Greek ETF Falters: Memo at Parliament -- Barron's Blog

       

By Dimitra DeFotis
        Greece appears headed for a bridge loan on the way to a third bailout, but the Global X FTSE Greece 20 exchange-traded fund ( GREK) fell nearly 1% Wednesday and Greek bank stocks sank in U.S. trading.
        The ETF is up nearly 7% this week. But the returns of Greek stocks have been mixed. In U.S. trading, the National Bank of Greece ( NBG) fell 4.6% Wednesday but is up 9% this week. Eurobank Ergasias ( EGFEY) rose 40% Wednesday and 58% this week -- but to 5 cents. Piraeus Bank ( BPIRY) fell nearly 5% Wednesday but is up 24% this week, while Alpha Bank ( ALBKY) is down about 9%.
        Eurasia Group Analyst Mujtaba Rahman thinks Greece will get a second bridge loan, and "the full bailout deal will very likely be concluded at the beginning of September." He also thinks domestic politics are going to muddy the bailout story going forward, with a split in the ruling Syriza Party likely either when the bailout deal is concluded or at a party congress in September. He thinks early elections are likely in September. Rahman writes:
        "Given the amount of progress made by the negotiating teams over the last few weeks, there is now a growing possibility that a full bailout deal will be concluded by 20 August. We therefore now assign 60% to the probability of a second bridge loan (down from 80% earlier) and 40% to the likelihood of agreement over a full new bailout.
        If a full bailout deal is to be reached, an in-principle agreement on the new Memorandum of Understanding (MoU) is likely early tomorrow [Aug. 13). The Greek government would then probably introduce one bill with two articles covering the MoU and prior actions ... The Eurogroup would then sign off the MoU and the passage of the prior actions, most likely on Friday followed by a (successful) vote in a number of creditor parliaments early next week (Germany would probably vote on Monday or Tuesday). This would then pave the way for a disbursement by the European Stability Mechanism (ESM) to Greece by 20 August to cover its EUR3.2 billion (3.57 billion) European Central Bank repayment.
        That said, there is so much left to be worked out, let alone accomplished. The Syriza government may not get opposition support on some matters, Rahman writes:
        "Outstanding issues still include, among other things, the timeline of the implementation of the new program's measures, the liberalization of the natural gas market, where creditors want to see an immediate separation of the network from its providers; labour market reforms, in particular the governance of labour relations; and the governance of privatizations ... as well as the timeline ... Importantly, creditors have also asked for a tax on farmers and the abolition of early retirement to be included in the prior actions. This will prove especially difficult for the government and the opposition which Syriza is reliant upon to get these measures passed."
        (END) Dow Jones Newswires

        August 12, 2015 17:52 ET (21:52 GMT)