Weekly bulletin – June 15, 2020

On the eve of reopening to tourism, the markets gave Greece a vote of confidence snapping up the latest 10-year bond issue at a record low yield.

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Monday marks the re-launch of international flights to Greece with Prime Minister Mitsotakis vowing to make the country the safest destination in Europe. Increased international interest was reflected after Greece tapped the markets for the third time in 2020, raising €3 billion, while the OECD predicts that the Greek economy will fare better this year, on average, than its EU peers. Privatisation tenders for a number of Greek ports enter their final phase, while activity in the energy sector picks up.

Greek Government Bonds (GGBs)

Greece raised €3 billion with a new 10-year bond issued on June 9, marking its third market foray of 2020. The offer book closed at €15.75 billion indicating a strong return of investor appetite, and the yield settled at 1.57%, a record low for €-denominated GGBs. Accounts from Greece covered 15% of the allocation, with the UK accounting for 27.5% and continental Europe 57%. Institutional investors snapped up 85% of the issue.

The Public Debt Management Agency raised a further €1.3 billion from a 52-week T-bill issue, which was also oversubscribed, with a yield of 0.25%, compared to 0.24% for the previous issue in March.

Macro

The OECD’s 2020 outlook predicts that the Greek recession this year will be lower than the EU average, reaching -8% GDP in 2020 and rebounding by 4.5% in 2021 in its “single hit” scenario, compared to the EU average of a -9.1% contraction followed by a 6.5% resurgence. A second wave of the pandemic, however, could result in a -9.8% contraction for the Greek economy, and see the debt-to-GDP ratio exceed 200%.

Tourism

Prime Minister Kyriakos Mitsotakis declared Greece open for tourism on a visit to Santorini on Saturday. “We’re ready to extend Greece’s legendary hospitality and welcome the world again,” Mitsotakis said during a press conference for foreign media, against the backdrop of the island’s famous sunset. “I’m not interested in making Greece the number one destination in Europe, I’m interested in making Greece the safest destination in Europe,” Mitsotakis underlined. With international flights resuming on Monday, June 15, the Prime Minister said that there is already significant demand for holidays in Greece from traditionally strong markets such as Germany.

Earlier in the week, the Health and Tourism Ministries unveiled the national strategy for tackling potential cases of COVID-19 at Greek resort destinations during the tourist season. With the aim of safeguarding visitors’ health, plans include the creation of ICU units on the islands, and tie-ins between resort areas and major hospitals on the mainland, as well as protocols for patient transport. Mobile testing units have also been deployed to key areas, and community testing will be ongoing throughout the summer.

During a video conference between the EU’s foreign ministers on June 11 it was agreed that restrictions should be lifted to and from countries that show a low number of cases of the COVID-19 virus in a coordinated fashion, and that specific measures should be taken to control and prevent the spread of the virus in tourism destinations. Greek Foreign Minister Nikos Dendias welcomed the constructive approach taken, which will allow the country to jump-start tourism under strict hygiene measures.

Turnover in accommodation and food services fell by 6.5% YoY in the first quarter of 2020, as is reflected by the Hellenic Statistical Authority’s Turnover Index in the Accommodation and Food Service Activities Sector. The decline was led by accommodation, which fell by 22.1%, reflecting hotel closures in March as part of the pandemic emergency measures.

Ports

The tender process for a number of key regional ports including Alexandroupoli, Kavala, Patras and Igoumenitsa is its final stretch. Privatisation fund HRADF is said to be finalising the details of the package for each port, as interest from international buyers intensifies, according to Shipping Minister Yiannis Plakiotakis. Alexandroupoli and Kavala both offer untapped potential as transport and energy hubs, while Patras and Igoumenitsa combine established sea routes to Italy with upgraded road networks into southeast Europe.

Shipping Minister Yiannis Plakiotakis has presented a draft shipping bill which aims to further strengthen Greece’s maritime economy and boost development on the islands, which make up 18.7% of the country’s land mass and are home to 15.1% of its population.

Energy

The contracts were signed on June 10 between Ariadne Interconnection – a subsidiary of power transmission network operator IPTO – and the contracting companies that will build the Crete-Attica interconnector to link up Crete to the mainland power grid. Among other benefits, the €1-billion connection will enable the further development of renewable power generation in Crete and shave €400 million euros annually off consumers’ electricity bills.

IPTO and Ariadne Interconnection organised and online press conference from Crete with Greece’s Minister of Environment and Energy and contractors from five countries. Copyright: IPTO

Greece’s first energy exchange is preparing to go live on September 17, the date that will also see the inauguration of the EU Target Model bringing more transparency and competition to the Greek electricity market. The revised date was agreed at a meeting between the Energy Ministry and representatives of the energy exchange, network operators and the power sector, after the original launch was delayed by the pandemic.

Power company PPC has signed an MoU on electric transport with airport manager Fraport Greece, supermarket group AB Vassilopoulos, and ride-hailing app Beat, with a view to providing value-added services through a vehicle charging network. PPC plans to install 1,000 vehicle charging points over the next 2-3 years, upping the number to 10,000 in the medium term.

Gas network operator DESFA has unveiled a 10-year plan to extend its network into western Greece. The operator is seeing growing demand for natural gas from industry in the Patras region, but also from western Macedonia where it is seen as a replacement fuel for power and heating, as the region prepares for the phase out of lignite-based power production.

Water

Water utility EYDAP plans to invest €1 billion over the coming decade in improving and extending its network. The investments will connect an additional 400,000 consumers to the network and add 1,400 km of pipes to the sewage system.

Stock market

Sellers dominated last week’s trading, with the ASE general index closing down -5.37% at 646.80 points as volatility from global markets affected domestic activity.

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