T. Pediaditaki, State Aids in times of economic crisis, 2009

State Aids in times ofState Aids in times of
economic crisiseconomic crisis
--
The Greek package for theThe Greek package for the
enhancement of liquidity ofenhancement of liquidity of
the economythe economy
Tonia Pediaditaki
Legal Counsel to the Greek Minister of Economy and
Finance (LLM, DEA)
Athens, May 30th
, 2009
International Conference
Institute for the Competition Law and Policy

T. Pediaditaki, Athens, 2009T. Pediaditaki, Athens, 2009
ΔιάγραμμαΔιάγραμμα // OutlineOutline
Ι. Κρατικές ενισχύσεις και
Οικονομική κρίση
 1. Η χρονολογία της οικονομικής
«καταιγίδας»
 2. Επιλογή εργαλείων για την
αντιμετώπιση της χρηματοπιστωτικής
κρίσης: Mεταρρύθμιση του Κοινωνικού
Κράτους ή βραχυπρόθεσμες λύσεις ;;
ΙΙ. Το ελληνικό πακέτο για την
ενίσχυση της ρευστότητας της
οικονομίας (ν.3723/2008)
 1. Οι 3 πυλώνες του συστήματος –
βασικά στοιχεία
 2. Η απόφαση της Επιτροπής για την
έγκριση του ελληνικού καθεστώτος
κρατικής ενίσχυσης Ν 560/2008
Ι. State Aids and Economic Crisis
 1. The chronology of the economic storm
 2. The choice of instruments for the
weathering of the credit crunch: Welfare
state reform or Short-term solutions??
II. The Greek scheme for the
enhancement of liquidity of the
economy (Law 3723/2008)
 1. The 3 pillars of the scheme – basic
features
 2. The Commission decision for the
approval of the Greek state aid scheme N
560/2008
22

The Chronology of the Economic StormThe Chronology of the Economic Storm
33

Rerun of the past ??Rerun of the past ??
Major financial crises, 1992-2008
Country Year
Finland, Sweden, UK Autumn 1992
The ERM crisis July 1993
Mexico December 1995
Asia (Thailand, Indonesia, South Korea) Summer 1997
Russia August 1998
Brazil January 1999
Turkey May 2001
Argentina December 2001
USA August 2007
The world economy 2008
44

……or return to the future??or return to the future??
 Yesterday’s financial catastrophes as patterns for today’s storms?
 Or New elements this time?
The story in short:
A. The rise …:
 Starts with financial deregulation and financial innovation combined
with expansionary monetary and fiscal policies.
 The boom is driven by a rapid rise in credit and by low rates of
interest.
 The rise in bank lending is channelled into asset markets, notably
real estate and stocks.
 As real estate increases in price, the higher market value is used as
collateral for new loans.
 The lending boom becomes a self-fulfiling process.
55

B. …and fall:
 Boom-bust pattern : the boom turns into a bust, as negative news
changes the outlook from optimism to pessimism, while credit starts
to contract and interest rates rise sharply.
 The value of real estate and stocks falls.
 Wealth losses lead to lower consumption and investment and
increase in private savings.
 Investment plummets, most rapidly within the construction sector,
 Unemployment soars.
 Tax revenues fall and public spending increases.
 The government budget deficit increases dramatically.
 The economy slides into a deep recession …
 At this stage, governments are usually forced to
support the financial system with capital injections into
banks and other measures to “save” the financial system,
as the bank system is the facilitator of the money
circulation and the cornerstone of the economy in
general…
66

