12th October 2015, Greek leftist government’s first austerity bill will be submitted today

·         ECB’s Draghi stated that there should be debt relief after the completion of current evaluation. During his interview to Kathimerini of Sunday, he mentioned that the discussion regarding debt restructuring will occur only after the completion of current review. Draghi represents the third head of Greece’s troika of creditors, who reconfirmed that Greece’s debt structuring is on the table and discussion will start just after the completion of current review.In addition, he emphasized the need that Greece will implement all structural changes which are included in 3^rd MoU, in order that local economy will return to growth trajectory.

·         IMF’s Lagarde reconfirmed from Lima - Peru that IMF won’t participate in Greece’s program as long as there is no agreement as regards debt restructuring. She emphasized the need that Greece will implement structural reforms mainly in pension system and banks.

·         Athens International Airport’s CEO, Paraschis was voted as CAPA Airport Chief Executive of the Year 2015. The International Committee of Centre of Aviation valued highly AIA’s innovation, high standard of service vis-a-vis the reduction of operating cost, reduction of carbon footprint, development of the biggest photovoltaic park in an airport, and dynamic marketing strategy.

·          According to press linkages, the EU is planning to merge all Greek Banks’ subsidiaries in Balkan states by end of 2015. This means that in case there are four Greek banks operating in one Balkan state, they will all merge into one Greek bank. At the moment there are about 2,700 branches of Greek Banks in Balkan states with approx. 35,000 employees. As a second step, each subsidiary will be sold within 2016.

·         Greek exports were reduced by -8.9% in August. It is the third consecutive month of exports’ drop. However, Greece’s trade balance deficit also dropped by -8.8% compared to Aug’14. In general, trade balance deficit dropped by -18.5% during the period Jan-Aug (compared to the same period in 2014). This is mainly due to a higher reduction of imports (-9.9%) vs. the reduction of exports (-3.3%).

·         The reduction of value of exports reflects mainly to the drop of price of fuels. On the other hand exports without fuels increased by +6.8% in August (compared to Aug’14). In terms of foreign markets, exports decreased by -22.4% to countries outside EU, and exports to EU region increased by +8.1%.

·         It appears that Greece Ministry of Finance will roll out a massive plan to minimize cash transactions and maximize bank cards’ usage throughout Greek economy. In addition, the use of bankcards will be the sole mean of transactions for a series of professions which were champions of tax evasion such as doctors, lawyers, plumbers, electricians, builders etc.  

Risk assessment. I remain on my previous view that the current coalition SYRIZA – Independent Greeks won’t last long. Despite the fact that Tsipras enjoys a refreshed mandate, the list of structural reforms which are included in the requirements to complete current review, impact vested interests and require broad political support which goes beyond current coalition. Regardless Tsipras verbal determination, it is still doubtful that the current coalition will finally ratify and/or implement those structural reforms. Considering the verbal objection of all other pro Europe political parties to support this austerity bill, we may see coalition’s first losses during next Saturday’s vote.

SYRIZA’s government will submit its first bill with austerity measures today. It appears that there is one MP ‘Independent Greeks’ (SYRIZA’s ally), who has sent ambiguous messages regarding his final stance during the vote of austerity bill. In addition, there is another MP who resigned from Central Committee of SYRIZA, as an act of protest as regards the way that lists of Party’s candidates were formed before elections. If both MPs either abstain or vote against the forthcoming bills, then the austerity bill will be ratified by 153 MPs (out 300).

It appears, that Greece’s government in an effort to meet budget targets, has chosen mainly to raise taxes instead of cutting expenses. In addition, taxation will be increased across all citizens, regardless if they could tax evade or not. It becomes evident that this will result to the increase of citizens’ arrears and social dissatisfaction.

Last but not least, Ministry of Finance’s Alexiadis announced a series of measures, which will reduce cash transactions and increase the bank cards' usage. Greece traditionally is a cash society which means that this is a structural reform of immense importance, which also includes cultural elements; and this makes it even harder to implement.

10th October, 2015, Geopolitics gradually gain ground in Greece’s daily agenda vs. economy

·         Geopolitical tensions escalate in Middle East – Turkey region. Two explosions at a peace rally in the Turkish capital Ankara have killed at least 97 people and injured 186, according to officials. The blasts took place near the city's central train station as people gathered for a march organized by leftist groups. The attack is the deadliest of its kind in modern Turkish history and it threatens the local general elections of November 1st.

