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DEVELOPMENT BANKING IN GREECE 1963-2002
Greek state did not follow a path such that indicated by Thomadakis (1993, 1995),
namely the support of public investment for developmental and also economic stability
purposes. Hence development banks were transformed into institutions that supported
failed enterprises rather than financing new innovative ones.
In this sense, development banks cannot be assessed as traditional banking institutions.
Indeed, as far as their profitability is concerned, this seems to have ranged
from mediocre to a failure. Of course, things could have been different if the macroeconomic
conditions during the 1970s and 1980s had been different and if government
policies during these periods had been less demand-driven in a pseudo-
Keynesian sense (Psalidopoulos, 1990). Besides, development banks’ dual role as
promoters of economic and institutional change made them, more than any other
financial institution, crucially dependent on government policy. To the extent that
the state was supportive, development banks took bold initiatives –with greater or
lesser success depending on the competence of their management– towards financing
industry and promoting new financial techniques. Their ultimate determining
factor was the existing financial environment and their interaction with it, which led
to their gradual transformation during the 1990s.
These observations lead us to the result that development banks in Greece were
in fact, both subjects –promoters and initiators– and objects of financial development
in so far as their transformation was a reflection of the transformation of the
financial structure of the country. They were so interrelated with the existing financial
environment that its liberalization meant their complete transformation and not
just a change of level from less to more competitive operation, as happened to the
commercial banks. This ‘privileged’ connection between development banks and the
financial structure made them unique as institutions and impossible to assess and
model in the same way as any other banking firm. These same characteristics rendered
government policy –mainly in the form of Monetary Committee directives–
the ultimate risk factor in their operation and the main constraint that they faced
during their forty-year presence in the Greek economy.
References
Alexakis P., T. Giannitsis, S. Thomadakis, M. Xanthakis and N. Hatzigiannis (eds) (1995),
Markets’ Liberalization and Transformations in the Greek Banking System, Athens:
ETBA, Papazisis (in Greek).
Constas D. and T. Stavrou (eds) (1995), Greece Prepares for the Twenty-first Century,
Woodrow Wilson Center & John Hopkins University Press.
ETBA (HBID), Annual Reports 1964-2002, Athens.
ETEBA (NIBID), Annual Reports 1964-2002, Athens.
Halikias, D. J. (1978), Money and Credit in a Developing Economy: The Greek Case, N.Y.:
New York University Press.
Investment Bank, Annual Reports 1963-1997, Athens.
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