Greek legislators approved on Saturday with a wide majority a bank recapitalization bill that paves the way to address the key issue for the stability and growth of the ailing economy.
The move came only a few hours after the European Central Bank (ECB) announced that the results of the stress test for Greece's four largest banks revealed a 14.4 billion euro (15.85 billion U.S. dollars) shortfall.
Despite diverging views on some issues, all pro-euro parties represented in the 300-member assembly who jointly control 269 seats agreed on the necessity of proceeding with the third bank recapitalization since the start of the crisis in late 2009, and voted in favor of the draft bill.
They considered the bank recapitalization as a crucial first step to restart the Greek economy.
Only the ultra- Right Golden Dawn and the Communist party voted against the bill.
The bill sets the framework for the procedure of the recapitalization that should be concluded by year end to avoid a bail in on deposits of over 100,000 euros according to the new European laws that come into force on Jan. 1.
Briefly the bill foresees that Greek banks should use common or preferred shares and other tools to strengthen their capitals and be in a better position to face crises in the future.
Should they fail to raise the required sums, the Hellenic Financial Stability Fund (HFSF), the state-owned recapitalization fund, will cover any parts of the capital shortfall that will not be covered by private investors.
According to ECB's announcement earlier on Saturday, the capital hole of Greece's banking system is smaller than initially feared. The four largest banks are short of 14.4 billion euros under the worst case scenario of a further severe downturn of Greece's economy in coming months. Under the best baseline scenario they will need about 4.4 billion euros.
The 86-billion-euro worth three-year bailout Greece agreed to with its international creditors this summer foresees the allocation of up to 25 billion euros from bailout funding for the banks recapitalization.
Addressing the parliament, Greek Finance Minister Euclid Tsakalotos appeared optimistic on Saturday that the entire procedure will run smoothly so that funds will reach the real economy which has suffered from prolonged recession and capital flight in recent years, as well as from the capital controls imposed in the summer to avoid a possible collapse of the banking sector.
Time is pressing and the four Greek banks are required to submit their recapitalization plans to ECB by Nov. 6.
In the meantime, Greek lawmakers were expected to vote by next Friday on a second key draft bill containing the second set of prior actions that need to be passed so that Athens can receive the next bailout loan installment in coming days.