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Week Ahead (11 March)

Monday, 11 March – Eurogroup to decide on ANFA bond profit returns

Today’s Eurogroup will be the most significant yet of 2019 for the Greek government, with Eurozone finance ministers expected to arrive at a decision on the return of some €4.8 billion in ANFA and SMP bonds held by the ECB and other Eurozone central banks.

The release of the bond profits, which will be done over a series of semi-annual tranches until June 2022, is contingent on Greece having made sufficient progress on its reform commitments. While the pace of reform was sufficient for Moody’s to upgrade Greece by two notches, enabling the country to successfully return to markets on 6 March, we expect the Eurogroup to keep the Syriza government on a tighter leash by deferring this decision until the 5 April Eurogroup in Bucharest.

Tuesday, 12 March – Meaningful vote to kick off decisive week of Brexit activity

Although the weekend brought no indication that it is any more likely to succeed, the British government has insisted that the ‘meaningful vote’ will go ahead on Tuesday. Nevertheless, there is some suggestion that, with no agreement in sight, the ‘meaningful vote’ will be pulled in favour of a motion setting out the kind of Brexit deal that would be acceptable to Tory MP. At the time of writing, Downing Street is insistent that the vote will go ahead as planned.

If May’s deal is voted down, this will trigger a chain of events arising from the amendment approved by the House of Commons on 27 February. The day following the defeat of the meaningful vote, parliament would reconvene to vote on whether it wants to opt for no-deal Brexit. This motion would be heavily defeated. The next day, parliament would vote on whether the government should seek an Article 50 extension. The expectation is that this motion would be passed. Attention would then turn to what length of extension would be requested, while the EU would also want to have clarity on what the UK intends to use the extension period for.

Wednesday 13 March, MEPs to give formal sign off on first element of NPL package

The European Commission unofficially aims to have Europe’s NPL overhang dealt with by end 2021. Part of its 14 March 2018 proposal of a package of measures to tackle non-performing loans (NPLs) in Europe was a prudential backstop requiring gradual minimum loss provisioning for non-performing exposures. The prudential backstop is designed to address the future stock of NPLs through capital measures that apply to all banks (Pillar 1) or are tailored for specific lenders (Pillar 2). On Wednesday, MEPs are expected for formally sign off on this element of the NPL package.

MEPs will now focus on the remaining elements of the file, by splitting it in two. They will firstly focus on the legislation which aims to create a secondary market for NPLs by removing impediments to credit servicing by third parties. MEPs are expected to have an initial discussion on this report as early as this evening in Strasbourg in an attempt to ensure work on the file is completed by the time Parliament closes in 50 days time on 18 April.

If no agreement is reached by then, it will be up to the next European Parliament to agree an approach.

MEPs have acknowledged that the second part of the file which deals with measures to streamline EU rules on the recovery of collateral will not be dealt with until the next legislature. This may prove difficult as an estimated 25-35% of the next parliament is expected to come from populist anti-European parties with little interest in facilitating a functioning NPL market.

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