Athens Digest 20.12.2018

• Reports: Government mulls extension of mortgage protection, teacher hiring drive

• Moody’s executive: Next Greece report by creditors key to upgrade

• Ex-PM Thanou to take top competition job

• Piraeus Bank, NBG finalise EUR 665.6 million Athens Airport funding deal

# The government is reportedly finalising plans to hire some 5,000 additional staff state at state-run schools in 2019, with promises to add another 10,000 public education jobs in the subsequent two years. The hiring drive was discussed at a Cabinet meeting called after Parliament approved the 2019 Budget, according to reports in pro-government news media. It was unclear whether the additional positions would be linked to government plans to re-categorize Greek Orthodox priests who are currently on the state payroll. Prime Minister Alexis Tsipras also reportedly discussed the possibility of a brief extension of mortgage protection rules that expire on January 1.

# A senior executive at Moody’s says the next report on Greece by creditors under the enhanced surveillance programme will be key to any decision on making an upgrade to the country’s investment status. In an interview with the Greek financial website, Kathrin Muehlbronner, a senior vice president at Moody’s Investors Service, said another crucial factor would be the decision to release of ECB profit returns from Greek bonds, worth more than EUR 6 billion. Muehlbronner said she did not expect the Brexit crisis or the budget standoff between the EU and Italy to have a significant impact on the Greek economy. Inspectors from creditor institutions are due to visit Athens in late January. With Greek bonds still in junk status, authorities are keen to secure a credit-rating upgrade, hoping to tap markets as early as February.

# Former caretaker prime minister Vassiliki Thanou has been confirmed by a parliamentary committee as the next head of Greece’s Competition Commission, despite intense objections from opposition lawmakers. Thanou, 68, denied assertions that her previous position as legal adviser to the Prime Minister’s office should disqualify her from the top position at the independent commission. “I think that argument is legally invalid … my position as legal adviser was not political and not party affiliated,” said Thanou, a former Supreme Court president. A day ahead of her confirmation, conservative opposition leader Kyriakos Mitsotakis sent a written complaint to EU Competition Commissioner Margrethe Vestager, describing Thanou’s candidacy as compromised.

# Piraeus Bank and NBG have finalised a EUR 665.6 million bond loan agreement with Athens International Airport. The private operator of Greece’s largest airport will use the loan to help fund a EUR 1.1 billion deal with the country’s privatisation agency, HRADF, to extend its operation of the airport through 2046. Piraeus Bank said in a statement that the transaction was completed in accordance to a tight timeline customised to meet the company’s needs, whilst addressing its structural complexities and the diverse stakeholders’ requirements. “This is another landmark transaction which confirms the leading role of Piraeus Bank S.A. in infrastructure projects in Greece and highlights the bank’s support of the Greek economy,” said Fotini Ioannou, general manager at Piraeus Bank’s corporate and investment banking division.

On our Radar: Morgan Stanley sober on lenders’ prospects, but buoyed by disposal fund proposal
A report from Morgan Stanley has cautioned that the high level of soured loans is likely to limit profitability at Greek banks, even when factoring new, ambitious NPE-reduction targets for 2021. The Wall Street giant, however, did appear supportive of the idea of creating a so-called bad bank option _ a state-backed disposal fund _ to help reduce the non-performing loan pile. The sober assessment came in spite of a recent pledge by Greek banks to the ECB’s supervisory mechanism to set more aggressive NPE-reduction targets, to around 20 percent in 2021, from current levels of some 45 percent.