Download Why Greece ? And why now

“Why Greece ? And why now ? Where and How ?. A safe road map to the new
locomotives of the Greek restart next to the “traditional” strongholds (tourism &
shipping): technology, food, energy and real estate”
Since the beginning of the crisis, a heated debate is going on among politicians and
scholars, inside and outside the country, on who’s responsible and whether the
austerity measures, adopted as a condition for the financial assistance by
international lenders, has been successful, proportionate and fair.
Entering a sixth year in recession, the Greek economy desperately needs jobs and
liquidity, therefore it desperately needs investments. With the current restrictions on
public spending and the difficult situation in the local market, it is rather self-evident
that investments can only come from abroad. Fresh money is needed in order to
revitalize the economy.
Why Greece? There are tremendous opportunities in the country. In fact most of
these opportunities are not here despite the crisis but because of it. Although still in
trouble, Greece remains the most advanced economy in the region, a high income
mature market with a significant infrastructure and a very well educated workforce.
But more importantly, unlike any other country in South East Europe, except for
Cyprus, Greece is a member of the Eurozone and it appears that it will remain so.
The fears of a so called “Grexit” have receded and the country has managed to post
a primary budget surplus, the first in a decade, and to put its public spending under
control. This was no easy task and it required too many sacrifices from a devastated
society which during the past five years has experienced a 25% of income loss and a
700% - 900% of rise in taxes collected in the country.
For the first time since the beginning of the crisis, Greece’s position in its negotiations
with its creditors, the EU, ECB and the IMF is strengthening and a further relief from
the huge public debt is now reasonably expected, not only on the grounds of
solidarity and fairness but also on pure pragmatic reasons: The Eurozone has done
too much already to let Greece collapse, so it is in everybody’s interest to keep the
debt sustainable and the country afloat.
Of course that does not mean that the situation is still not difficult. The fear of an
accident in the international economy and political uncertainty is still holding funds
outside the country. And this brings us to the second question. Why now?
Because later it will be too late. Unlike what happens in Europe where bankruptcy
is considered a terminal failure and a personal disgrace, banks in the US would be
more willing to lend someone who has already failed once than someone who has
never experienced hard times. When Greeks woke up with a terrible hangover after a
big party that took place for more than 20 years and even before the headache
subsided, they all agreed in one thing: Never again. Especially the ones who not
only were not invited to the party but were also asked to pay the bill, such as low
income employees in both the public and private sector, pensioners and small and
medium businesses.
After the initial shock and despite the despair and the anger for what had happened,
the people in Greece made a hard decision: to go forward. Unlike what everyone
predicted for a country trapped in a death spiral, there were no bank runs, no mob
attacks on stores and super markets and a few months after the emergency bailout
plans and the austerity packages that accompanied them, there are no more violent
riots and massive rallies and demonstrations.
Although liquidity is still missing from the local market, Greek banks have been
recapitalized and the banking system has been stabilized. And despite the delays
and the reactions to the reforms introduced by the Greek governments over the past
five years, it appears that international trust has been restored. Before the crisis
international markets were very suspicious about the facts and figures reported from
the local statistics service. In fact the term “Greek Statistics” had regrettably become
a sort of a joke.
Despite the reactions, the protests and the political cost associated with them and the
delays that necessarily come with such a sweeping change, the Greek governments
have managed to introduce a number of necessary structural reforms in order to
reduce bureaucracy, especially related to zoning laws, building permits and licensing
and ease of doing business and transactions with government agencies, while the
long awaited rationalization of the labor market removes one by one the disincentives
for offering new jobs. As more corruption cases than any other time in Greece’s
recent history are brought to justice, it appears that the Greek Government is starting
to win also the battle of corruption, which together with bureaucracy have an
estimated cost of 14 billion Euros per year to the Greek economy or more than 5% of
the country’s GDP, according to Transparency International.
There is much to be done yet. But the country is finally on the right track and nothing
can get it out of track again mainly because everybody understands now that all
these reforms are necessary and any further delays could put the country’s future at
risk. Therefore, despite the fierce political debate about the details of the program,
which after all is part of the democratic process, all major political forces recognize
that the position of Greece in the Eurozone and the European structure in general is
non-negotiable.
