August 2020


Greece and Turkey Hit Impasse After Germany’s Mediation Effort

(Bloomberg) —
Turkey said it wouldn’t curtail its offshore explorations as a precondition to restart negotiations with Greece, throwing into question a German-led effort to defuse tensions in the eastern Mediterranean.“It’s impossible for us to accept all the conditions set by Greece for a good dialog,” Turkish Foreign Minister Mevlut Cavusoglu said on Tuesday in a joint press conference with his German counterpart Heiko Maas. “We are ready to enter talks without preconditions, but if one party starts imposing conditions, we have many of those to list ourselves.”

Maas traveled to Athens and Ankara on Tuesday in an effort to put an end to the escalating conflict over the NATO allies’ competing maritime claims. Talks collapsed earlier this month after Athens announced a maritime delimitation agreement with Egypt on Aug. 6, similar to a Turkey-Libya deal in December.The disputed region in the Mediterranean Sea has become an energy hot spot with big natural gas finds for Cyprus, Israel and Egypt in recent years. Turkey’s push to secure a share of the resources has deepened strains between the historic rivals.

“The current situation in the eastern Mediterranean is playing with fire, with any small spark potentially leading to catastrophe,” Maas told reporters in Athens earlier in the day. “What we need immediately are signals of de-escalation and a readiness for dialog.”

Greece on Monday began joint military exercises with the U.S. in an area that partially overlapped with the expected location of a Turkish survey ship, which Ankara had announced would explore that area until Aug. 27, three days longer than had been originally planned.

EU Meeting

“Greece has shown that it’s ready for dialog, but not amid challenges and as its sovereign rights are being violated,” Greek Foreign Minister Nikolaos Dendias said, adding that he expects a possible list of sanctions against Turkey to be presented at an EU meeting later this week.

EU foreign ministers will meet in Berlin this week to discuss “our relationship with Turkey, and Greece’s voice will have special weight,” Maas said.


Greece says that islands must be taken into account in delineating a country’s continental shelf, in line with the United Nations Law of the Sea, which Turkey has not signed.

Ankara argues it should be measured from the mainland, and that the area south of the Greek island of Kastellorizo — just a few kilometers off Turkey’s southern coast — therefore falls within its exclusive zone.

Turkey is also at loggerheads with Cyprus over offshore gas reserves around the island, where the Republic of Cyprus is an EU member state and officially has sovereignty over the entire island.

But the island has been effectively divided into two since Turkey’s military captured the northern third in 1974, following a coup attempt in which a military junta in Athens sought to unite Cyprus with Greece. The Turkish minority’s self-proclaimed state in the north, recognized only by Ankara, also claims rights to any energy resources discovered off its coast.



(Economist Intelligence Unit)- Greek inflation goes deeper into negative territory in July

Greece economy: Quick View – Greek inflation goes deeper into negative territory in July

Tuesday, August 25, 2020 01:15 AM

Aug. 21 (Economist Intelligence Unit) — The harmonised index of consumer prices (HICP) fell by 2.1% year on year in July, after decreasing by 1.9% in June. In the past 12 months, the HICP has contracted by an average of 0.2% year on year.

Greek consumer price inflation on an HICP basis recorded its fourth consecutive negative outturn in year-on-year terms in July, but the latest data indicate the steepest fall this year. Prices on an HICP basis rose by an average of 0.6% in January-March 2020, before falling by 1.2% in the second quarter of the year.

Price growth across Europe has weakened considerably so far in 2020, reflecting a combination of collapsing oil prices and a negative demand shock from the lockdown measures imposed in response to the Covid-19 pandemic. However, in July aggregate euro zone HICP inflation was still marginally in positive territory (0.4% according to the flash estimate). Euro zone aggregate output declined by 15% year on year according to Eurostat’s initial assessment. A flash estimate for Greek GDP in April-June is not yet available, but Spain, which like Greece relies heavily on international tourism, recorded a decline in output of 22.1%.

