Weekly bulletin – June 1, 2020

Moves to jump-start the tourist season gather pace, as Athens welcomes proposals for an EU Recovery Fund

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If approved, the EU’s €750-billion recovery package would mean €22.5 billion in grants and €9.4 billion in loans for Greece, while the creation of a ‘Bad Bank’ is proposed by the Bank of Greece to assist the sector in reducing NPE’s from their balance sheets. Tourism is set to re-open to international travellers on June 15 on the back of a white list comprising 29 countries that are considered relatively safe. Meanwhile, Greek start-ups gain traction.

EU Recovery Fund

The European Commission published its proposal for a €750-billion stimulus package in an initiative dubbed “Next Generation EU”, to be attached to the bloc’s 2021-2027 multi-year budget, bringing the EU’s total pandemic response to €2.4 trillion. The package consists of €500 billion in grants and €250 billion in loans, from which Greece can expect to draw €22.5 billion in grants and €9.4 billion in loans, giving it the fifth largest allocation in the scheme.

While the proposal was welcomed by Athens, it will still need to get approval from the Member-States.

Moody’s

Ratings agency Moody’s has revised its forecast for Greece, and is now expecting the economy to shrink by -9.5% compared to its earlier prediction of -5%. However, it expects a rebound as strong as 7% next year, and sees this year’s economic setback as transitory, with the country’s credit profile on the mend and no issues on the horizon for financing.

Bank of Greece

Speaking before a parliamentary committee, the head of the Bank of Greece (BoG) Yiannis Stournaras said he was in favour of radical solutions, including the creation of a “bad bank” to help banks reduce their non-performing exposures (NPEs), rather than rely on the Hercules securitisation scheme in the current challenging circumstances. Stournaras also recommended the government make use of the cheap credit offered by the European Stability Mechanism’s (ESM) pandemic borrowing facility to cushion the economic effects of the crisis. The BoG’s forecast for 2020 foresees a -6% recession as the base scenario, within a range of -4.5% and -9.5%.

Banks

An analysis issued by the Economic Chamber of Greece (OEE) expects new bad loans on Greek banks’ books as a result of the pandemic crisis to range between €10-17 billion, based on scenarios for a recession ranging between 5% and 10%. The study expects that out of the €7.5 billion of loans to the hospitality and catering sectors, 40% to 50% will cease to be serviced.

Alpha Bank is proceeding with plans to market its €10.6 billion Galaxy loan securitisation package. The bank aims to incorporate the package into the state-backed Hercules guarantee scheme by the end of the year, with the aim of closing a deal in early 2021. DBRS has been appointed to rate the package, and initial meetings have been held with several major banks that are seen as potential bidders.

Greece’s systemic banks have no immediate liquidity concerns, and according to Axia Research they have decided to postpone their planned issuance of Tier II bonds until 2021.

Tourism

The government has released a “white list” of 29 countries selected based on epidemiological criteria, from which it will receive visitors with no routine testing or quarantine requirement when international flights recommence on June 15. Travellers from European countries including Albania, Austria, Denmark, Finland, Germany, Malta, Norway, Romania and Serbia will be welcomed, as will visitors from destinations such as Australia, China, Japan, Lebanon, New Zealand, and South Korea. Arriving passengers will be subject to spot checks at the airport.

While flights from the U.S., UK, Italy, Spain and France are currently banned due to the high rate of COVID-19 infections in these countries, the government has said it plans to review its white list as of July 1.

Thessaloniki’s “Macedonia” Airport will be reopening to international flights a fortnight earlier than planned, to coincide with Athens International Airport on June 15, and the likeliest date for reopening Greece’s land borders.

Digital

Greek startups have notched up some notable successes during the lockdown, with the acquisitions of Think Silicon by Applied Materials and Softomotive by Microsoft, as well as a €3-million investment in shipping technology startup DeepSea Technologies by green-tech fund ETF Partners. At a meeting hosted by Prime Minister Kyriakos Mitsotakis last week, members of the startup community were invited to discuss initiatives to promote the sector, while Microsoft Corporate VP Charles Lamanna said his company is looking at basing its Robotic Process Automation centre in Greece.

A report by SEV, the Hellenic Federation of Enterprises, shows that e-commerce boomed in Greece during the lockdown, bringing it more in line with the rest of Europe. While Greece has lagged behind the EU average in embracing e-commerce, digital consumers more than doubled during April. Online weekly consumer expenditure increased by 170% compared to the same period last year, while e-commerce stores reported a six fold growth in income during March and April.

SEV – Hellenic Federation of Enterprises reports that moving a business online can generate 20% more sales than competitors who have not made the move to go digital. Copyright: Rido / Shutterstock.com

AEGEAN Airlines

AEGEAN has announced that it will be seeking to borrow a total €150 million from the four systemic banks backed by the COVID-19 Guarantee Fund to augment its share of the €115 state rescue package for the Greek aviation sector. The loans represent 11% of the carrier’s turnover. Aegean, which also holds over €500 million in cash reserves, intends to rely on its own resources to see it through the pandemic crisis rather than seek further state support.

Real estate

Sotheby’s recorded a 53% rise in interest for luxury properties in Greece during March. The company attributes the spike in interest in large part to the country’s successful record in tackling the pandemic, coupled with the availability of high-end properties offering privacy and seclusion, as 50% of the broker’s HNW clients say they now prioritise the search for a refuge property.

Stock market

The ASE general index closed May at 652.58 points, with monthly gains of +3.87%, regaining some of the ground lost due to the pandemic crisis. The index has lost -28.81% since the start of the year.

Bank stocks rallied in the early part of the week but predictably receded in Friday’s trading as a result of selling activity linked to the rebalancing of the MSCI index. Overall this week the general index rose +7.12%, while the banking sub-index gained +21.62%.

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