So where to invest? Those who are not familiar with the Greek economy find it hard
to believe that Greece is not all about tourism and shipping. Although, these two very
successful industries are leading the way by being extrovert and highly competitive
and by continuing to improve and innovate, the country needs diversification and a
larger portfolio of options In order to attract attention.
We believe that real estate will be very big over the following years. With the burst of
the real estate bubble and the collapse of the market and with liquidity still missing
from the market, there are still excellent opportunities out there. But they will not be
for long. The hotel industry has already picked up and it is very difficult now to find
the prices one could find until last year. A very interesting trend is starting to show
over the last months as individuals and entities from non-EU countries, especially
Russia and the CIS on one hand and the Middle East on the other, are massively
seeking for real estate opportunities which will allow them to apply for a Schengen
Visa in Greece thanks to a successful campaign of the Greek government to attract
foreign capital in this way. It is therefore no wonder that two major deals in real estate
were announced during the past few months: Canadian Fairfax Financial Holdings
invested 200 million Euros in EFG Eurobank Properties, raising their share from
5,7% to 42%. Last November the Dutch private equity Invel Real Estate and the
Israeli diamond king Beny Steinmetz announced a joint purchase of 66% of Pangea
REIC, Ethniki Bank’s real estate unit, for 653 million Euros, “betting on a recovery in
the country’s economy”. Actually both deals related to a Greek REIC, a Real Estate
Investment Company, a very convenient and tax efficient vehicle which is expected
to draw more attention from the market as more investors will start to explore
opportunities in Greece. Needless to say that if the tender for the Hellenikon project
is successful and this project begins, this will signal a major comeback not just for
real estate but also for Greece as an investment destination.
Information technology is another field where Greece already has a good track
record. Not many people know that Greece exports more information technology than
our famous olive oil. A Greek company listed on the Athens Exchange is the world’s
leader of integrated gaming and transaction processing systems, sports betting
management and interactive gaming services and has now a presence in 56
jurisdictions in all 5 continents. Likewise the global leader in mobile marketing and
mobile monetization, is a Greek company with international presence working with
mobile operators in 40 countries with direct marketing and billing access to over a
billion consumers thanks to an owned developed innovative technology platform. It
seems that the country didn’t do it all wrong during the Big Party. Despite its obvious
organizational and financial deficiencies, the Greek educational system obviously
works. As a result excellent scientists have graduated from local universities and are
now employed in some world class companies in the country.
Food and beverage have always been one of Greece’s main industries but until
recently Greek producers were more or less restricted to the local economy and were
not willing to explore their possibilities outside the country. Ever since the crisis,
exports in this field have sky rocketed. The strategic advantage of the Greek food
and beverage industry is quality. From unique products, known around the world,
such as olive oil, Aegina peanuts, Chios mastic, Greek Red Saffron to our excellent
wines, cheese and other dairy products, Greece is now present at every table in the
world. Greek exporters are opening their wings. Who would have ever imagined a
few years ago that a Greek fruit company would export almost its entire production of
kiwis to China? The company in question has quadrupled its production in two years
to meet the demand which keeps increasing.
Energy is another field of huge potential. BP’s recent return in a market which the
British giant abandoned in 2009 is no coincidence. This time, BP is not back to sell
gas. It’s here to buy the entire production of the Prinos Oil Unit in the North Aegean
during the next 6 years for 500 million Euros. The possibility of exploration of
hydrocarbons in the Ionian Sea and at the south of Crete has attracted the attention
of all major companies in the field. At the same time the renewable sources of
energy, such as solar and wind power, are already developing throughout the country
whereas the new gas pipelines are turning Greece into an energy crossroads
between eastern suppliers and western consumers.
Last but not least, the ambitious privatization plan of the Greek Government attracts
a lot of interest in major infrastructure management projects, such as ports and
airports. At the same time, the unique position of the country makes it an ideal place
for logistics services. The infrastructure already in place is indeed very advanced
and it can be further improved considerably within a reasonable time and at a
reasonable cost. Cosco International and Hewlett Packard are already here to prove
it.
Christos Christou
Drakopoulos Law Firm
Partner