Greece’s Grating Poll Grab
Greek shares slipped after 2013’s MSCI best return with the latest EUR 5 billion rescue loan installment still held up by the Troika in the face of a May bond repayment for twice that amount, and ant-euro party Syriza ahead by three points in opinion readings prior to watershed European Parliament elections. The constitutional court’s ruling against state employee wage trims has underscored an estimated EUR 10 billion budget hole this year and next despite a primary surplus, which may be covered by program maturity extension and interest rate reductions according to German reports. The PMI inched above 50 in January, but bank lending continues to shrink to corporations and households, with the latter frozen by a mortgage repossession ban. The maneuvering around voting on a new president may dissolve the legislature before the May pan-European contest, and Syriza has adopted a self-reliance platform criticizing conditions imposed for external commercial and official borrowing. The existing government has suggested possible global bond market re-entry in the coming months following Ireland’s and Portugal’s examples. Lisbon completed a liability swap and then a fresh issue after receiving IMF praise for structural changes and the first current account surplus in two decades. Business confidence improved slightly but unemployment is stuck at 15 percent and big private sector bank BCP tallied another heavy loss in 2013. State counterpart BPN became the subject of art world controversy as it tried to unload a collection of Miro masterpieces to boost its coffers before opposition politicians blocked the sale. The 2014 budget gap will be 4 percent of GDP on retirement and health insurance cutbacks to offset the previous unconstitutional pension benefit cut for civil servants. EU bailout recipient Cyprus likewise proposed public sector adjustments to meet targets as debt climbed to 110 percent of GDP. NPLs are almost half of bank portfolios as almost EUR 1 billion in time deposits seized to fund recapitalization will soon be released as wider capital controls are removed over the coming months, according to the Finance Minister. Letters of credit from Bank of Cyprus are no longer honored abroad, hurting property construction outfits in particular calling for special facilities.
In a positive sign peace talks may resume in the near term with Ankara on the 30th anniversary of the island divide, as European banks like BBVA and Unicredit have begun to rethink Turkish exposure in the context of the ongoing ECB asset quality review. One-quarter of earnings have come from emerging markets to counter Eurozone foundering and the BIS’s latest total of outstanding lines was $3.5 trillion. Despite the December doubling of the current account deficit to $8 billion from the preceding month, a $1.5 billion 30-year international bond was well subscribed at a yield over 6.5 percent. Investor traction was maintained after a sovereign outlook ratings downgrade as the lira tried to reattach around 2.2 to the dollar.
