A ROUTE OUT OF THE EUROZONE CRISIS
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To recap, banks and their sovereign states have come closer together in the course of the crisis. The fundamental problem has remained the insolvency of several sovereigns. Increasing reliance of banks on essentially insolvent sovereigns in the periphery has multiplied the risks for the financial system as a whole, exacerbating the prospect of a break up in the Eurozone. In September 2011 the European Banking Authority declared that 16 banks from across the Eurozone had to boost their capital ratios by April 2012. The internal markets commissioner stated: “We want the recapitalisation for these banks to be by private means. The era of bailing out banks must end. But I cannot of course exclude the possibility that some of the above banks will require state aid.� 27 These were fine sentiments but, in practice, policy makers in the periphery had already begun to face a tough dilemma: either full nationalisation, or selling banks to foreigners, for instance, to sovereign wealth funds of the emerging east or of the oil producers. 28 Selling the banks abroad echoes the continuous calls for privatisation made by lenders to peripheral nations: repay, even if it means a firesale of future revenue streams. Nationalisation, on the other hand, would only be a first step in resolving the crisis. It would simply create a more propitious context to deal with the problem of state insolvency but also to confront the profound economic dislocations created by the Eurozone, as is shown in the next chapter for Greece.
27 See http://www.ft.com/cms/s/0/49d6240e-e527-11e0-bdb8-00144feabdc0.html#axzz1YNIbQpro 28 The merger of Eurobank and Alpha Bank in Greece has already been announced with an equity injection of EUR500mn from Qatar. It has also been rumoured that Greek government preference shares could be bought for roughly EUR2bn. This could be a first indication of what lies in wait for Greek banks were default to materialise in the Eurozone in the near future, though Qatar is unlikely to be a major source of funds.