by Nicolas Bornozis, Capital Link,Inc, www.capitallinkgreece.com
Greek stocks increased this week by 4.21% closing at 2321.19 points. The FTSE/ASE 20 Index increased by 5.35% closing at 1237.7 while the FTSE/ASE 40 realized a gain of 3.20%, ending the week at 2006.4 points. The FTSE/ASE small cap 80 Index decreased this week by 0.20% closing on Friday at 472.91 points.
The Minister of Finance said that the government is examining the reduction of corporate taxation rates to 25% from 35% currently gradually, within a period of three years. Among others, the Minister said that the government is examining the following: The reduction of corporate taxation rates to 25% from 35% in three stages. According to press reports that most probable scenario would be the reduction to 32% in 2005, 29% in 2006, and 25% in 2007.
Introduction of new incentives for mergers and acquisitions
Introduction of new legislation that would promote capital intensive investments and new technologies
Introduction of a new legislation framework for BOT projects
The Minister also referred to the formation of a privatisation program without giving specific details. According to press reports, privatisation revenues within 2005 could reach EUR 2bn.
According to the National Statistics Service, Greece’s new building construction material price index rose 4.2% Y-o-Y in July, following a 2.7% and 2.1% increase in July 2003 and 2002. . On a month-on-month basis, the index registered a 0.1% rise, while the average rise in the August 2003-July 2004 period reached 3.2%.
The Public Works Minister submits in Parliament the new expected legal framework regarding the assignment of Public projects. All public projects have been halted until the passage of this new bill. Specifically, the Public Works Minister has changed the existing mathematical formula for the award of the public projects with a tender procedure. The new legal framework is expected to become active by the end of September. The government intends with the new legal framework to resolve all the issues that cause significant delays in the assignment and completion of the projects, and therefore to reduce the time required for a project to be completed. The scope of the new legislation is threefold including amendments in letter of warranty, in the participation of the Greek banks and for the construction consultants. Meanwhile, the government intends to resolve the issues associated with the ‘halted projects’. The most of the legal issues surrounding these projects have not been resolved yet, but government intents to facilitate the sector within the period until the passage of the new legislation.
According to press reports citing data from the government’s recent fiscal inventory, Greek general government budget deficit in 2003 settled at 5% of GDP (if not higher), while this year’s deficit is not expected to settle below 5% of GDP, much higher than EU’s 3% threshold, mainly due to the excess of the budget for the Olympic Games. In early August, 2003 deficit had been estimated at 4.2% of GDP vs. a previous revision of 3.2% of GDP (Eurostat revision). We recall that in March 2004, Minister of National Economy and Finance had estimated 2003 deficit at 2.95% of GDP, up from a forecast of 1.7% as described in 2004 fiscal budget unveiled in November 2003 by the previous government. The issue of the excess deficit will be discussed today in the Ministry of National Economy & Finance while the basic figures regarding 2005 budget will be also defined. The Minister’s target is to bring 2005 budget deficit below the 3% level; an optimistic target. Such a development would require drastic cuts in expenditure as well as measures to increase revenues. Prime Minister is expected to announce the government’s main pillars of its economic policy for the coming year at the Thessaloniki International Fair. We recall that according to MoF comments, the Olympic Games that take place in Athens will cost Greece more than EUR 7bn or about 1.6% of the country’s GDP.
According to press reports, the Finance Ministry is considering changes in corporate taxation including the taxation on consolidated earnings and not on each company. According to the reports, taxation on consolidated earnings and not on each of the group’s subsidiary individually will be effective as soon as in 2005. The same reports claim that the specific amendment was strongly proposed by banking institutions, which are expected to be the main beneficials, as they will be able to take advantage of their loss making subsidiaries and reduce their effective tax rate and cash outflow.
The textile group of the Klonatex Group of companies (Naoussa Spinning Mills S.A., Fanco S.A., Rodopi Spinning Mills S.A.), which is represented by Mr. Thomas Lanaras, and the major credit banks National Bank, Commercial Bank, Agricultural Bank, Alpha Bank, EFG Eurobank – Ergasias reached an agreement aiming at resuming the Group?s standard operating activities.
Based on the agreement which was signed today, the banks, with National Bank of Greece as the Lead bank of the banking group, decided to issue a 23 million Euro bond, 20 million Euros of which will be allocated initially and the remaining 3 million Euros after December 31st, given certain conditions. This 5-year bond, issued to Naoussa Spinning Mills S.A., Rodopi Spinning Mils S.A. and FANCO S.A., could be recalled every six months for the period of the next 18 months, if it is found that operations and activities are not in line with the Group’s business plan. Out of the aforementioned amount, 9 million Euros will be used to refinance the outstanding short term debt issued by the banks to the Group’s underlying companies, in the form of a bridge loan.
BANK OF CYPRUS PUBLIC COMPANY LTD
In 1998 the Bank of Cyprus Public Company Ltd (the Bank) introduced for trading its Global Depositary Receipts (GDRs) to the London Stock Exchange to facilitate investment in the Bank’s shares by the international investing public.
With the lifting of all foreign exchange controls as from 1st May 2004 (following the entry of Cyprus to the European Union) and due to the trading of the Bank?s shares in two European exchanges, the Cyprus Stock Exchange and the Athens Exchange, the advantages previously offered by the GDRs no longer apply.
For the above reasons, the Bank has decided to proceed with the necessary actions to withdraw the GDRs from the international market and as a last step to withdraw their listing on the London Stock Exchange. For this purpose, the Bank has given the required 90 days notice to the GDRs Depositary bank (Bank of New York) to terminate the Deposit Agreement. The GDRs will not be delisted from the London Stock Exchange until all required procedures have been fully completed.