ATHENS – Fears concerning Greece’s efforts to fix its faltering economy flared anew Monday as bank shares sank 30% -- the maximum allowed in a day -- after plans to merge the country’s two biggest lenders were suddenly frozen.
Investors dumped shares of the National Bank of Greece and Eurobank during the early hours of trading after both institutions confirmed late Sunday that their merger was off because of fears that the new combined entity would be too big to handle.
The surprise freeze came amid testy talks between the government and international lenders from the European Commission, the European Central Bank and the International Monetary Fund, which together are keeping Greece afloat with a multibillion-dollar rescue package in exchange for strict fiscal reforms.
The bank merger was part of a broader plan to consolidate the financial sector in order to cope with the fallout of Greece’s devastating debt crisis and deepening recession. Although the National Bank of Greece and Eurobank have been in negotiations since last year, the trio of international lenders raised concerns about the banks’ ability to raise about $20 billion between them to meet the solvency criteria set by the country’s central bank.