Among the main categories of the Greek HICP, the strongest decline in July was for transport (16.3% weighting), where prices fell by 8.6%, reflecting much lower global energy prices compared with a year earlier. There was a 5.2% decline in the cost of housing (9.5% weighting), while prices in the hotels, cafes and restaurants category (18% weighting), which is heavily influenced by tourism, fell by 2.3%. Among the biggest categories, only the cost of food and non-alcoholic beverages (19.4% weighting) increased, rising by 2.1%.

HICP inflation in Greece was only 0.4% year on year in July 2019, meaning that base effects were already supportive of price growth in the most recent data. However, base effects will be even more supportive in coming months, with the HICP having averaged flat year-on-year growth in August-October 2019. Nevertheless, the latest IHS Markit manufacturing purchasing managers’ index (PMI) for Greece indicated little evidence of upward pressure on consumer prices. The survey showed that although input costs rose in July, firms were unable to pass this on to consumers. Output charges continued to fall in July, reflecting high levels of competition in the face of scarce demand.

Impact on the forecast

We expect inflation on the EU-harmonised measure to decline by 1% in 2020, before rising by 0.9% next year.

Source: Economist Intelligence Unit


(Economist Intelligence Unit)- Greece was already in technical recession when the coronavirus crisis hit

Greece economy: Economic outlook: all eyes on tourism


* The Greek economy was already in technical recession when the coronavirus (Covid-19) crisis hit, but strict measures to contain the pandemic and the catastrophic impact on tourism have dealt the economy a further heavy blow.

* The lowpoint in terms of economic activity has already passed: high-frequency hard and sentiment data point to an easing of the downturn from May onwards.

* Tourism-which directly and indirectly accounts for around one-fifth of the economy-was largely wiped out in the second quarter. Latest data show an increase in arrivals from abroad, but these are down dramatically compared with 2019.

* The economy will partly recover in the second half of the year, but the likelihood of further restrictive public health measures means that the recovery will be weak and uneven in coming quarters.

* Extremely favourable external financing conditions give the government space to support workers and firms, and Greece will benefit significantly from EU fiscal support, boosting growth rates in 2021-24.


Aug. 11 (Economist Intelligence Unit) — Greece’s reliance on tourism means that it will probably experience a contraction in real GDP that is worse than the EU average this year. Moreover, unless an effective vaccine is rolled out in the first half of 2021, next year’s tourism season will also suffer compared with recent years.

Greece was already in technical recession when the coronavirus crisis hit-recording negative quarterly growth in the fourth quarter of 2019 and the first quarter of 2020-but the scale of the fallout from the coronavirus pandemic is an additional, large negative factor for economic activity.

Greece has so far managed the public health crisis very well, but the imposition of strict measures to limit social contact, and the country’s over-reliance on tourism, mean that the damage to economic activity is already worse than for many other EU countries.

Latest data reveal extent of the second-quarter downturn

The high-frequency data released by Greek and EU sources give some idea of the scale of the downturn in the first few months of the pandemic. Hard data, which is released with a significant lag, indicate that the peak of the downturn was in April. As of May (latest available), data mostly indicate an easing of the downturn, but in all key branches of the economy activity was still firmly in negative territory. Working-day-adjusted retail trade turnover, for example, fell by 5.3% year on year in May, compared with a 24.5% decline in April. Industrial output declined by 7.5% year on year in May, after a 10.2% decline in April.

Labour market data indicate a less dramatic decline in April-May than retail trade and industrial output figures, but the negative trend is visible. As of May the seasonally adjusted unemployment rate was 17%, up from 14.5% in March. This rate is likely to rise substantially in the coming months. Economic weakness, a poor labour market outlook and and a consequent plunge in demand have contributed to much lower price pressures, with the harmonised index of consumer prices (HICP) falling by 1.9% year on year in June. A recent report by the Hellenic Confederation of Commerce and Entrepreneurship (ESEE) revealed that more than three-quarters of retailers were already engaged in discounting amid fragile consumer demand.

The most up-to-date sentiment data suggest an improvement in recent months, albeit from extremely low levels and with big differences by sector. The Economic Sentiment Indicator improved to 90.8 in July, from 87.6 in the previous month, according to the European Commission. Business optimism was higher in services, construction and industry. However, retail trade sentiment was particularly weak, falling to 70.4, from 84.4 in June. Consumer confidence also fell further in July. According to Eurostat, Greek consumers are the most pessimistic in the EU.