EC policy response & Greece’s action planEC policy response & Greece’s action plan
The reaction of the EC Commission
“If Europe acts decisively to implement this recovery
plan, we can get back on a path of sustainable growth
and pay back short-term government borrowing”
(José Manuel Barroso)
“We must grasp this opportunity to drive forward a
restructuring of global governance”
(Commissioner Joaquin Almunia)
******
 Commission Communication, 13 October
 European Council, 15-16 October 2008
 ECB guideliens: 20 October
 Article 87 par. 3 (b) EC Treaty : serious disturbance to
the economy !
 Empowerment procedure for urgent decision-making
process
 Commission Communications of 5 and 17 December
2008
 “State Aid Rules are part of the solution not of
the problem”
while
 “Flexibility doesn’t mean throwing out the rules”
(Commissioner Neelie Kroes)
The reaction of Greece
 Quick reaction to the new reality 
23 October 2008
 Powerful, systematic and pragmatic
approach
 Robust coordinated measures:
 Guarantee for bank deposits
(up to 100,000 €)
 3-pillar scheme for the
enhancement of liquidity of the
economy
 Effect as from 24 October 2008
77

3 pillars of the Greek package approved3 pillars of the Greek package approved
under State Aid scheme N 560/2008under State Aid scheme N 560/2008
 1. Recapitalisation scheme
 2. Guarantee scheme
 3. Bond loan scheme
88

11stst
pillar : Recapitalisation schemepillar : Recapitalisation scheme
 makes available new capital to credit
institutions in exchange of preference shares,
to allow them to strengthen their capital base
against potential losses.
 The State purchases shares which are
considered as non core tier 1 capital and will
be remunerated with 10% interest.
99

22ndnd
pillar: The guarantee schemepillar: The guarantee scheme
 covers against remuneration new debt with a
maturity between 3 months and 3 years, issued
during maximum 6 months after November 19th
,
2008.
 Subordinated debt and interbank deposits are
excluded from the scheme.
 The remuneration is aligned with the ECB
recommendations.
1010

33rdrd
pillar: The bond loan schemepillar: The bond loan scheme
 provides government bonds against
remuneration to credit institutions to enhance
their access to liquidity, in particular with the
ECB.
 The bonds are borrowed by the credit
institutions against collateral, which has been
subject to significant haircuts and against a fee
similar to that of the guarantee.
1111

Key elements of the Greek schemeKey elements of the Greek scheme
Law 3723/2008 + Ministerial decision
&
Matrix of decisions of banks’ general
assemblies and bilateral contracts
**
The role of the Bank of Greece
Supervisory Council for the monitoring of
the scheme
State’s representatives to the participating
1212

Evaluation of the Greek schemeEvaluation of the Greek scheme
 Comprehensive
 Appropriate & Proportionate
 Non-discriminatory
 Limited in time and scope
 Entry windows of maximum 6 months
 Incentives for exit system
 Budget caps
 Market-oriented remuneration
 Targets only fundamentally sound credit institutions
 Based on solvency and capital ratio requirements
 Growth restrictions on clear benchmarks
 Behavioral safeguards to avoid the abusive use of State support
 Behavioral constraints (dividend ban, managers’ bonuses)
 SUCCESFUL in terms of scope, structure, application and
Commission approval 1313

Games of Institutional DynamicsGames of Institutional Dynamics
 The Shock as a catalyst for institutional change?
OR
 Focused measures to remedy the crisis without changing
the perimeter of regulation?
 Traditional dichotomy of institutional changes:
 Gradual continuous change  minor changes
 Shock discontinuous  major changes!
1414

The Process of Institutional ChangeThe Process of Institutional Change
Process of change Results of change
CONTINUITY DISCONTINUITY
INCREMENTAL Reproduction by adaptation
Gradual
transformation
ABRUPT Survival and return
Breakdown and
replacement
1515

The international dimension ?The international dimension ?
1616

The Greek case nowThe Greek case now
SchemeScheme
ProlongationProlongation
Review phaseReview phase
under wayunder way
1717

T. Pediaditaki, State Aids in times of economic crisis, 2009

Empfohlen

Empfohlen

Weitere ähnliche Inhalte

Was ist angesagt?

Was ist angesagt? (20)

Andere mochten auch

Andere mochten auch (8)

Ähnlich wie T. Pediaditaki, State Aids in times of economic crisis, 2009

Ähnlich wie T. Pediaditaki, State Aids in times of economic crisis, 2009 (19)

Kürzlich hochgeladen

Kürzlich hochgeladen (20)

T. Pediaditaki, State Aids in times of economic crisis, 2009