Athens Digest 13.08.2018 (weekly brief)

• Fires hold up government exit strategy

• Last installment comes with a warning

• Budget watchdog: Keep pension-cut commitment

• Waiver goodbye

• Piraeus Bank to sell shares of Albanian subsidiary, launches tender process for disposal of Imithea S.A. shares

• Commissioner Jourova warns over golden visas


# Smoke again blanketed the sky over Athens, as wildfires forced evacuations on the island of Evia and kept public attention on the last month’s deadly blaze at Mati, despite a government effort to shift focus to Greece’s bailout exit and an expected Cabinet reshuffle. As the death toll rose to 94, Prime Minister Alexis Tsipras ruled out early elections and announced plans to create a new public department to tackle natural disasters.

# Greece received its final bailout payment and a two-notch upgrade from Fitch ratings agency, but the good news came with a warning not to stray from reform commitments made to creditors. The final EUR 15 billion installment was granted as new BB- sovereign rating inched Greece closer to investment grade. Unemployment dipped below 20 percent in May _ another plus-column milestone. But for the outlook to remain positive, lead Greek creditor ESM stressed that reforms have to keep rolling forward. “Greece will now have to prove to its partners and the markets that it is committed to not reversing past reforms,” managing director Klaus Regling said. Fitch added a similar caution, noting that a loosening of fiscal policy would have a negative impact on the country’s recovery.

# If the government proceeds with unilateral acts like the suspension of pension cuts on January 1, 2019 it will send the wrong message to markets and hurt the credibility of country’s post-bailout economic policy, according to the head of the Parliament’s Budget Office. Frangiskos Koutentakis told Skai television: “It will send the message that there is a rupture, or that there is bad communication and that things are happening that have not been agreed upon.” He said there is a positive prevailing view about the Greek economy, but also concern over the direction it will take after the bailout. “The markets will evaluate the country risk and this will depend on the messages (Greece) will send,” he said.

# The ECB announced it will stop accepting Greek government debt as collateral from the day after the bailout ends, leaving lenders with a financing headache. Starting on August 21, the ECB will drop end the waiver that exempted Greece from the rule that only investment-grade bonds can be used as collateral _ an arrangement only allowed during the rescue programme. Lenders are now expected to rely on more expensive options like the interbank market and a Bank of Greece emergency assistance facility.

# Piraeus Bank S.A. has announced that it has entered into an agreement with the Balfin Group and the Komercijalna Banka, for the sale of shares in its subsidiary in Albania, Tirana Bank. Total consideration amounts to EUR 57.3 million for the 98.83 percent stake Piraeus Bank holds in Tirana Bank. Piraeus Bank S.A. also announced that the 1st phase of the tender process for the disposal of 100 percent of the shares of its subsidiary Imithea S.A., owner and operator of the Henry Dunant Hospital Center _ one of the Greek capital’s largest hospitals _ was completed on August 3, 2018, following the timely submission of a satisfactory number of non-binding offers by investors participating in the competitive tender process.

# EU Justice Commissioner Vera Jourova has sharply criticised member states described as lax in granting citizenship and residency rights to investors from outside the bloc, arguing that the practice can often encourage money laundering and provide a haven for criminal fugitives. Speaking to Germany’s Die Welt newspaper, Joureva said: “Granting citizenship carries a serious security risk because it gives them full rights as EU citizens and allows them free movement … The EU must not become a safe haven for criminals, corruption, and dirty money.” So-called golden-visa schemes have helped breathe life back into Greece’s real estate market, and are also used in Malta, Cyprus, Bulgaria, among other members.



On Our Radar: “Retaliatory” Russia slammed
In an ongoing diplomatic spat, the Greek Foreign Ministry has slammed Moscow’s “retaliatory and arbitrary” decision to expel two Greek Embassy staff from Moscow. A ministry statement said Greece’s expulsion of two Russian diplomats in July had been based on “specific evidence of illegal and irregular activities of Russian officials and citizens within Greece.”
“The Russian side’s decision is arbitrary, retaliatory and not based on any evidence,” it said, adding that since Moscow “began fighting as a comrade in arms with Turkey … it appears to be steadily distancing itself from positions befitting the level of friendship and cooperation that has characterized Greek-Russian relations for the past 190 years.”