UPDATE 2-Greek PM urges banks to regroup to cope with crisis

* PM says Greek banks must regroup

* Finance minister seeks “great moves” to help bank system

* Greece hopeful of achieving or exceeding targets-finmin

* Cabinet to sign off on pension, labour reform Friday

(Recasts, updates with quotes)

By Harry Papachristou

ATHENS, June 24 (BestGrowthStock) – The Greek government on Thursday
urged the country’s lenders to seek alliances to better cope
with the debt crisis and resume funding its ailing economy.

“The Greek banking system can and must take strategic
regrouping steps,” Prime Minister George Papandreou told a
cabinet meeting, according to an e-mail from his office.

There has been intense media speculation that bank mergers
are in the offing, involving the country’s biggest lenders
National Bank, Eurobank (EFGr.AT: ), Alpha Bank and Piraeus
(BOPr.AT: ).

Finance Minister George Papaconstantinou also urged lenders
to regroup, in a speech earlier on Thursday at a bankers’
conference. “Now is the time to see the great moves that will
safeguard the future of the banking system,” he said.

Papaconstantinou voiced optimism of meeting or even beating
targets for slashing Greece’s budget deficit in 2010 agreed in
an EU and IMF bailout, and said the socialist cabinet would sign
off on a controversial pension and labour reform bill on Friday
before submitting it to parliament for approval.


Greek banks, which have rapidly expanded in eastern Europe
over the past years, are struggling to preserve capital through
Greece’s deepest recession in nearly four decades.

Earlier this week, Alpha Bank (ACBr.AT: ), Greece’s third
largest, dismissed media speculation that it was seeking to
merge with another bank to cope with the country’s debt crisis.

Credit expansion to businesses and households has frozen in
April compared with the previous month, Bank of Greece data
showed on Thursday.

Greek lenders have lost wholesale access to fund their
operations and have become dependent on funding from the
European Central Bank.

About 10 billion euros out of the 110 billion euro ($148
billion) EU/IMF bailout have been set aside for a fund to
safeguard Greek banks’ liquidity.

National Bank of Greece (NBGr.AT: ), the country’s biggest
lender said on Thursday it plans to sell 15 billion euros worth
of mortgage-backed covered bonds.

National Bank’s chairman and head of Greece’s bank
association Vassilis Rapanos told the bankers’ conference that
the country’s lenders faced big challenges but remained
resilient and would not shrink their presence in southeast


Greece plans to cut its budget deficit to 8.1 percent of
gross domestic product (GDP) in 2010, down from 13.6 percent in
2009, to meet its bailout conditions.

“We have the well-founded hope and are optimistic that the
budget targets will be achieved or even be exceeded,”
Papaconstantinou told the bankers’ conference.

He said the government had cut the budget deficit by 40
percent in the first 5 months of 2010. “We have overcome the
hardest part,” Papaconstantinou said.

“Tomorrow we are approving the framework of a major pension
reform for the public and private sector… we will also adopt a
new framework for labour relations,” he said.

The reforms have sparked protests by unions, including a
general strike planned for June 29.

Growth Stocks

(Writing by Alister Doyle and Ingrid Melander; Editing by
Ruth Pitchford)

UPDATE 2-Greek PM urges banks to regroup to cope with crisis