar with the matter told the FT this week that between €700m and €1bn a day has been withdrawn from Greek lenders this week.

    Mr Varoufakis and Mr Tsipras will embark on a round of visits next week to London, Paris and Rome to seek backing for Greece’s position.

    Mr Varoufakis will meet his French counterpart Michel Sapin on Sunday before flying to the UK for a meeting with chancellor George Osborne. He may also meet investors in London, where Merrill Lynch and Deutsche Bank are trying to fix meetings.

    Ms Merkel said on Saturday that Europe would continue to show solidarity with Greece and other nations hit by Europe’s debt crisis as long as they undertook their own reform and austerity programmes. “We — Germany and the other European partners — will now wait and see what concept the new Greek government comes to us with,” she said