Pension reform to be brought to parliament

 Greek stocks closed higher yesterday for a second day in a row, in a session that was characterized by limited transaction activity (EUR46mn). The benchmark index recorded marginal gains of 0.1% owing to an underperformance of the banking index (-0.3%). Performance of banks was mixed; National Bank (+2.4%) and Alpha Bank (+1.1%) recorded gains while Eurobank (-2.4%) and Piraeus (-4.1%) closed lower. Among non-financial large caps, GEK TERNA (+4.0%), Terna Energy (+2.9%), Folli-Follie Group (+2.3%) and OTE (+2.1%) were among the day’s notable outperformers while on the other hand, Viohalco (-3.7%), OLP (-3.3%) and PPC (-2.7%) underperformed. For today, negative international sentiment is likely to weigh on domestic equities.

 Economy // IMF calls for labour reforms as part of the 1st review; Creditor team heads to arrive in Athens by early next week

According to Kathimerini, the IMF appears to be insisting that Greece proceed with labour reforms as part of the first review and has raised the issue in the context of the current negotiations. Labour reforms – such as group layoffs, employer lockout rights and amendments to the union law – were meant to be dealt with in the context of the second program review, but the IMF has brought forward the issue along with the social security reform and the fiscal consolidation over 2016-18. The insistence of the IMF to include labour reforms in the debate is an additional hurdle that the govt will need to overcome and could push back the completion of the first assessment. The delegates of creditors’ technical experts are arriving in Athens today, with the mission heads expected to follow by early next week.

Politics // Pension reform to be brought to parliament

Amidst increasing protests from multiple levels of economic activity, the government proposed pension reform legislation will be brought to the parliament’s plenary session for discussion. This will mark the first item in parliament where the PM and newly elected official opposition leader Mr. Mitsotakis go head to head. Press reports are indicating that the government will bring forward some amendments in an effort to improve the bill’s receptiveness, but in any case the tone of the debate will set the tone for the short term domestic political backdrop as we head for the ESM program’s 1st review.

Economy // BOG Governor stresses importance of timely 1st review completion

During a speech to the Hellenic-American Chamber of Commerce, the head of the Greek Central bank stated that a timely completion of the 1st review is a prerequisite so that the economy can start growing again in H2’16, while is expected to contract mildly in H1’2016 on the back of the negative carry over from 2015, which is expected to have closed at -0.2%. In any case, the governor mentioned that delays take their toll on economic activity thus urged policy makers to commit to the program’s implementation so that confidence is restored, along with the banking system’s liquidity which in turn may lead to a loosening of the current capital control regime. According to press, he stated he was not able to comment on a timetable of lifting capital controls, and that this depended on developments in the year.

Banks // Troika asks for full lift of restrictions regarding NPL sales

According to Kathimerini, the government is considering ways to extend the exemptions set in last years’ law based on which loans backed by primary residencies as well as consumer and SME NPLs cannot be sold to non-banking institutions until February 15, 2016. If there is no new legislation until mid February, that means that the market for NPLs is fully liberalized and thus the Greek government is considering a number of criteria in order to impose restrictions on the sales of specific NPL categories, especially when primary residencies are used as collateral. On the other hand, according to the same sources the Troika is pushing authorities to lift all restrictions in order for banks to have greater flexibility in dealing with their problematic cases.

OPAP // Govt reportedly considering changes to the gaming tax structure

According to euro2day.gr, the govt is considering making a u-turn regarding the recently imposed player tax on OPAP’s over-the-counter games and is examining various alternative sources of revenue. Reportedly, the govt is now considering raising the GGR levy across-the-board, i.e. not solely for OPAP’s games but for all gaming segments including casinos, lotteries and online gambling. OPAP currently pays a 30% GGR duty for its OTC games and each 5% incremental levy would mean an additional cEUR50m burden until 2020. For the period 2021-2030, OPAP has secured a number of step-up remedies in case the tax regime changes. Note that for VLTs, we already assume a 35% GGR duty in our model (instead of 30%). On the other hand, were the GGR duty to increase for all gaming segments, we believe operators such as casinos and online would find it rather hard to continue their operations. This would lead to player migration to OPAP’s channels or to a significant increase of the illegal market.