The Evolution of Bank - State Ties under Economic Adjustment Programmes: the case of Greece

This paper focuses on the evolution of bank-state ties in Greece during the Economic Adjustment Programmes (EAPs). On one hand, the Greek institutional framework points to close "formal and informal ties" between political and banking elites, while at the same time the Troika's pressure to reduce the state 's political influence in the banking sector was expected to be high. Indeed, from the very early stages of the crisis, even though the recapitalisation was realised with public funds, the Greek government 's actual control of the banking sector was restricted, and "formal links" between the banks and the state were broken. Nonetheless, little was done before 2015 in order to evaluate and restructure the governing bodies of the Greek banks, keeping the "informal links" intact during the first two EAPs. In order to explain this surprising delay, this paper advances a new narrative. Based on 25 in-depth elite interviews with actors involved in the recapitalisations, it demonstrates that preserving these "informal" bank-state ties served as an important crisis management tool and proved useful for safeguarding financial stability at the domestic but also at the EU level. Lastly, evidence suggests that beyond the creation of the Banking Union, it was the international actors' lack of trust in the Greek government, which finally led to aggressive corporate governance reforms of Greek systemic banks breaking the "informal ties" between the bank and the state after the third recapitalisation.