7th October 2015, Greece’s risk profile has been improved but crisis it ain't over yet

 

·         IMF issued a warning that despite the fact that Greece’s leftish government signed off the 3^rd MoU, the risks related to Greek question remain. In addition, it remains in its initial estimates which were showing a GDP contraction of -2.3% in 2015, due to a significant contraction of -5.4% which will occur during Oct-Dec 2015.  

·         Greece’s government submitted in local Commons the budget 2016 bill. It includes increases of taxes and pension cuts which are totalling 4.3 bios euros. The total amount concerning tax increases reach the level of 2.5 bios euros but could be higher considering that the farmers’ bill has not been published yet. 

·         Ministry of Finance’s Alexiadis stated that effective 2016, Greek citizens will stop visiting Tax Offices which has been the standard practice up to now, and represented a source of corruption. This means that all customer requests will be processed either through web or through KEPs (Citizens Service Centers) which are currently servicing a significant part of citizens’ requests.  

·         Ministry of Finance Mardas announced that the local government will implement an existing plan and create a Summer Davos in a Greek island. It will be an Aegean island which will be transformed to a global conference centre and where countries from all over the world, will be invited to ‘adopt’ a building.  

·         It appears that there are three potential buyers of National Bank of Greece’s stake at the Turkish Finansbank. More specifically, the Turkish bank Fibabanka (in cooperation with Societe Generale), Garanti Bank and Qatar National Bank. 

·         The local Council of State decided against the previous government of SYRIZA's decision to partially close down the goldmines of ‘Hellas Gold; hence operations of Hellas Gold restarted. As a reminder, the SYSIZA’s government decided to close down a part of goldmine operations just before September’s parliamentary election, which led the company Hellas Gold’s decision to close down all operations. 

 

·         There was another incident of attack to IRS officers. It occurred in a local religious feast in Northern Greece, where IRS officers found a merchant having an undeclared cashier, which was producing fake receipts for customer transactions. This was the fourth incident of attack to Tax Officers within the last four months.  

 

·         Cyprus is planning to launch a 10 year bond in the coming weeks amid improvement of local economic conditions. Nicosia is planning to raise up to 1.5 bios euros by end of 2015. The announcement came just after the positive evaluation of Cypriot program by its creditors which led to the release of 0.5 bios euros disbursement.   

 

 

Risk Assessment. The Greek crisis aint’t over yet. Leftish Tsipras’ government chose to continue its previous alliance with the extreme right political party of ‘Independent Greeks’ amid deteriorating economic conditions and significant political and economic challenges ahead. I remain on my previous views that a) GDP contraction will be less than was initially expected and b) that the current coalition won’t last long.

Greece’s leftish government will need to handle within the following 5 weeks, three major challenges such as 1) evaluation of current program, 2) recapitalisation of Greek Banks and 3) debt restructuring.  This requires broad political consent which doesn't exist, despite Tsipras' recent mandate. Actually Tsipras has already made some kind of steps to bridge the gap (who has created), between SYRIZA and the other centre, centre-left parties PASOK, Potami and Centrist Union.

The Greek leftish government’s first full-year budget is going to be ratified tonight. It is highly likely that tonight’s vote will be evolved without any losses from the current parliamentary majority. However, implementation risks of austerity measures remain. This is due to the following reasons:

·         Budget 2016 includes a significant number of austerity measures, which are in contrast to the populistic rhetoric that brought Tsipras to power.

·         The new set of austerity measures impacts significant vested interests such as farmers and islanders. It is the first time that farmers loose significant privileges, which allowed them to enjoy an almost tax free status. In addition, the new measures impact significantly all pensioners which earn above 1000 euros on a monthly basis. These pensioners come from powerful state sector and other significant social groups such as engineers, lawyers and doctors.

·         At the same time, there is no relaxation of taxes to the regular, loyalist taxpayers. This creates an explosive mixture which could impact a) the implementation of budget 2016 and b) the current coalition SYRIZA – Independent Greeks.