The July manufacturing purchasing managers’ index (PMI) was 48.6 in July, down from 49.4 in June, and below the 50 level separating expansion from contraction. It has, however, recovered significantly from a trough below 30 in the second quarter. Firms reported weaker demand from tourism-related industries, according to IHS Markit. The survey also registered the fifth consecutive cut in workforce numbers.

Tourism is the key

The Greek economy is particularly exposed to the coronavirus crisis owing to its dependence on international tourism, one of the hardest-hit sectors globally. Directly and indirectly, tourism accounts for about one-fifth of the Greek economy, and has contributed about half of all growth in recent years.

The second quarter was a disaster for tourism, coinciding with major restrictions on international travel and the peak of domestic and foreign restrictive measures. In June the number of air passengers arriving in Greece was 93% lower than a year earlier. A report by the Hellenic Association of Professional Conference Organisers (HAPCO), the Athens Convention and Visitors Bureau (ACVB) and the Thessaloniki Convention Bureau found cancellation rates for international conferences in Greece were running at 95%.

In mid-June Greece started to open up to international arrivals. The cruise sector opened again on August 1st and in early August the tourism minister, Haris Theocharis, reported that almost 80% of hotels were open. That Greece is seen as a success story in public health terms has had a positive impact on foreign tourists’ willingness to travel there. However, there is widespread risk aversion to travel in general, reflecting concerns about the increased risk of contracting the virus while travelling and uncertainty regarding changes in border controls and whether or not quarantine is mandatory when arriving or returning. Available data for tourism in Greece in the third quarter so far are not especially encouraging. Air passenger arrivals in July picked up versus June but are still down by around three-quarters on last year.

The risk of new restrictive measures

During February, as European countries gradually became aware of the threat of the coronavirus, Greece reacted quite slowly by the standards of regional peers. However, the Greek government started to act strongly at the end of February, and by late March Greece became one of the most restrictive countries in the EU with the exception of Italy. Given the low number of cases and deaths in Greece, the government felt able to loosen restrictions on economic life in mid-June. This helped the economy to start to recover. However, as the number of cases began to rise again from July onwards, the government tightened some measures again. This is likely to weigh negatively on the nascent economic recovery.

More fiscal space to support the economy

The coronavirus has loosened significantly the fiscal constraints that Greece has faced for a decade. Greece’s euro zone creditors have waived onerous primary surplus targets for now in acknowledgement of the extraordinary situation. Greece is set to get a big entitlement under the EU recovery fund. One estimate by Bruegel, a Brussels-based think tank, found that Greece’s entitlement under the Next Generation EU support and 2020 budget amendment would total grants worth 13.5% of GDP and guarantees worth a further 1.35%. This is the largest allocation of any member state except Bulgaria and Croatia.

Meanwhile the monetary interventions of the European Central Bank (ECB) have created a favourable financing backdrop, creating more space than at any time since the global financial crisis for the government to use fiscal policy to support the economy. As of early August, the nominal yield on Greek ten-year bonds was close to an all-time low of around 1%, with the yield on five-year bonds being below 0.25%. In early August the government announced new support measures worth EUR4.5bn, with a focus on returning pre-paid taxes and support for seasonal employees working in tourism.

Bumpy recovery with huge uncertainties ahead

The outlook for the Greek economy remains highly uncertain, and the risks to our forecasts in both directions are unusually large. Our current forecast is for a contraction of 7.5% this year, and a recovery of 3% in 2021. This rests on an assumption that there is not another national lockdown and a vaccine is available by the end of next year.

During the rest of 2020, we expect a choppy recovery, influenced by a pattern of easing and tightening of public health measures. This pattern will probably define 2021 as well. This year risks to the forecast are probably weighted to the downside, not least because of the recent increase in cases in Greece, which could have a negative impact on tourism demand. For next year, if a vaccine is rolled out more quickly than expected, the recovery could be a lot stronger than we project.

