Athens Digest 20.02.2019

• Yield drop raises expectations for new bond issue

• Greece pressed to finalize new household insolvency rules

• Budget report sees no threat from wage hike but presses for the implementation of pending reforms

• Judicial investigation after a Dep Health Minister’s phone call to the governor of the central bank leaked to the press

• Piraeus Bank CEO says NPL demand encouraging


# The yield on Greece’s 10-year bond dropped further below the 4-percent mark to 3.77 percent, fuelling speculation that Greece is readying another issue. Quoting an unnamed government official, The Wall Street Journal reported that a 10-year bond issue is now expected in the next month _ reviving plans for a major market test that had been stalled by Italy-related turmoil. The move by the Public Debt Management Agency would follow a successful auction of 5-year bonds in late January, in the first test since the end of the bailout.

# Greece’s bailout creditors are pressing the government to provide details of plans for a replacement framework for household insolvency regulations, including eligibility criteria to receive protection and how the new rules will identify so-called strategic defaulters. Specifics of the new framework must be hammered out by the end of the month when the current rules expire.

# A minimum wage hike introduced on February 1 is not likely to hurt the country’s competitiveness, according to a new report from the Parliamentary Budget Office. The 11 percent hike “will have a greater impact on the sectors dealing with domestic demand and significantly less on export sectors, so no significant negative effect on employment and competitiveness is expected,” the quarterly report said. On the other hand, the report highlights the risk of missing these targets due to some upcoming court decisions about wages and pensions cuts. It also suggests that Greece should implement the reforms agreed with its creditors, sending a signal that the country sticks to responsible policies after its adjustment programmes.

# It is not the first time that the Deputy Health Minister has been accused for interfering in the operation of independent authorities. This time, it was the Bank of Greece. Pavlos Polakis telephoned the Bank’s governor Yannis Stournaras to question him about an audit into a EUR 100,000 commercial loan he had taken from a non-systemic bank and also pushed him to proceed in other audits, too. A transcript of their conversation appeared in a newspaper. The leak prompted a judicial investigation. In a statement, Stournaras called the action an “unprecedented attempt by a member of the executive to interfere, in an unheard-of manner, with the performance of my duties.” Polakis claimed he had not taped the conversation (which would have been illegal) and that he had relied on his… excellent memory. “We reiterate our utmost respect to the independency of all central banks,” told Commission’s chief spokesperson Margaritis Schinas.

# Piraeus Bank CEO Christos Megalou says international investor interest in Greece’s NPL market will help lenders meet their target of reducing the non-performing loan stock by EUR 50 billion by 2021. The reduction target for Piraeus Bank in EUR 15 billion. “All the international funds that are present in the NPL business in Europe, namely in Spain, Italy, and to a lesser extent Portugal, have been looking for investment in Greece,” Megalou told CNBC in an interview. “We had situations where funds were competing _ and in the process of competition they had to … pay significant amounts of money in due diligence to be able to bid for these assets _ and we are very happy as a principal selling those loans with the level of competition and the level of activity that we see in the NPL market.”
He added: “I would say, I would dare say, that one of the most interesting asset classes in Greece these days is the non-performing loans in this country.”



On our Radar: Let’s Talk
Greece and North Macedonia have agreed to slash roaming charges for mobile phone users traveling to one another’s country, in the latest friendship gesture after the name-change deal was finalised last week. Nikos Pappas, the Greek digital policy minister, announced the agreement that will take effect before the summer while on a visit to Skopje. Pappas, who met with PM Zoran Zaev, said the deal was the first of many cooperation agreements that wound “herald a new era of friendship.”