Athens Digest 14.02.2018

• Turkey accused of hostile patrols in Aegean

• Erdogan remarks prompt EU warning

• Greece, FYROM aim for NATO invitation in June

• Regling: Greece could be ‘success case’

• Top banker insists foreclosures are ‘last resort’

• HRADF launches tender to sell five percent stake in the OTE telecom company

# The prime ministers of Greece and Turkey, Alexis Tsipras and Benali Yildirim have spoken on the telephone in an attempt to reverse a dramatic spike in tension in the Aegean Sea. The escalation occurred after a Greek coast guard vessel was damaged in a collision near uninhabited islets that were at the centre of a major crisis 18 years ago. The patrol boat was struck by a Turkish guard vessel near the islets of Imia, prompting a strongly worded complaint from Athens. “Dangerous incidents such as these, which place human lives at risk, are the result of the escalating and provocative conduct that Turkey has increasingly exhibited in recent days,” a Greek Foreign Ministry statement said. Turkey’s ambassador to Athens was summoned by the government to receive the complaint. Greece and Turkey came to the brink of war in 1996 over ownership of Imia, known as Kardak in Turkey, in a dispute seen by Athens as an attempt to dispute sovereign sea boundaries.
The latest incident occurred after Turkish navy vessels blocked an Italian energy firm from natural gas exploratory drilling off the coast of Cyprus, arguing that the venture was a unilateral action by the island’s Greek Cypriots.

# The European Union has criticised Turkey after President Recep Tayyip Erdogan threatened Greece and Cyprus with a military response. Referring to Cyprus, Erdogan told MPs from his party: “We advice foreign companies not to become an instrument in issues that exceed their capacity, by trusting the Greek Cypriot side.” He added: “Their show of strength will only last until they see our military’s ships and our planes.”
In Brussels, EU Commission spokesman Margaritis Schinas said the Greek vessels was co-financed by the European Border and Coast Guard. “We would like to stress the need to respect the sovereignty of member states over their territory, sea and airspace.”

# A UN envoy met in Vienna with the foreign ministers of Greece and the Former Yugoslav Republic of Macedonia as the two countries are reportedly closer to reaching a deal that would allow FYROM to receive an invitation in June to join NATO. According to officials with knowledge of the ongoing negotiations, Greece and FYROM would reach a provisional agreement on a new name by June, allowing Athens to lift its veto on NATO membership. Implementation of the deal and a possible change in FYROM’s constitution would be pushed to a later date when NATO membership would be confirmed and talks for European Union accession could begin.

# Eurozone rescue fund chief Klaus Regling says Greece is heading for a successful exit of the bailout, speaking as Greek officials were braced for the fourth and final review. “Greece is still in the programme. But they will exit in August this year. And if they continue to implement reforms, there is a good chance that Greece will also become a success case.”
The fourth review, due to start at the end of this month, is expected to add pressure on Greece to step up privatizations, toughen tax collection penalties, and take further action to protect banks from non-performing loans by speeding up online property auctions.

# The head of the Hellenic Bank Association met with Greek President Prokopis Pavlopoulos to provide a public assurance that lending institutions were working to limit the number of foreclosures to a minimum. Nikos Karamouzis said at the meeting that property auctions were considered the “last resort” as banks remained committed to try and renegotiate repayment terms with distressed mortgage holders. Greece’s government is under pressure from rescue creditors to speed up online property auctions and reduce the risk posed to banks by non-performing loans.

# A public privatisation agency (HRADF) has launched a tender to sell another five percent stake in the OTE telecom company. Investors have until March 15 to submit offers, the agency said. Deutsche Telekom, the main shareholder of OTE, has the right to buy this 5 percent at the cost of the maximum bid. The sale is part of Greece’s commitments to international creditors to speed up and broaden privatisations, in exchange for continued disbursements and debt relief.

On our Radar: Investment gauge
Euclid Tsakalotos is expected to meet officials from investment institutions in Paris today in a new round of consultations to prepare for Greece’s follow-up bond issues. The finance minister will travel onto London later this week. Following last week’s successful 7-year bond auction, Greece is expected to test bond markets on two more occasions before the August bailout exit.