National Bank of Greece (ADR) (NBG): Crucial 48 Hours Ahead
Greece is expected to finalize a bailout deal with international creditors in the next two days
NBG
By: TROY KUHN
Published: Jun 23, 2015 at 8:13 am EST
Optimism surrounding a potential bailout deal was raised yesterday as Greece’s international creditor’s nodded approval to the economic proposals presented by the country. Greece and the rest of Europe were seen rising to prospects of an end to the impasse in bailout talks that have dragged on for more than five months now.
Although Greece’s creditors showcased approval to the proposals, negotiations are expected to carry on for another two days before Greek Prime Minister Alexis Tsipras manages to ink final agreement. A bailout deal would release further funds required to keep Greece’s financial sector afloat.
The emergency summit in Brussels concluded last night, with German Chancellor Angela Merkel telling reporters that the list of proposals presented by Greece display “a certain step forward." As quoted by Bloomberg, she added: "...but it was also said very clearly that we’re not yet where we need to be. Hours of the most intensive deliberations lie ahead of us." Similarly, president of the European Council, Donald Tusk, told reporters: “Today’s proposals are a positive step...they will be assessed in the coming hours.”
Meanwhile, Greece’s largest lender saw its stock rising on the back of positive sentiment. National Bank of Greece (ADR) (NYSE:NBG) stock surged more than 18% yesterday and traded within the daily range of $1.20-1.30 to close at $1.30. Similarly, other Greek banks, namely Alpha Bank, Eurobank, and Piraeus Bank rose 18%, 22%, and 25%, respectively. Following a rise of 9% yesterday, the Athens Stock Exchange Index is up more than 4% today as of 05:37 AM EDT.
Along parallel lines, Greek government bonds saw their rates declining as developments in the emergency summit came forth as a significant breather. 10-year rates fell to 11.2% and two-year yields were down to 21.5% at close. Rates continued the downward trend as markets opened today. Two-year and 10-year yields are down 9% and 5% as of 05:30 AM EDT.
Greek banks were provided with a further extension to their lifeline today, inside sources reported to Bloomberg. As Greek savers continue to pull their deposits out of Greek banks, the European Central Bank (ECB) simultaneously increases the cap on the emergency liquidity assistance program (almost daily) that has been keeping these banks afloat.
In addition to today’s increase, Greek banks were allotted a raise to financial assistance on Monday. The ceiling on emergency liquidity assistance was bolstered by $2.1 billion to a total of $ 98.6 billion yesterday. ECB’s chief Mario Draghi assured the Greek prime minister that if Greece pledged to remain in the bailout program, Greek banks would continue to receive further support from Europe’s central bank, reported Reuters.
Prior to yesterday’s advancement, both Greece and its international creditors had entered negotiations with considerable austerity. Both sides refused to compromise over economic reforms, resulting in a five-month long standoff. Although the leftist Greek government maintains that its original stance was not compromised in yesterday’s talks, experts believe the country has had to make considerable cuts and concessions to reach the present juncture. Creditors viewed the new plan as “detailed, credible and impressive.”
According to The Guardian, in its proposals, Greece has agreed to generate additional revenues of 2.7 billion in 2015. Furthermore, Mr. Tsipras has proposed surplus targets of 1% in 2015, 2% in 2016 and 3% in 2017. Creditors believe that it is crucial for Greece to achieve these targets in order to emerge from the present recessionary environment.
Mr. Tsipras has a total of 48 hours to convince austere parliamentarians and strike a deal with Greece’s creditors. Greek government spokesperson Gabriel Sakellaridis told Mega TV: “Every lawmaker has a personal responsibility to recognize and understand not just the urgency of the moment, but the urgency of the whole project," as quoted by Bloomberg.
