National Bank of Greece (ADR): Greece Drafting Reform Plan Within Days. EU leaders seem hopeful as Greek’s Prime Minister has promised to draft a reform plan in return for further assistance...NBG
By: Troy Kuhn
Published: Mar 20, 2015 at 10:08 am EST
After dipping aggressively (almost 10%) on Wednesday, National Bank of Greece (ADR) (NYSE:NBG) stock slightly recovered yesterday, and is currently trading at $1.20. In fact, the stock is up by over 3% in pre-market trading. Investor sentiment has recovered primarily due to Greece agreeing to abide by bailout extension conditions.
EU leaders have declared that Greece has agreed to construct a new reform plan within days, which would grant Greece accessibility to additional funds required to avoid bankruptcy. The news surfaced in the early hours today, following marathon talks that subsided between Greece and its EU partners. In fact, Greece’s left-winged government leader, Alexis Tsipras, stated he was “more optimistic” after the meeting.
The talks were conducted in middle of the night, for which the prime participants were: Mr. Tsipras, German Chancellor Angela Merkel, French President Francois Hollande , and leader of EU institutions. The EU leader confirmed that Mr. Tsipras had committed to produce a comprehensive list of reforms within the next few days.
Ms. Merkel meanwhile specified: “The Greek government will take full responsibility for the reforms and submit a list of these reforms in the coming days.” She further described the meeting as “good and constructive." These reforms will be aimed at improving the country’s dwindling balance sheet. Mr. Tsipras, however, made clear that the reforms would not be aimed at “recessionary measure,” which could further worsen the plight of the Greeks.
The meeting was a result of an eleventh-hour request for a mini summit on Thursday night. EU leaders came out of the meeting far more optimistic than they went in. The Greek Prime Minister, despite having committed to a strict set of principles, also seemed fairly optimistic. “We are more optimistic after this deliberation. All the sides confirmed their intention to try their best to overcome the difficulties of the Greek economy as soon as possible,” he stated.
However, a majority of EU partners are rapidly losing their confidence in Greece, committing to their promises. The government has dragged previous commitments for a month, without carrying out fundamental economic changes. Sources familiar with ECB reported to Reuters that the president of the bank, Mario Draghi, had no intentions of relieving limits on the Greek short-term debt issuance. In fact, on several occasions, Greece’s finance minister has talked about the limits on short-term debt issuance “asphyxiating” Greece. Sources further reported: “It’s up to Greece to meet its commitments in order to get money from its creditors. The ECB doesn’t do bridge finance.”
Greek officials further ensured EU partners that the country had sufficient cash reserves to make a final installment payment of over $370 million on Friday; this is in relation to the loan granted by the IMF. Greece has been granted two major EU/IMF bailouts since 2010, amounting a total of $240 billion. Despite the aid packages, the economy has been shrinking consistently, currently at the 25% mark. A key reason behind the contraction of the economy stands to be the piling austerity measures levied by Greece’s lenders.
Further aggravating its EU partners, the Greek parliament granted approval of an anti-poverty bill Wednesday. To the frustration of Greek creditors, the country passed the legislation without fully consulting them first. More so, Greece’s economic policies have been attracting negativity outside the Eurozone. British Prime Minister David Cameron stated: “When I first came here as prime minister five years ago, Britain and Greece were virtually in the same boat. We have similar-sized budget deficits. The reason we are in a different position is we took long-term, difficult decisions and we had all of the hard work and effort of the British people.”
Indeed, Greece’s banking sector faces acute threat from a potential exit from the EU, as European Council president Donald Tusk remarked: “Nobody wants a so-called Grexit and everybody wants to avoid this risk.”
