Athens Digest 30.01.2019

• Athens buoyed by bond-auction success

• EC’s Katainen urges persistence on NPL effort

• IOBE lowers growth forecast over election-year concerns

# Greece’s first post-bailout test in bond markets was declared a success by relieved government officials last night, raising EUR 2.5 billion on a 5-year bond yield of 3.6 percent. Finance Minister Euclid Tsakalotos told Parliament that interest, worth more than EUR 10 billion, had “exceeded all expectations,” arguing that the quality of investor had also improved. “What is most important is that … there has been a major shift away from hedge funds and towards regular investors.” The auction saw Greece raise more than a third of the amount targeted for the year and is expected to be followed up with another issue in April.

# “Greece’s return to the international capital markets was long overdue. On the positive side of the current issuance are the strong demand and the quality of the investors, whereas on the negative side lies the high yield _ over three percentage points higher than the corresponding duration Portuguese bonds,” told Athens Digest Prof. Panos Tsakloglou, former Greece’s representative at the EWG. “Despite the existence of the cash buffer, Greece should continue to issue new bonds but also make every effort to reduce the yields, so that the cost of capital to the private sector is also reduced. To this end staying on the path of structural reforms and improving the growth prospects of the economy are of paramount importance,” he added.

# Jyrki Katainen, the EU Commission vice president, urged Greece to keep up efforts to reduce the bank burden of soured loans during a visit to Athens for a Commission event to support young entrepreneurs. “This government and the next government should continue the reforms which have been agreed with the other European partners and also deal with the NPLs. It is a quite challenging task but, for sure, it’s one of the main issues which is crucial for growth and SME financing,” he said. Asked about the minimum wage increase by 10.9 percent, he added: “We took note of the latest initiative. Commission will analyse it once we see it on paper. The perspective which first comes to our mind is that hopefully salaries will follow the development of productivity. We recommend that all countries follow this healthy principle.” Katainen met with deputy PM Yannis Dragasakis and opposition leader Mitsotakis, and also spoke in parliament.

# A leading Greek think tank has lowered its growth forecast for 2019, warning that fiscal discipline could slip ahead of elections. The Foundation of Economic and Industrial Research, or IOBE, dropped its forecast from 2.4 to 2 percent growth for the year. IOBE did however note that the economy would be bolstered by improved investment and private consumption, with respective increases of 12 percent and 1.4 percent.

On our Radar: Greece sinks lower on corruption index
Greece has sunk lower on an annual corruption index, despite a strong overall record for the European Union. Transparency International’s annual Corruption Perceptions Index found that a recent improvement in Greece had halted and the country slid back three points to 45 points in 2018, slightly better that Bulgaria at 42 and edged by Hungary (46). The reported cited “burdensome bureaucracy” the drugs procurement scandal and a key state appointment to Hellenic Competition Commission as reasons for the decline.