Business and Banking Community in Greece React Positively to the Change - The Best from Greece

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Posted on: 12/Oct/2009

THE BUSINESS and banking community this week welcomed Pasok’s clear mandate for reform.

“Finally, we have a solid government with a great majority, with no need for a repeat election as many had feared,” George Stamnos, head of Treasury at Hellenic Postbank (TT), told the Athens News.

“Greece is in a recession and many businesses and individuals are in debt and cannot afford to get out of that situation. The new government’s plan to help people settle debts and revive the economy would be very welcome by everyone.”

Market watchers cautiously welcomed the result.

“Pasok has won a holding mandate from a fickle electorate,” said Philip Dragoumis at HSBC Securties. “What Greece needs, however, is reform. Even as Greece enters recession - and before George Papandreou doles out a promised 2.5bn euro fiscal stimulus - the budget deficit is far too high.”

Positive overall

On balance, Dragoumis said, the election outcome is, overall, positive for the market given the stronger than expected parliamentary majority. However, the market will be awaiting more tangible evidence of the new government’s economic policy.

Signs of fiscal loosening could lead to widening spreads on sovereign paper, he said, and changes in the top management teams of directly or indirectly state-controlled companies, and the liberalisation of product and service markets will be good news for capital markets, Dragoumis said.

“A crackdown on tax evasion is a fine aspiration,” he added. “But the new government’s first budget should go much further. Papandreou should freeze most new recruitments into the public sector, get a handle on corruption - particularly in healthcare and defence - tighten control of departmental budgets, enhance crosschecking for tax returns and depoliticise national accounting.”

He pointed out that Pasok has pledged to freeze tariffs at state-controlled utilities and revisit the sale of stakes in telco OTE to Germany’s Deutsche Telecom, and also the recent privatisation of Olympic Airlines.

However, many businesspeople did not see this as realistic.

“I don’t think the government will take stakes back for OTE or OA, despite what it said prior to the win,” said Stratos Manolas, managing director at UK-Greek fund Axion Investments. Deutsche Telecom, for example, would first have to agree to sell shares back and the state does not have the cash to buy them.

“Greece needs to continue with its privatisation programme, such as water utilities and the trains. In my view, Pasok can bring experienced people in to heed up state entities, but unless they get strategic investors in nothing will change,” he said.

Changing guard

State-controlled and listed ATEbank will see new senior management appointed, a source at the bank said.

“We are waiting for Pasok to make an announcement and we expect that it will appoint new chairs for our bank and for Post Savings,” he added.

However, National Bank of Greece (NBG) does not expect the incoming socialists to change its senior management, including CEO Takis Arapoglou, a source close to NBG said.

Arapoglou has a three-year contract. The Greek state has a 12 percent stake in NBG and is the largest single shareholder.

NBG stock was down 2.3 percent on the Athens Stock Exchange the day after the election because of concerns over a possible management change.

“We have not had a political appointment for NBG’s CEO since 1996,” the source pointed out. “While, technically speaking, the [new] government could replace Arapoglou, I don’t think they will do so. Institutional investors have over 50 percent and the government would need to be sure of what the cost and benefit of changing the CEO is.”

Regarding banking reform, Pasok is expected to introduce measures to support small and medium enterprises as well as home loans.

Stamnos described the expectation as “showing the more human face of banking”.

source Athens News


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