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Greek banks agree to merger deal

Greece's second and third largest lenders, Eurobank and Alpha Bank, have announced plans to merge to better withstand the country's acute financial crisis.

The widely anticipated merger, announced today, would create Greece's biggest bank, and was immediately welcomed by the country's Socialist government.

The move saw shares surge on the Athens Stock Exchange, with the banking sector up nearly 20%, while shares in National Bank of Greece, the country's largest lender, were up 29%.

The merger will also see investment from a Qatari investment fund, Paramount Services Holding, a joint statement from the two Greek banks said.

Greece is in the throes of a major financial crisis, and only avoided bankruptcy after two international bailouts agreed over the past two years, worth a combined total of 219 billion euros (£194 billion).

Central bank and government officials have repeatedly urged bank consolidation, arguing it will afford them greater protection from the fallout of the crisis.

"The decision by the two banks to proceed with a merger is a positive development," finance minister Evangelos Venizelos said. "This initiative demonstrates that today's crisis could serve as a corrective opportunity and provide a boost in the financial sector as well as in the real economy."

The deal, which requires regulatory approval, would create Greece's largest bank by assets - 150 billion euros (£132 billion) - with 80 billion euros (£70 billion) in deposits. The terms of the merger agreement include an exchange ratio of five new Alpha Bank ordinary shares for every seven Eurobank EFG ordinary shares.

In February, Alpha rejected a takeover bid from National Bank of Greece, arguing that the proposed terms were not beneficial to its shareholders.

"At a time when it is hoped Greece will experience the first signs of a recovery through the implementation of reforms and the support of its European partners, the new bank will aim to contribute to the resumption of growth in Greece and our country's connectivity with its neighbouring markets in south-eastern Europe," Alpha Bank chairman Yannis Costopoulos said.

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