Greek centralbanker defends Piraeus-ATEbank deal

Greece's central bank chief has defended the government' s decision to transfer state lender ATEbank's healthy assets to Piraeus Bank, saying ATEbank was not viable and required a capital boost to continue operating.

"The transaction process was done with absolute respect for law and transparency," central bank Governor George Provopoulos told parliament on Friday. "ATEbank was not viable. If it shut down, we would have had thousands of newly unemployed."

Athens announced last week it would split agricultural bank ATEbank into two by transferring its performing loans and securities portfolio and its deposits to Piraeus and liquidating its non-performing business.

The move signalled the coalition government's drive to stick with its bailout plan agreed with international lenders, which it needs to do to resume the flow of funds from the IMF and its euro zone partners.

Piraeus will fork out 95 million euros to the liquidator to cover costs, but the state will not receive any proceeds from the deal.

The deal is expected to strengthen Piraeus's balance sheet, and make the bank, now Greece's fourth-largest lender, the country's second-biggest bank.

The deal, however, has come under fire from ATEbank's union, which has announced rolling strikes against the deal, and the powerful radical leftist opposition party Syriza, which has called it the "Great Robbery".

Provopoulos said the state had no choice but to push through such a deal since ATEbank had been deemed non-viable by the European Central Bank, which had cut off funding to the bank.

Recapitalising a non-viable bank was not an option under Greece's EU/IMF bailout package but the lender's collapse had to be avoided to preserve stability in Greece's banking sector, he said.