Oct 1st, 2015, Tsipras does capital markets

·      Greek Prime’s visit in US continues; he met the Secretary of State John Kerry. In an unprecedented u-turn, Greece’s leftish Prime Minister Tsipras, chose Wall Street Journal to state that a satisfactory debt restructuring deal could help Greece to return to bond markets soon. 

·       Greece remained in the same position as previous year (81^st among 140 countries) in the Global Competiveness Chart, which is published by the World Economic Forum. It maintains lower ranking than Ruanda (58^η), Botswana (71^η) και Tadzhikistan (80^η). On the other hand, France (22^nd), Portugal (38^th), Spain (33^rd) and Italy (43^rd) further advanced on competiveness ladder.  However, it was mentioned in the report that data regarding Greece were collected before the agreement of 13^th July.

·       The Alternate Finance Minister Alexiadis confirmed that as of next year, only the taxpayers who use bankcards for transactions who represent at least 10% of their annual income, will benefit from the income tax free threshold. This measure will also include medical bills.

·      The number of new business starts reduced during the period Jan-Sep 2015, compared to the same period in 2014 (21,761 vs. 28,334 last year). This figure was even worse in July’15 when new business starts dropped by 47.7% (compared to July'14), due to political uncertainty.

·       Hellenic Financial Stability Fund’s Michelis expressed his confidence that Greek Banks’ bail-in will be avoided and his hope that recapitalisation process will proceed fast and smoothly.  

·         New Democracy’s Meimarakis is set to announce his candidacy for the party leadership. He has received the support of two major party's barons Karamanlis and Bakoyanni. On the other hand, Tzitzikostas who is the elected head of Central Macedonia prefecture seems that gathers support from some younger generation's party executives, who also maintain connections with the former King of Greece, Constantine.

·         Russia has begun carrying out air strikes in Syria against opponents of President Bashar al-Assad. The strikes reportedly hit rebel-controlled areas of Homs and Hama provinces, causing casualties. The US says it was informed an hour before they took place.

Risk assessment. I remain on the view that Greek Banks’ capitalisation will evolve smoothly. This is due to three factors:  

1.      the impact on GDP due to capital controls has not been significant

2.      Tsipras maintains a recent, strong mandate; anti memorandum, Eurosceptic forces suffered a humiliated loss; he will be supported by other pro Europe political parties in certain cases concerning structural reforms.   

3.      the recapitalisation process appears to be the critical path for the completion of current review of Greece 3^rd MoU, which will lead to debt restructuring

As it was mentioned in previous commentaries, it will be very critical that the forthcoming recapitalisation process won’t impact significantly the existing private shareholders, who participated in previous recapitalisations. Considering that Banks could separate regular NPLs from strategic defaulters, this could be achieved either a) through the creation of a Bad Bank or b) or through selling corporate NPLs and NPLs concerning ‘strategic defaulters' to special funds, which will manage funds collection, restructuring and/or turnaround of companies.

Tsipras’ statement regarding Greece’s return to capital markets, doesn’t only represent a significant political U-turn and adjustment of his previous leftish, populistic rhetoric to reality, but also represents a critical step towards Greece’s return to European normality. This is because the return to capital markets will increase government’s flexibility to implement policies (within MoU context) but also a) will reduce country’s risk profile and b) will increase confidence among international investors.

The on-going attacks of Russian aircrafts against Assad’s opponents (including ISIS), increase geopolitical instability in Turkey-Middle East region. The situation becomes complicated as a) attacks occur close to Syrian-Turkish borders, b) Turkey also supports Assad’s opponents and c) there is an ongoing war between Turkey and Kurdish PKK.

Greece's geopolitical role has increased significantly because it represents the only country which is member of NATO and Eurozone in the region and this gradually promotes Greece as a regional safe haven.

Considering the ongoing refugees’ influx to Greece, the ongoing negotiations with international creditors, the open disputed matters with Turkey and the need to attract Foreign Direct Investments, the Greek administration has only one strategy to pursue which is a) it will represent West’s interests in the region and b) it will always remain part of the solution.