·         Greece’s Prime Minister Tsipras accompanied by Defence Minister Kammenos attended the final phase of military exercise ‘Parmenion’. He stated that Greece is not at war, however is in the middle of a destabilisation triangle referring to Ukraine, Libya and Syria.

·         ECB’s Draghi stated in an interview in Kathimerini of Sunday that he has raised concerns regarding Greece’s debt sustainability and there should be elements of lighting the debt burden. He emphasized the need that the Greek Government will implement structural reforms in order to return to growth trajectory.

·         Eurogroups’s Dijsselbloem stated that Greece’s debt restructuring is feasible if Greece honours its commitments. In addition, he stated that there is ground for an agreement according to which annual cost of servicing debt won’t surpass the level of 15% of GDP.

·         New Democracy’s four leadership challengers, Meimarakis, Mitsotakis, Georgiadis and Gigikostas started their campaign. The centre right party’s elections will take place on 22^nd November.

·         Licences of new cars increased by +7.1% in September, compared to September 2014. During Jan-Sep period, licences of new cars increased by +8.1% compared to the same period of 2014.

·         Industrial output increased by +4.5% in August compared to the same month last year. This increase occurred after three consecutive months of falling industrial production. At the same time, manufacturing production increased by +4.2%, electricity production by +9% while mining output decreased by -6.1%.

·         According to Greece’s Ministry of Agriculture, exports of agricultural products increased by +15.7% during the Jan-Jul period (annualised) vs. a decrease of -9.5% during the same period in 2014. Overall the contribution of agricultural products to total country’s exports increased to 30.6% from 28.8% in 2014.

·         It appears that a Chinese bank is included among the four banks which are interested in Finansbank (Turkish subsidiary of National Bank of Greece). As a reminder, NBG’s leadership has confirmed that is planning to sell 40% of Finansbank’s stake. However, the final decision will be based on NBG’s total capital needs which will be announced after the completion of stress tests.

 

·         According to the Bank of Greece prices of offices have dropped up by -30.4% while prices of shops by -28.3% during Greece’s debt crisis. At the same time, rental prices for offices dropped by -29.3% while shops’ ones dropped by -33.9%.  

·         The former Governor of Bank of Greece Provopoulos, took over the position of the Chairman of the Bulgarian Postbank, which is a subsidiary of Greece’s Eurobank.

·         Albania’s GDP increase by 2.5% during the 2^nd quarter of 2015. Growth in local construction industry (+24.5%), manufacturing (+6.3%) mainly contributed to this increase. According to IMF, Albania’s GDP will increase by 2.7% in 2015 and by 3.4% in 2016.  
 

Risk assessment. It appears that geopolitics gradually gain ground in Greece’s daily agenda. The appearance of Tsipras wearing a military jacket in a military exercise is completely new to local public opinion. This is because local leftish political parties traditionally have been pursuing an anti-military, anti-war agenda. However, geopolitical tensions in Syria have started impacting Turkey.

Although Greece’s geopolitical role has been significantly increased during the last couple of months, due to Syrian crisis, a potential destabilisation of Turkey due to geopolitical crisis' contagion from Syrian crisis represents a major threat for Greece’s security.

Needless to say that Greece’s eastern borders, at the same time represent EU’s south east borders and a significant component of EU's energy corridor to Middle East energy resources.

The fact that at the moment all major EU’s important posts related to foreign, security, defence, management of crisis and military are held by Italians, Greek and Cypriot citizens, show the importance of EU's south eastern group of countries to overall EU's security. More specifically:

Federica Mogherini is an Italian politician and is serving as High Representative of the European Union for Foreign Affairs and Security Policy.

Dimitris Avramopoulos is a Greek politician and is serving as EU Commissioner for Migration, Home Affairs and Citizenship.

Christos Stylianides is a Cypriot politician and is serving as EU Commissioner for Humanitarian Aid and Crisis Management.

General Michail Kostarakos is a Greek Army officer who served as the Chief of the Hellenic National Defense General Staff in 2011–2015. He is the appointed Chairman of the European Union Military Committee, taking office from 6 November 2015.