Source: Economist Intelligence Unit


Turkey’s finance minister concedes economy at risk of shrinking

Turkey’s economy is in danger of contracting this year after the coronavirus pandemic hit economic activity in the second quarter, the country’s finance minister has said, acknowledging that his previous forecast of a 5 per cent expansion was no longer within reach.

Berat Albayrak told a Turkish television channel that this year the country’s economy could shrink by up to 2 per cent, or expand by a maximum of 1 per cent. But estimates from international institutions for an even sharper contraction were baseless, he said in the interview late on Wednesday evening.

The IMF forecasts that the Turkish economy will contract by 5 per cent in 2020, while the World Bank’s baseline scenario is for a 3.8 per cent fall.

Mr Albayrak said the sharp decline in the lira had made Turkey more competitive in attracting tourists and selling goods overseas, adding that he was not worried about the exchange rate. The currency has lost about a fifth of its value against the dollar this year.

Goldman Sachs estimates that Turkey spent about $65bn of its central bank foreign currency reserves in June and July on efforts to keep the currency stable, but since the start of August it appears to have abandoned the attempt.

The central bank has rebuffed calls to raise its benchmark interest rate to stem the lira’s losses. It will confront the dilemma when it holds its next monetary policy committee meeting, in a week’s time.

Earlier this week President Recep Tayyip Erdogan called for interest rates to fall further. He subscribes to the unconventional view that higher interest spurs inflation.

“There is a very important paradigm shift now with a competitive
exchange rate, low interest rates and most significantly, a
transformation that is based on production, not imports,” said Mr
Albayrak, who is Mr Erdogan’s son-in-law.

In a move which some analysts said was intended to buffer the lira, the Turkish central bank has recently hiked banks’ funding costs.

Late last week it scrapped its usual one-week repo operation priced at the policy rate of 8.25 per cent. On Thursday the bank instead held a one-month repo auction at which lenders set the rate through their bids at 271 basis points above 8.25 per cent according to Bloomberg.

“The [central] bank is trying to rein in lending . . . without hiking the base
rate,” Timothy Ash, an analyst at BlueBay Asset Management, wrote in a
research note.

The supply of credit has risen sharply since the government compelled banks to increase lending. Regulators this week also took other steps to cool lending, including reducing the loan-to-asset ratio for banks.

But letting the lira weaken “is essentially a muddle-through scenario”, Mr Ash said: “Clearly the central bank does not want the ignominy of being forced to hike the base rate [and] it’s not even clear they would get approval from the president for such a move . . . unless the lira is in freefall.”

Mr Albayrak rebuffed suggestions that Turkey needed a higher interest rate to support portfolio inflows, arguing that net flows have been negative for the past two years. Foreign investors have sold about $12bn of Turkish assets over the past year, according to Bloomberg.

“The exchange rate will rise today, fall tomorrow . . . What is important is that Turkey manages the volatility,” Mr Albayrak said.

He blamed “crisis lobbies” for portraying the currency as under siege and said that the lira’s decline would have only a limited impact on inflation, which is running at an annual rate of about 12 per cent.

Turkey’s economy needs to become more independent in order to cope with divergences with the country’s traditional allies over foreign policy, Mr Albayrak said, adding that overseas military excursions had put pressure on the public finances.

Tax revenue fell to zero for four months this year because of coronavirus, and Turkey is likely to record a budget deficit of about 5 per cent of GDP this year, he said. But he reiterated that Turkey would not seek assistance from the IMF.


Source: link


When It Comes to Covid Shots, Rich Nations Are First in Line

By James Paton
(Bloomberg) — 
Wealthy countries have already locked up more than a billion doses of coronavirus vaccines, raising worries that the rest of the world will be at the back of the queue in the global effort to defeat the pathogen.Moves by the U.S. and U.K. to secure supplies from Sanofi and partner GlaxoSmithKline Plc, and another pact between Japan and Pfizer Inc., are the latest in a string of agreements. The European Union has also been aggressive in obtaining shots, well before anyone knows whether they will work.Although international groups and a number of nations are promising to make vaccines affordable and accessible to all, doses will likely struggle to keep up with demand in a world of roughly 7.8 billion people. The possibility wealthier countries will monopolize supply, a scenario that played out in the 2009 swine flu pandemic, has fueled concerns among poor nations and health advocates.

