July 10, 2017 / 1:42 PM / 16 days ago

Greece plans to create a state development bank in 2018

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ATHENS, July 10 (Reuters) - Greece is eyeing the creation by mid-2018 of a state development bank that would lend to small and medium-sized enterprises (SMEs) to aid the recovery from its long economic crisis, government officials said on Monday.

SMEs account for more than 85 percent of companies in Greece, according to some assessments, meaning they are a key driver of economic growth, but they have been starved of financing by commercial banks, which are loaded with bad loans.

"Our aim is to free up the liquidity which is trapped due to the high load of non-performing loans and to boost the network of partner banks," a senior government official told Reuters.

Years of austerity have left people and businesses struggling to repay their lenders.

The government council for economic affairs is expected to discuss the development bank's structure later this month, the official said, and the government aims to submit a draft law to parliament in September.

Greek authorities have sought technical support from the World Bank and European institutions, two officials said.

The bank is likely to be jointly managed by the finance, economy and energy ministries and the government is exploring whether funds from the public investment budget can be transferred to the new lender, one of the officials said.

Foreign development banks have also shown an interest in participating in the project, one government official said.

An initial plan to set up a development bank has already been approved by Greece's euro zone partners. They last month concluded a crucial review of its reform progress and outlined debt relief measures to be carried out in 2018, when its third international bailout, worth 86 billion euros, expires.

The development bank, which will not take deposits, will bring together existing state bodies such as the Hellenic Fund for Entrepreneurship and Development and partner banks in different Greek regions.

It will also advise potential investors in Greece, the official said. (Reporting by Renee Maltezou; Editing by Catherine Evans)

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