Last but not least, although the ongoing geopolitical crisis represents a source of risk as regards Greece’s security, it could be proved as a historic opportunity to emerge as a regional safe haven and business, political and cultural hub for the region of Middle East, Turkey and Northern Africa.

As a reminder, Greece represents the only country in the region which is member of both Eurozone and NATO.

 

8th Oct 2015, Greek stock prices might be heavily undervalued

·         as it was expected Greece’s government won last night's vote of confidence; 155 MPs voted ‘Yes’ and 144 voted ‘No’ (there was an absent MP, who stated that he would vote .

·         France's Hollande stated during his speech at European Parliament that Europe will agree on debt restructuring with Greece, if the latter meets its obligations. It is important to mention that this statement occurred just before the vote of confidence at Greece's Commons and while having Chancellor Merkel sitting next to him. 

·         Ministry of Economy’s Stathakis stated that GDP contraction could be less than -1.5% due to spectacular performance of tourism and less than expected impact of capital controls to local economy. He added that approx. 4.5 bios euros of EU funds will be released by end of 2015.

·         Ministry of Finance’s Alexiadis stated that a new real estate tax will be introduced especially to those Greek citizen who own real estate abroad. He mentioned that Greece will replicate Italy’s similar tax. He added that effective 2016, all real estate transactions will be processed automatically through the so-called system TAXIS. 

·         Ministry of Pensions’ Katrougalos stated that SYRIZA’s government will try to protect all pensions below 1000 euros. At the moment there about 900,000 pensioners who earn more than 1000 euros on a monthly basis. Press linkages show that pensions above 1,000 euros will be reduced between -11% up to -13% (in weighted average terms)

·         Greece’s 10 yr. bonds' yield dropped below 8% (at 7.774%) for the first time since November 2014. This was fluctuating close to 20% in 10^th of July 2015. On the other hand, yield of German Bund was fluctuating around 0.6% while Italian at 1.69%, Spanish at 1.83% and Portuguese at 2.35%.

·         Greece’s 2 yr. bonds' yield dropped below 9% (at 8.932%) which represents one year low. As a reminder, the 2 yr.  bonds yield reached the level of 58% in 10^th of July 2015.

·         Local Bourse’s index and trading volume increased during the last few days. More specifically, total gains during last week crossed the level of 6% while banks’ index increased by 28.8% during the last four sessions.  In addition, trading volume increased to over 60 mios on Wednesday from just over 40 mios euros on Tuesday

·         There has been an escalation of geopolitical crisis in Syria. More specifically, Russia said it has launched rocket strikes on Islamic State group targets in Syria from warships in Caspian Sea – about 1,500 km (930 miles) away.

Risk assessment. I remain on my previous estimates that the current SYRIZA – Independent Greeks coalition won’t last long. In addition, Greece's GDP contraction will be less than it was initially expected after the implementation of capital controls.

This, among other things, means that Greek stocks' evaluations remain relatively cheap. Since my previous commentary in which I was stating that Greek Banks’ stocks might be cheap, prices increased by almost 30%. The positive thing is that trading volume is gradually catching up as well but still remain low compared to pre-crisis levels.

It appears that the SYRIZA-led government will proceed on implementation of austerity measures. Although the Greek government will have to implement pension cuts and structural reforms, with a marginal majority of 5 MPs, the country’s risk profile has been improved significantly since July because of a) Tsipras’ fresh mandate and b) the vast majority of opposition remains pro-Europe. This is evident mainly on yields of Greek bonds.

Tsipras' determination to complete the evaluation of current program within the agreed timeframe, has nothing to do with the urgency for disbursement of 2 bios euros. This is mainly due to the fact that completion of evaluation will send the positive message to markets, could attract investments. The resulting improvement as regards overall economic environment, will allow him to proceed on Greek Banks’ recapitalisation. And if everything goes well, he could close the deal as regards the Greek debt's restructuring.

You may ask, ‘how can a leftish politician be so sensitive about markets and banks?’ Although Tsipras is very keen to use populistic language to attack markets and banks, it seems that he understands that a failure on recapitalisation front could result to Banks’ bail-in. A potential bail-in won’t only impact bondholders, and depositors but will cause derailment as regards local economy’s recovery and more importantly could cause social unrest.   