The U.S., Britain, European Union and Japan have so far secured about 1.3 billion doses of potential Covid immunizations, according to London-based analytics firm Airfinity. Options to snap up more supplies or pending deals would add about 1.5 billion doses to that total, its figures show.

“Even if you have an optimistic assessment of the scientific progress, there’s still not enough vaccines for the world,” according to Rasmus Bech Hansen, Airfinity’s chief executive officer. What’s also important to consider is that most of the vaccines may require two doses, he said.

A few front-runners, such as the University of Oxford and partner AstraZeneca Plc and a Pfizer-BioNTech SE collaboration, are already in final-stage studies, fueling hopes that a weapon to fight Covid will be available soon. But developers must still clear a number of hurdles: proving their shots are effective, gaining approval and ramping up manufacturing. Worldwide supply may not reach 1 billion doses until the first quarter of 2022, Airfinity forecasts.

Investing in production capacity all over the world is seen as one of the keysto solving the dilemma, and pharma companies are starting to outline plans to deploy shots widely. Sanofi and Glaxo intend to provide a significant portion of worldwide capacity in 2021 and 2022 to a global initiative that’s focused on accelerating development and production and distributing shots equitably.

The World Health Organization, the Coalition for Epidemic Preparedness Innovations, and Gavi, the Vaccine Alliance are working together to bring about equitable and broad access. They outlined an $18 billion plan in June to roll out shots and secure 2 billion doses by the end of 2021.

The initiative, known as Covax, aims to give governments an opportunity to hedge the risk of backing unsuccessful candidates and give other nations with limited finances access to shots that would be otherwise unaffordable. If governments put their own interests first, it could result in a worse outcome for everyone, allowing the virus to continue to spread, some officials warn.

Tangle of Deals

Countries would need to strike a series of different agreements with vaccine makers to raise their chances of getting supplies, as some shots won’t succeed, a situation that could lead to bidding battles and inefficiencies, Seth Berkley, Gavi’s CEO, said in an interview.

“The thing we worry about most is getting a tangle of deals,” he said. “Our hope is with a portfolio of vaccines we can get countries to come together.”

Some 78 nations have expressed interest in joining Covax, he said. In addition, more than 90 low- and middle-income countries and economies will be able to access Covid vaccines through a Gavi-led program, the group said Friday. There’s still concern the rest of the world might fall behind.

“That is exactly what we’re trying to avoid,” Berkley said.

Biggest Investment

AstraZeneca in June became the first manufacturer to sign up to Gavi’s program, committing 300 million doses, and Pfizer and BioNTech signaled interest in potentially supplying Covax. Brazil, the nation with the second-highest number of coronavirus cases, also reached an agreement to secure doses of the Oxford vaccine with AstraZeneca.

The Trump administration agreed to provide as much as $2.1 billion to partners Sanofi and Glaxo, the biggest U.S. investment yet for Operation Warp Speed, the nation’s vaccine development and procurement program. The funding will support clinical trials and manufacturing while allowing the U.S. to secure 100 million doses, if it’s successful. The country has an option to receive an additional 500 million doses longer term.

The European Union is closing in on a deal for as many as 300 million doses of the Sanofi-Glaxo shot and is in advanced discussions with several other companies, according to a statement Friday.

“The European Commission is also committed to ensuring that everyone who needs a vaccine gets it, anywhere in the world and not only at home,” it said.

In China, home to some of the fastest-moving programs, President Xi Jinpingpledged to turn any vaccine developed by the country into a global public good.

The U.S. has invested in a number of other projects. Pfizer and BioNTech last week reached a $1.95 billion deal to supply their vaccine to the government, should regulators clear it. Novavax Inc. announced a $1.6 billion deal, while the U.S. earlier pledged as much as $1.2 billion to AstraZeneca to spur development and production.

U.S. investment to speed up trials, scale up manufacturing and boost vaccine development is “great news for the world,” assuming vaccines are shared, Berkley said.

“It helps drive the science forward,” he said. “On that I’m very positive. My concern is that we need global supply.”

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