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Week in Review (14 February)

Greek 10 years bonds break the 1% barrier

On Thursday Greek bonds dipped below 0.9%, following on from Wednesday's landmark numbers where 10 year bond yields dropped to a record low of 1% for the first time. The landmark was reached despite its current low credit rating, with investors seeing value in betting on assets offering positive yields in an economy which is growing at a reasonable pace as opposed to the negative yields on offer in other European countries.

Greece enjoyed a good year in 2019, with several of the ratings agencies indicating that, should improvements in the economy continue, an upgrade in ratings was likely to follow in 2020. Fitch upgraded its credit rating in late January, while DBRS and S&P rate Greek debt three notches below investment grade. Moody's ranks Greece at B1, four notches below investment grade. S&P will conduct a review of its investment grade in April, while Moody's will follow suit in May. It is expected that both ratings agencies will upgrade Greek debt; a full upgrade to investment level (at which point Greek assets can be purchased by the ECB) could happen as soon as end of year 2021.

Barnier rejects UK request for changes to finance equivalence process

Michel Barnier rejected the United Kingdom's demand for changes to the finance equivalence process this week after reports emerged of the UK's desire for a decision to be made on "comprehensive, permanent equivalence". Barnier told a meeting in Strasbourg that the UK should be under no illusion that "general, open-ended, ongoing equivalence in financial services" would happen, and that the EU was firmly of the view that the current rules set by the bloc would have to remain in place. The rules allow companies in the financial sector from outside the EU to establish themselves in a member state without strict oversight providing that the country of origin rules are as strict as those imposed in the EU. Currently, the EU can revoke equivalence agreements in as little as 30 days, leading to fears in the City of London of a post-2020 financial climate in the UK characterised by uncertainty.

Google's appeal against €2.4 billion fine begins in Luxembourg

Google's appeal against a €2.4 billion fine for promoting its own shopping comparison service started this week in the General Court in Luxembourg. The case is the first big test of EU Commissioner for Competition Margrethe Vestager’s campaign against Google in recent years which has seen the company repeatedly fined — in 2018 for €4.34 billion over its Android operating system and in 2019 another €1.49 billion over online search advertising.

The appeal begins in a week where further accusations of anti-competitive behaviour were aimed at the company. Thirty four companies which offer travel and accommodation services wrote to Commissioner Vestager to complain about Google's vacation rentals service which was launched last year. The companies involved in the new complaint include large travel firms Tripadvisor, Expedia and eDreams Odigeo. It is understood that at least one of the companies filed a formal antitrust complaint last year. Google has amassed fines of €8.2 billion from the EC in the last three years, all relating to alleged abuses of power. It is appealing all the fines in the coming months.

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