In addition, Tsipras has shown evidence in the past that is very cautious as regards developments in banking sector. More specifically, during the recapitalisation of Greek Banks in 2014, which occurred just after his victory in European Parliament, he kept low profile but started pushing for snap just after the completion of recapitalisation (October '14). 

Probabilities of having a positive scenario are high. In addition, what is beyond dispute is that many stocks in Greece are at this point incredibly cheap by almost any measure.

Although trading volume in local Bourse is tiny, it gradually increases. In addition, Banks’ stock prices have been increased by almost 30% since last week of September. Due to capital controls, all purchases of Greek stocks represent foreign funds. If Greece’s government keep its promises and meet its obligations, Athens Stock Exchange could act as the mean for foreign capital inflow to Greek economy.

Few things are as little understood as investing, and rarely are they as misunderstood as when they are most interesting and useful. For all reasons explained above, current prices of Greek stocks represent a typical example of heavily undervalued assets.

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.

5th Oct, 2015, Greece now needs to set the ball rolling

·         Greece’s government agreed with its creditors on the 48 actions which will free up the disbursement of 2 bios euros. It is very important to mention that the local government agreed on these actions during Friday’s Euroworking Group, and before presenting its policy program in front of local Common’s.

·         The new Greek Parliament elected as its new Speaker, the former Interior Minister Voutsis. Local Government will present its policy during the following three days. There will be a vote of confidence of new government, by this Wednesday. In addition, it will submit its budget 2016, by end of today. It appears that this will happen before the start of Eurogroup meeting, as part of an agreement between government and creditors.  

·         According to HRADF - Hellenic Republic Asset Development Fund’s Pitsiorlas, the privatisation of the 14 peripheral airports will be signed off between Greece and the consortium Fraport-Slentel, by end of 2015. This privatisation will include among others, the airports of Rhodes, Thessaloniki, Chania and Lesvos.  

·         HRADF’s Pitsiorlas also added that the project of privatisation of the Port of Piraeus is progressing well, and that it is feasible to have competitive bids by November 2015. However, according to port industry insiders the tender for the sale of 51% of Piraeus Port Authority (OLP) is at risk because of resistance within SYRIZA, local authorities and unions. 

·         British tourists’ arrivals increased by 29.3% and revenues increased by 37.2% during the period Jan-Jul 2015. During the same period, the arrivals of British tourists increased in Spain by 2.9%, in Cyprus by 16.35 while they were decreased by -0.9% in Turkey.         

·         According to Frankfurter Allgemeine Zeitung, European Union and Turkey have agreed on a roadmap as regards the refugees’ crisis. On the other hand, Financial Times mentioned that there is progress in negotiations but no agreement.  

Risk assessment. Greece gradually returns to European normality. The local government completed, in rather fast manner, all pending steps in order to a) form government b) elect new Common’s Speaker. This ended the 9 months of unprecedented, destructive, Eurosceptic, populistic service of the former Chairwomen, Constantopoulou. Needless to say that she didn’t only loose her position as Chairwoman but was not re-elected as MP as well. 

The change of the Speaker is considered as an important development as the Speaker of Commons maintains a significant position in local political system, with considerable agenda setting powers.  

It is important to mention that Greece and its creditors agreed last Friday, on the terms regarding the next disbursement of 2 bios euros.

However, Tsipras needs to set the ball rolling and start the ratification of austerity measures which are included in the 3^rd MoU.

While the new set of austerity measures will hit pensioners and other groups of Greek society which have not impacted significantly so far, such as farmers, islands and private education, the most important pending item appears to be Greek Banks’ recapitalisation. It is important to mention that this represents a very complicated task as it includes participation of private sector.

Although the yield of 10 yr Greek Bonds has been decreased significantly since the 10^th of July (down to 8.27% from close to 20%), the distance compared to other members of Eurozone remains long. At the moment, the confidence regarding Greek economy remains very low and prevents FDIs. The economy requires an investments’ shock which will increase local banks’ liquidity and attract foreign investors as regards the next phase of recapitalisation.

In general, the improvement of investments sentiment won’t happen easily. The government needs to focus on many operational objectives in parallel such as: a) the improvement of state financials due to increase of revenues and/or reduction of expenditure b) the successful implementation of planned privatisations c) the announcement of better than expected macroeconomic conditions i.e. GDP of 3^rd quarter d) the sell of corporate and 'strategic defaulters' NPLs to funds or the creation of a Bad Bank in order to decrease capital requirements.

