While Eurostat is back at the drawing board for government related deals that could lead to a change in data reporting for some member states, new transactions continue to come to market. The two tax package securitizations that already form part of the October (see ASR 10/10/05) new issues pipeline may be joined by a new Greek tax deal that could emerge by the end of the year.

A Eurostat spokesman said that it had not reached any conclusions, nor was Eurostat prepared to comment on what preliminary stance it planned to take on the more recent spate of deals. "Eurostat is currently preparing a committee on monetary, financial and balance of payment statistics consultation on this issue," the spokesman said. "After the consultation we will issue more detailed guidelines [but] until then we can make no further comment."

The Greek government is reportedly trying to securitize delinquent taxes, similar to the Italian INPS transaction, with the aim of reducing its fiscal deficit. The Ministry of Economics and Finance aimed to reduce the budget deficit to 3.6% of GDP this year and 2.8% in 2006. The EU accepted that Greece can use securitization to reduce its 2005 deficit but warned that it should not base its reduction of the 2006 budget deficit to proceeds from its securitization, and should instead focus on more structural reforms, according to EU economic and monetary affairs Commissioner Joaquin Almunia. As a result, Greece is expected to reconsider new measures to cut its budget deficit below the EU 3% GDP limit.

Sources working on the recent Belgium tax deal said that they have entered into preliminary talks with Eurostat regarding how the deal will be treated and are now awaiting a decision. However, the government has already announced plans for a second securitization that will be backed by VAT receivables.

Sagres deal conclusion

Fitch Ratings last week downgraded the junior tranches of Portugal's delinquent tax and social security claims Sagres STC explorer 2004-1. Earlier this year, Fitch placed the transaction on ratings watch negative. This followed the publication of the first 12 months of collections data for the transaction which, in aggregate, represented approximately 49% of Fitch's base projected collections for the same period. Although cumulative collections have been improved, they are still only 56% of Fitch's base case projections.

"We believe there is less incentive for Portuguese state intervention, when compared to countries such as Italy, as Portugal does not have a large-scale securitization program nor does it have as compelling an interest in removing debt off its government balance sheet," said analysts at The Royal Bank of Scotland.

(c) 2005 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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