Sep 30th, 2015, Greece needs to run in order to meet its deadlines

·         Tsipras continues his trip in US. He met with representatives of the powerful Greek American community yesterday night. He admitted that US administration was supportive during Greece’s negotiation with its European partners.

·         European Commission’s Vice President Dombrovskis issued a clear warning to Greece’s government that the first review of 3^rd MoU must by completed by November 15, 2015.

·         It appears that Greece’s economic contraction due to capital controls will be less than it was initially expected. Press linkages indicate that in 2016 budget’s bill which will be submitted by local Ministry of Finance in coming days, will include a contraction of -1.5% vs. 2.3% which was initially expected.

·         New measures which indicate relaxation of capital controls announced by local Ministry of Finance. According to the new legislative act, those funds which are generated from liquidation of foreign domiciled mutual funds and are deposited to local banking accounts, are exempted from the daily limit of 60 euros; hence depositors could withdraw 10% of those deposits.  

·         According to European Commission, Greece lost 37 bios of revenues related to VAT during 2009-13. Tax evasion remains at significantly high levels; local ministry of finance fails to collect the 35% of revenues related to VAT.

·         In an effort to attract Foreign Direct Investments, Greece’s Confederation of Enterprises (SEV) started discussion with business counterparts of other major economies. More specifically, the president of SEV Fessas was met with the administration of MEDEF in Paris.

·         Turkey’s Financebank announced that its parent company National Bank of Greece (NBG) is considering various ways to meet additional capital requirements. Press linkages indicate that NBG is planning to sell it 99% stake in Finansebank. The expected outcome of this transaction could surpass the level of 2 bios euros which means that NBG could meet its capital requirements after stress tests without asking for additional capital injection.

Risk assessment. It appears that the next three weeks will be the most difficult period for the new Tsipras’ government. This is because the 3^rd MoU is frontloading which means that about of 50% of bailout’s measures need to be implemented by mid-October, in order to complete recapitalisation of local banks within 2015. Last but not least, the program review needs to be completed by mid- November.  

Ahead of expectations for better than expected GDP and better than expected state revenues due to excessive use of bank cards (which increases tax collection through VAT), it appears that Greece’s government negotiates with its European partners some kind of relaxation of measures, which seems to be feasible.

However, Greece’s government needs to choose relaxation of taxes vs. relaxation of structural reforms on state’s expenditure i.e. pension system. At the moment, Greece has 3 million pensioners compared to 3.5 million employed citizens. It is absolutely necessary that pension system’s restructuring will proceed in order to increase employment, which will enhance pension system’s sustainability and support 

economic growth.