It seems highly unlikely to see a miracle such as a significant Foreign Direct Investment in a Greek Bank, unless we see improvement in various fronts of local economy. However, remain on my previous view that capital needs of local banks will be less than expected due to a) less deterioration of economy from capital controls b) the sale of parts of NPLs to special funds         

Oct 2nd, 2015, Tsipras also needs to speak investments’ language when he returns home

·         Greece’s Prime Minister carries on his visit in US. He stressed out the need of debt restructuring during his speech at United Nations General Assembly. In another occasion, he invited the Greek Americans to invest in Greec

·         According to Greece's Gerontological Company, unless there is a change, 4 out of 10 Greek citizens living in Greece, will be over 60 years old by 2050. At the moment, 27% of Greeks are over 60 years old.

·         According to the Foundation of Economic and Industrial Research (IOBE), Greece’s economic climate index increased to 83.1 in September vs. 75.2 in August and 81.3 in July.

 ·       Although consumer confidence continues to decline reaching -64.2 which is the lowest level of last three years, business expectations improved vs. previous month. More specifically, PMI increase to 43.3 (from 39.1 in August). However, it remained below 50, which indicates economic contraction.

·         According to Eurostat, Greece’s unemployment increased to 25.2% in June vs. 25% in May, while unemployment in Eurozone and EU remained stable at 11% and 9.5% respectively. However, Greece's youth unemployment dropped to 48.3% in June from 51.4% in May. 

·         As it was mentioned in previous commentaries, Greek Banks’ recapitalisation appear to be the critical path for the next disbursement of European funds and the start of negotiations regarding debt restructuring. It seems that there is progress as regards the discussions regarding the sell of the Turkish Finansbank by its parent company National Bank of Greece. If that occur, then it is highly likely that National Bank of Greece won't need capital injection.

·       Press linkages indicate that Euro Working Group will decide the list of prior actions by today Friday October 2^nd. This list will be discussed during Eurogroup meeting next Monday. Jeroen Dijssebloem stated that although there are pending items, Greece is still on track.

·         Cyprus’s Laiki brought a claim to the International Centre for Settlement of Investment Disputes seeking damages of over 4 bios euros concerning its loss resulted from Greek state bonds haircut. However, chances that Laiki will win the case are extremely low considering that there is a previous case in past, of a Slovenian Bank which has lost.

·         Retail sales dropped by -7.3% in July vs. July’14); June’s retail sales also dropped but by -0.4%. As reminder, July was the first month after the implementation of capital controls.  

·         According to Greece Confederation of Enteprises (SEV), internal devaluation which has been occurring since 2009, didn’t increase competitiveness due to credit asphyxiation which prevented investments.

·         Meimarakis announced his candidacy for New Democracy (centre right) leadership.        

 

Risk assessment.

Greece’s ageing society is committing ‘demographic suicide’ and needs immigrants to keep its workforce from shrinking further. The local government has to proceed on necessary measures in order to integrate refugees within its social network. There are many social and political reasons which justify this strategic option. In addıtıon, Greece needs young workforce to support the sustainability of its economic growth and pension system. 

Economic data indicate that Greece continues to stay far behind the rest of Eurozone, in terms of competitiveness and economic growth. Despite its high calibre human capital, its natural resources and climate and its strategic geopolitical position, local political system prevents economy from growing.

After eleven month of political uncertainty and three elections, Tsipras has started showing elements of realism and determination to support economic growth, during his visit in US. However, it remains to see if his recent U-turn as regards the negotiations with creditors and his escalating pro investments, pro-markets, pro-economy rhetoric will continue when he will return to Greece. It is not unusual for Tsipras to use different rhetoric when he travels abroad compared to the one when he addresses local audiences. 

It’s a matter of days to see if Greece’s new government can achieve the ratification of a series of measures, which will liberalise markets and open professions, will cut pensions-related expenditure, achieve banks’ recapitalisation with minimum impact to existing shareholders. All above are prerequisites for Greece to start discussions as regards debt restructuring, which will enhance debt’s sustainability and attract international investments.

I expect no miracles… I just want to listen Tsipras to speak the investments’ language, even as bad as he speaks English

language

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.