Prime Minister Lucas Papademos said on Friday that Greece has received a first tranche of 25 billion euros in European Union funding to bolster its cash-starved banks.
Papademos told a conference on small- and medium-sized businesses that the funding from the European Financial Stability Facility (EFSF) would offset losses that Greek banks suffered after participating in a writedown of Greek debt held by private firms last month.
The cash injection from the EFSF is crucial to ensure the country's banking sector functions properly, the premier said.
Greece is set to receive a total of 50 billion euros from the EFSF for its banks.
The country's four main banks -- Alpha Bank, Eurobank, National Bank and Piraeus -- are expected to report serious losses for 2011 when they publish their earnings reports later Friday.
Papademos said the recapitalization of Greece’s banks was a “prerequisite” for the lenders to get involved in restarting the sluggish economy. Supporting businesses after five years of recession is a «top priority» for Greece, he said.
“The government is trying to do everything possible to make sure that financial resources reach the real economy,” Papademos said.
The terms of the recapitalization of the banks are expected to be postponed until after the May 6 elections after difficulties emerged in the attempt to reach an agreement. The sticking point is how the private character of the lenders can be retained, according to sources.Ekathimerini.com