{"id":19217,"date":"2019-12-09T10:15:58","date_gmt":"2019-12-09T08:15:58","guid":{"rendered":"https:\/\/bestinsurance.gr\/a1\/?p=19217"},"modified":"2019-12-09T10:15:58","modified_gmt":"2019-12-09T08:15:58","slug":"greece-is-enjoying-a-new-feeling-of-euphoria","status":"publish","type":"post","link":"https:\/\/bestinsurance.gr\/a1\/archives\/19217","title":{"rendered":"Greece Is Enjoying a New Feeling of Euphoria"},"content":{"rendered":"
(Bloomberg Opinion) —<\/span><\/section>\n
After a decade of gloom, there\u2019s\u00a0a new sense of euphoria in Athens. The Greek stock exchange is on course to be the world\u2019s best performer<\/a> this year because investors believe the new prime minister, Kyriakos Mitsotakis<\/a>, will deliver on his promise<\/a>\u00a0to attract foreign investment and boost growth.The star performers are bank shares, which have nearly doubled in value in less than 12 months. Politicians and financiers believe they\u2019ve found the magic cure for the banking system\u2019s\u00a0plague of bad loans. The scheme \u2014 called \u201cProject Hercules\u201d<\/a>\u00a0\u2014 involves a complicated mix\u00a0of securitization and state guarantees, modeled after an Italian plan called \u201cGACS.\u201d<\/a><\/p>\n

Hercules will no doubt help banks secure a better price as they offload their non-performing loans, speeding up an overdue clean-up. But it creates a non-trivial risk for taxpayers, who\u2019ll pick up the bill if things don\u2019t go according to plan. The government also needs to follow up on its idea to reform Greece\u2019s byzantine insolvency laws. Only that will increase the value of the collateral\u00a0pledged to\u00a0the banks and allow debtors to move on.<\/p>\n

Greek banks are saddled with about 75 billion euros ($83 billion) in non-performing loans, the legacy of the country\u2019s economic crisis. This staggering amount \u2014 equivalent to about 40% of the country\u2019s total loans<\/a> \u2014 has weighed on stock valuations and made it harder for lenders to provide credit to businesses and consumers. For years, politicians and bankers have dithered<\/a> over what to do, as they faced two conflicting problems:\u00a0European state-aid rules ban governments from sweeping up bad loans at inflated prices;\u00a0while lenders that dispose of them at excessively low prices risk creating a hole in their balance sheets.<\/p>\n

Now\u00a0Mitsotakis\u2019s government says it will issue up to 12 billion euros of guarantees that lenders can use as they bundle together their bad loans, and chop them up into portions according to their riskiness \u2014 a process called \u201csecuritization.\u201d\u00a0The Greek state will guarantee the \u201csenior\u201d tranche, while the \u201cmezzanine\u201d and \u201cjunior\u201d tranches will be less protected. Banks plan to retain the senior tranche on their balance sheets. The others will be sold or distributed to investors.<\/p>\n

Lenders will have to take a hit on their regulatory capital, since many of these loans were marked at exceedingly high values. But since the senior tranche is considered risk-free, that will release capital to be put to better use. The \u201cGACS\u201d scheme prompted a success in Italy, where it helped shrink the pile of non-performing loans.<\/p>\n

It would be wrong, however, to assume that Hercules can solve Greece\u2019s banking alone. One mustn\u2019t forget that it leaves\u00a0taxpayers on the hook for the senior tranche. How risky this is will depend\u00a0on banks\u2019\u00a0ability to repossess collateral, and on the economy. The faster the rate of Greek growth, the more likely taxpayers will be spared.<\/p>\n

Another worry is\u00a0that Greece\u2019s insolvency regime is extremely messy. There are several bankruptcy avenues for companies and individuals in trouble, giving room for arbitrage between different procedures. The new government plans to simplify things, but the reform might lead to public protests because of the eviction threat to homeowners in arrears on their mortgages. Nevertheless, a more streamlined insolvency regime is essential if banks are to extract a better price for their non-performing loans.<\/p>\n

Nor will Hercules get rid of the differences between Greece\u2019s four main banks. Eurobank Ergasias SA and Alpha Bank AE are looking substantially stronger, as they press ahead with ambitious plans to reduce their bad debt piles. National Bank of Greece and Piraeus Bank SA are further behind. For now they don\u2019t need more capital. But as their disposals of non-performing loans get underway, it will become clearer whether they need to beef up their balance sheets again.<\/p>\n

In some ways, Greek banks are in a\u00a0happier place than their European peers. Lending rates there are higher than elsewhere in the euro zone, giving bankers healthier margins to play with. A recovering economy would be an additional boon, if the new government continues to deliver on its reformist pledges.<\/p>\n

But Hercules needs some help. It would be a pity if its strength was wasted.<\/p>\n<\/section>\n

Ferdinando Giugliano writes columns on European economics for Bloomberg Opinion. He is also an economics columnist for La Repubblica and was a member of the editorial board of the Financial Times.<\/section>\n","protected":false},"excerpt":{"rendered":"

(Bloomberg Opinion) — After a decade of gloom, there\u2019s\u00a0a new sense of euphoria in Athens. The Greek stock exchange is on course to be the world\u2019s best performer this year because investors believe the new prime minister, Kyriakos Mitsotakis, will deliver on his promise\u00a0to attract foreign investment and boost growth.The star performers are bank shares,<\/p>\n","protected":false},"author":1,"featured_media":12498,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[2],"tags":[],"class_list":["post-19217","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-2"],"jetpack_publicize_connections":[],"_links":{"self":[{"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/posts\/19217","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/comments?post=19217"}],"version-history":[{"count":1,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/posts\/19217\/revisions"}],"predecessor-version":[{"id":19218,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/posts\/19217\/revisions\/19218"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/media\/12498"}],"wp:attachment":[{"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/media?parent=19217"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/categories?post=19217"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/tags?post=19217"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}