Italian politics and ECB conspire against clean Greek bailout exit

On Thursday, Greek prime minister Alexis Tsipras, the once-Marxist firebrand-turned faithful-implementer of austerity, declared that a parliamentary vote on another slew of economic reforms was nothing less than "historic".

Passed by a narrow majority – 154 votes secured in the 300-seat Hellenic Parliament – the measures allow for the release of €12 billion of new loans from the country's third bailout programme since 2010.

The latest reforms include further pension cuts, tax measures, performance reviews for civil servants and the setting up of a national land registry by 2021.

Critically, it also sets Greece up for a key European finance ministers meeting next Thursday to discuss what form of debt relief the country can look forward to as it prepares to exit its rescue programme on August 20th.

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If it was already shaping up to be another fudge that will give Greece little leeway, governments across Europe will be in an even less generous mood with the European Union facing a showdown, sooner or later, with Italy's new populist government.

Tsipras blinked first after he brought Greece to the brink of crashing out of the euro in 2015, within months of sweeping to power on a populist agenda. But the stakes are much higher with Italy – the euro zone’s third-largest economy and biggest borrower, whose €2.3 trillion public debt pile is about seven times that of Greece.

Tsipras has long given up on any hopes of the EU writing off some of its loans.

The Athens government’s borrowings continue to stand at almost 180 per cent of the size of the economy – the highest ratio in the euro zone – even after private bond investors were forced to take a €107 billion “haircut” on what they were owed six years ago under the biggest debt restructuring in history.

The International Monetary Fund (IMFs) refused to take part in Greece's third bailout programme as it argued that the country's debt was unsustainable in the long-run without its EU bailout partners taking a hit on what they were owed.

Tsipras has long given up on any hopes of the EU writing off some of its loans. Debt relief will amount to more extensions on repayments of EU loans; the possibility of Greece receiving profits made by the EU on previous loans to the Mediterranean country; and a so-called “growth adjustment mechanism” that would link long-term repayments to economic performance.

The last €12 billion cheque on Greece’s third bailout will add to the country’s cash buffer, as it sets its sights on returning to full market funding.

But the markets will likely ignore any self-congratulatory statements from EU figures on an expected deal next week to see what the IMF has to say about Greece’s debt sustainability.

For the moment, at least, Tsipras – who also had to deal with political and public uproar this week over a compromise agreement to end a long-standing dispute with neighbouring Macedonia over its name – is determined to follow Ireland and Portugal in pursuing a “clean” bailout exit without a precautionary credit line.

Potential rumblings from Rome in the coming months and the European Central Bank’s decision this week to end its massive bond-buying stimulus programme in December will make it all the harder for Tsipras to avoid another Greek tragedy.

Central Bank fines Custom House Capital whistleblower

Appian Asset Management, which abandoned thoughts of buying the now-defunct Custom House Capital (CHC) in 2011 and went straight to the Central Bank of Ireland after smelling a stench in the books of its would-be target, has received little mercy from regulators for failing to identify something suspicious going on closer to home.

The Central Bank revealed on Friday that it had fined the 15-year-old firm €443,000 for failing to spot red flags when a client of the firm was hacked and Appian followed through on an instruction from the fraudster to transfer €650,000 of the client’s money to bank accounts in the UK.

Appian, which has €800 million of assets under management, said that it has reimbursed the client out of its own money, addressed its failings and introduced new client asset and anti-money laundering policies and controls.

Recently-filed accounts show it recorded a €425,000 pre-tax profit in 2016 after taking a provision for the matter. The Central Bank said that its fine would have been €825,000 “had it not been for the financial position of the firm”.

It must only be a matter of time before chief executive Patrick Lawless receives some calls from potential suitors.

Markets question Francesca’s UK plans

Bank of Ireland chief executive Francesca McDonagh clearly has her work cut out convincing investors that she can deliver on her strategic plan, delivered during the week, in which she’s targeting a 20 per cent jump in the size of the group’s loan book, €200 million of cost cuts, and a doubling of returns in its underperforming UK business.

Shares in the bank have fallen by almost 7.5 per cent in Dublin since McDonagh and her team presented her blueprint to 80 analysts and fund managers on Wednesday. (The shares haven’t been helped by a wider sell-off across European banks towards the end of the week as the ECB signalled that interest rates will remain at historic lows until late 2019 at least.)

Keefe, Bruyette & Woods analyst Daragh Quinn told clients in a note on Friday that he was unconvinced by the group's strategy and loan-growth targets in the UK – a market that investors would have expected the London-born banker to have nailed in her vision.