Greece crisis: knife-edge election raises bank fears

EU authorities "find themselves in a bind" over Greek banks, says the Financial Times. European creditors agreed not to touch bank deposits as part of the latest bailout deal - and now face a race against time to recapitalise the stricken sector before new capital rules come in across the continent in January that could "wipe out shareholders". And there is the small matter of an uncertain election that could yet "tie authorities' hands".

   At issue is the fact that Greek banks were drained of capital in the months leading up to the failure of the last bailout in July, forcing them to close under a draconian regime of capital controls which have still not been fully lifted. The banks need at least €25bn, but creditors have so far "only agreed to spend €10bn" from the first tranche of loans, with the rest "tied to Athens' implementation to the bailout deal".

   But this could be complicated by an election this Sunday, with polls currently showing the ruling Syriza party and the opposition New Democracy neck-and-neck. "No single party… is on course to gain the 36 per cent threshold to form a majority government," the Daily Telegraph notes, and "that means a coalition beckons". Syriza has said it will not work with its main rival or other establishment parties meaning there is a good chance no government will be possible for a time.

   This threatens Greece's ability to comply with controversial reforms ahead of a review of the agreement, which could determine whether the International Monetary Fund participates and therefore all European countries hold firm. It could also truncate a timetable to resolve the bank crisis and mean "a mad end-of-year scramble", says the FT.

   The terms of the bailout deal are already seen as onerous, not least because of fiscal targets that Ashoka Mody, the IMF's former bail-out chief, told the Telegraph would "require a miracle".

Πηγή: theweek.co.uk