The eyes of the international investment community will be on Athens, where the meeting of the ECB’s board of directors is being held today for the first time in 15 years.
In the best-case scenario, central bankers, under the host of the whole organization, Giannis Stournaras, will decide to end the current cycle of monetary policy tightening, keeping interest rates unchanged, after 10 consecutive increases of a total of 450 basis points, since July 2022.
It is recalled that during this period the deposit acceptance facility rate has risen from -0.50% to 4%.
This development is considered highly probable, after the greater than expected slowdown of the consumer price index in September, the significant rise in yields on European bonds, but also the increased risks for the European economy after the outbreak of the crisis in the Middle East.
The question, of course, is whether the brake will be temporary or whether the process of reducing borrowing costs in the euro area will begin sometime in 2024.
In a recent interview, the governor of the Bank of Greece emphasized, among other things, that the ECB should not overdo it with interest rates, as there are serious risks for the economy.
He also estimated that if inflation is further reduced in the coming months, the relaxation of monetary policy could start from the middle of 2024.
In this context, the press conference that will be given this afternoon by the head of the ECB Christine Lagarde, who will refer to the rationale of the decision that will be taken by the Board of the Eurobank, is eagerly awaited.
However, it is not certain that it will provide any guidance for the next moves on the interest rate front.
And this is because the environment is complex. On the one hand, the increase in energy prices is likely to slow down the speed of inflation de-escalation, but on the other hand geopolitical risks cannot be ruled out leading to a contraction of economic activity.
Possibly, better visibility will be available at the meeting scheduled for December 14 in Frankfurt, as it will be preceded by the publication of the ECB’s updated estimates of the path of the economy.
Greek banks
For the Greek banks, however, the rise in interest rates to date has contributed decisively to the strengthening of their organic and net profitability.
Most of their loan portfolio is floating rate, linked to European interbank indices. As a result, the increase in installments, and therefore interest income, happened almost automatically.
On the other hand, revisions to deposit yields were sub-multiples.
Demand accounts are mostly interest-free or offer interest rates a few basis points above 0%, while the transfer of liquidity from savers to the more expensive term deposits remains extremely slow to date.
In this context, net interest income recorded an impressive annual increase of 60% in the first half of 2023, while, according to analysts’ estimates, the performance of the third quarter, which will be announced in the first ten days, will also be excellent of November.
At the same time, there are no tendencies to create new bad debts, due to the rise in borrowing costs, allowing banks to keep the cost of credit risk at reasonable levels.
On the other hand, the demand for new loans has decreased, despite the reductions in banks’ profit margins, in the direction of containing the final cost of the financial tools they have.
At the same time, the premature repayment of green exposures by borrowers with sufficient liquidity, who in this way reduce their debt servicing costs, after successive increases in interest rates, is a concern.
In the event that there are new upward adjustments, it is possible that these trends will strengthen again.
Latest News
Rhodes Airport Tops Fraport Greece’s Regional Airports in 2024 Performance
According to Fraport's data, more than 35 million passengers (specifically 35.2 million) were handled by Fraport-managed airports during the 11 months.
European Central Bank Cuts Interest Rates by 25 Basis Points
It is the fourth cut of interest rates by Europe’s central bank, a move expected by the markets and financial analysts leading to the rate settling at 3%.
Airbnb: New Measures Add €600 in Extra Costs for Property Owners
Property managers face an immediate administrative fine of 5,000 euros if access to the inspected property is denied or any of the specified requirements are not met.
Economist: Greece Included in the Best Performing Economies in 2024
Meanwhile, Northern European countries disappoint, with sluggish performances from the United Kingdom and Germany.
EasyJet Expands Its Routes from Athens
The airline’s two new routes will be to London Luton and Alicante and they will commence in summer 2025.
Capital Link Forum Highlights Greece’s Economic Resurgence; Honors BoG Gov Stournaras
Capital Link Hellenic Leadership Award recipient, Bank of Greece Gov. Yannis Stournaras, an ex-FinMin, was lauded for his pivotal role during Greece’s economic recovery
Tourist Spending in Greece Up by 14%, Visa Card Analysis Shows
Greece’s capital Athens emerged as the most popular destination, recording a 17% increase in transactions with Visa cards, surpassing even the cosmopolitan island of Mykonos.
Inflation in Greece Unchanged at 2.4% in Nov. 2024
The general consumer price index (CPI) posted a 0.4% decrease in November compared to the previous month
2024 Christmas Holidays: Extended Shop Hours Schedule
The 2024 Christmas Holidays extended shop hours schedule commences on Thursday, December 12 and runs until the end of the year.
ELSTAT: Seasonally Adjusted Unemployment Down in October
The number of employed individuals reached 4,284,694, an increase of 67,723 compared to October 2023 (+1.6%) and 22,002 compared to September 2024 (+0.5%).