Athens Digest 03.07.2018

• As if it were elections; PM ups the ante with opposition conservatives during cabinet meeting

• Bank of Greece governor raises alarm over high primary surpluses

• Piraeus Bank agrees the sale of retail NPΕ portfolio

• Economic sentiment declines in June for the first time in five months

# The country’s political polarization in the aftermath of last month’s Eurogroup deal and the agreement between Greece and FYROM over the name dispute, was highlighted during yesterday’s cabinet meeting with Premier Alexis Tsipras comparing the leader of New Democracy Kyriakos Mitsotakis to Hungarian PM Viktor Orban and Austrian Chancellor Sebastian Kurz. For its part, New Democracy responded that SYRIZA is governing with the far right- referring to Junior Coalition partner, the Independent Greeks (ANEL). Moreover the cabinet meeting was held without the presence of ANEL leader Panos Kammenos, fueling further speculation that the ruling coalition may not survive. Referring to the Eurogroup deal as “historic,” Tsipras said it made the country’s debt sustainable and reiterated that he will restore collective labor bargaining, increase the minimum wage and introduce “targeted” tax breaks. He made no reference to the planned pension cuts and the lower of the income tax threshold in 2019.

# The Governor of the Bank of Greece (BoG) Yiannis Stournaras warned yesterday of the dangers the Greek economy could face due to the high primary surpluses it must achieve until 2060 as stipulated in the agreement reached with the Eurogroup on June 21. “No country in the world, even more so our country, never had such large primary surpluses for such a long time, with the exception perhaps of oil producing countries,” he told Parliament during the submission of the BoG’s monetary policy report which said that relief measures will help make Greece’s debt burden sustainable and pave the way for a return to market financing. However, the report noted that the debt’s long term sustainability depended on the continuation of the fiscal and reform effort, and more debt relief. Stournaras also noted that Greece’s enhanced post-bailout surveillance may allow the ECB to maintains its waiver on Greek government bonds and their induction in the ECB’s quantitative easing mechanism.

# Piraeus Bank announced its agreement with APS Investments in relation to the sale and transfer of non-performing, denounced unsecured retail consumer and credit cards exposures equivalent to EUR 2,238m total legal claims or EUR 385mn on-balance sheet gross book value. The transaction amounts to 5 percent of the EUR1.0bn outstanding principal amount of the portfolio. It is the second NPE sale for Piraeus Bank in 2018. “Our effort to decrease the NPE stock has been intensified. Both recent deals have been positive to our Group’s P&L and accretive to our capital position”, Christos Megalou, Piraeus Group CEO, said.

# The Foundation for Economic & Industrial Research (IOBE) said yesterday that economic sentiment in Greece fell in June 2018 – the first time in five months. It said the relevant index reached 102.5 points, down from 104.2 points in May and 103.6 points in April. The reduced economic sentiment has been blamed on deteriorating indexes measuring business expectations in the retail sector and construction. The foundation also said consumer confidence had also declined in June – when Greece signed its bailout exit deal with the Eurogroup. Retail trade was also hit by a moderate decline in household consumption

On Our Radar: Parliament to debate Eurogroup deal on Thursday
Greek lawmakers on Thursday will debate the comprehensive bailout exit deal reached at last month’s Eurogroup. The debate was requested by New Democracy which is accusing the government of striking a debt deal that was far below expectations that had been cultivated. Before the debate begins, Prime Minister Alexis Tsipras will brief lawmakers about the results of the deal.