{"id":1715,"date":"2015-07-24T13:00:00","date_gmt":"2015-07-24T13:00:00","guid":{"rendered":"http:\/\/starthostunlimiteddmffassi-ss.stackstaging.com\/bondworld.ch\/home\/sites\/20b\/7\/760c69a11c\/public_html\/investmentworld.ch\/index.php\/2015\/07\/24\/24-07-weekly-viewpoint-on-wednesday-22-the-second-green-light-was-given-by-the-greek-parliament-to-approve-t"},"modified":"2015-07-24T13:00:00","modified_gmt":"2015-07-24T13:00:00","slug":"24-07-weekly-viewpoint-on-wednesday-22-the-second-green-light-was-given-by-the-greek-parliament-to-approve-the-preliminary-reforms","status":"publish","type":"post","link":"https:\/\/www.investmentworld.eu\/ch\/24-07-weekly-viewpoint-on-wednesday-22-the-second-green-light-was-given-by-the-greek-parliament-to-approve-the-preliminary-reforms\/","title":{"rendered":"24.07 Weekly Viewpoint: On Wednesday 22 the second green light was given by the Greek Parliament to approve the \u201cpreliminary reforms\u201d"},"content":{"rendered":"

After the vote on 15 July, on Wednesday 22 the second green light was given by the Greek Parliament to approve the “preliminary reforms” ahead of the opening of negotiations on the third bailout programme. <\/span>….<\/p>\n

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Furthermore, on Wednesday, the ECB expanded ELA by a further 900 million euros, to 90.4 billion. Negotiations with international creditors on the new package are expected to end by mid-August. However, the process will not be free of obstacles.<\/p>\n

– In a new all-night session which lasted for over five hours, the Greek Parliament approved, with a wide majority (230 votes in favour, 63 against) the second draft law containing the remaining measures agreed on with international creditors and not approved at last week’s session. Tsipras again won the support of the opposition (the Neo Dimokratia left party, the Pasok socialists, and the To Potami liberals). The number of dissenting Syriza MPs has dropped to 36 from 38 last week, but stays high (out of 162 in total), and will keep the government under pressure on the path towards the third bailout programme. The main measures approved include changes to the Code of Civil Procedure, to encourage foreign investments, and embracement of the EU directive on the bank recapitalisation and crisis resolution. This second reform also provides for measures to “bail-in” creditors when a bank fails, starting in 2016 (but only on deposits larger than 100,000 euros, which account for around 40% of overall deposits), but the actual risk of deposit-holders being damaged by the measure is limited, as by then the bank recapitalisation process will probably already have been completed. For the time being, the two most controversial reforms have been put on hold (abolishment of early retirement and of tax shields for farmers), although their approval is necessary for the successful completion of negotiations (expected by mid-August).<\/p>\n

– In case of delays, the second tranche of the bridge loan, worth 5 billion, to be issued early next month, would in any case enable Athens to honour the 3.2 billion euro payment due on 20 August to the ECB, whereas the subsequent 1.5 billion debt repayment to the IMF is due in September. If negotiations are successfully completed, the first tranche of bailout funds will be issued, and should amount to 7.3 billion. Ideally, an agreement could be reached (probably at a later stage, in the spring of 2016, but only on condition of the government having proven trustworthy) on a new restructuring of debt, not by means of a “haircut” (explicitly ruled out by Germany), but resorting to a (further) significant lengthening of the grace period and of the amortisation plan. This step seems necessary to guarantee the IMF’s participation in the third bailout. In the meantime, the ECB (for the second time after the deal was struck), stepped up its ELA in support of Greek banks by 900 million euros, to 90.4 billion.<\/p>\n

– The third financial assistance programme will in any case face new difficulties. The likeliest scenario at present is that Tsipras will continue to rely on the opposition parties to pass the more unpopular measures, rejected by the radical wing of Syriza, in waiting to call new elections in the autumn to seek a renewal of his mandate, as discretely let on by the government’s new spokeswoman. The most radical faction of the party, of which Varoufakis is the leading member (although the former finance minister sided with Tsipras in the 22 July vote, joined by four other dissenters who had abstained at the previous vote), is probably attempting to gain time, waiting for Tsipras’s de-legitimisation to become complete in the eyes of Syriza’s electors, to then cash in on their malcontent at the elections. However, the plan may not work: recent polls show that Tsipras’s popularity ratings are on the rise, after the population had to bear the taxing effects of a three-week shut down of banks. Tsipras could therefore decide to sever links with the extreme faction and call new elections in September or October, further compacting the party and leaving extremists with the choice of toeing the line or forming their own new party to seek to win seats in Parliament, although at that point they would have slim chances of garnering enough to prevent Tsipras from governing.<\/p>\n

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Appendix
Analyst Certification<\/strong>
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Important Disclosures<\/strong>
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Source: BONDWorld.ch<\/p>\n","protected":false},"excerpt":{"rendered":"

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