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Expectations for Greece at a peak

10/02/2015 16:18
Expectations about tomorrow’s extraordinary Eurogroup, where Greece is expected to submit its proposals for the extension of the economic adjustment program, have climaxed while the aim is to finalize an agreement between Greece and the European Commission until February 16.

“The target now is to clinch an interim deal by Monday's scheduled meeting of the Eurogroup in Brussels”, a European official told Reuters.

“This would give time for any ratification required by national parliaments before the current EU bailout deal expires on February 28," the official said, although cautioned against setting "any fake deadlines".

Earlier, a Commission spokeswoman stated that expectations for a debt deal this week are low.

Expectations for a Greece-EU agreement lead to a decline in the yields on Greek bonds and a stock market rise. The yield on the ten-year Greek bond reached 10.3% from 10.6% yesterday.

The Athex general index closed 7.98% up at 826.31 points and FTSE at 244.75 points up by 8.22%.

National Bank soared by 20.8%, Alpha Bank closed up by 7.1%, Piraeus Bank advanced by 15.6% and Eurobank jumped by 19.7%. Bank of Cyprus in the CSE closed down 1.1% to €0.186 and in Athens at €0,185 down by 2.1%.

Greek proposals

Meanwhile, analysts expect at tomorrow’s Eurogroup the presentation of a program for the extension of the validity of the current economic adjustment program.

According to Piraeus Equity, at tomorrow's extraordinary Eurogroup Greece is expected to seek a funding program that can run until August and includes part of €7.2 billion of the pending payments to Greece. In return, Greece will be committed to implement 70% of the existing bailout program.

Specifically, according to reports, the Greek government will present a proposal based on five pillars, which will include a bridge program until September 2015 which will include 70% of the measures of the previous program. 30% of the measures will either be deleted or replaced with 10 new measures and reforms in cooperation with the OECD.

The proposal will also include a projection for a primary surplus of 1.5% and dealing with the debt via swaps. Also, the €11 billion held by the Greek Financial Stability Fund will be used for the treatment of non-performing loans while in the meantime the financial needs of the country can be covered by the disbursement of part of the tranche of €7.2 billion.

Also, the government insists on the immediate disbursement of an amount of €1.9 billion from the profits of the Greek bonds held by the ECB which were not part of the write off, the increase of the margin for issuing Treasury Bills by €8 billion as well as ELA to be more “flexible”, depending on the requirements.

According to Eurobank Equities, the government seems to be drawing a red line on issues related to fiscal austerity, aiming at keeping the primary surplus target of 1.5% despite its expansion to 3%. In addition, the government wants to promote the idea of tackling the problem of non-performing loans, while ensuring the opening of discussions on the sustainability of its outstanding debt.