Monday, May 23, 2016

Reflecting On 6 Weeks In Greece

This past stay was shorter than the normal 2-3 months but it seems like we are moving towards more frequent visits with shorter stays. The apartment has been returned to order, all the bags are packed, we are ready to go, except --- there are a couple of hours left before the flight. A good time to reflect.

Believe it or not --- I think Greece has turned the corner; at least for the next 2-3 years or so. By that I mean that the overall situation will certainly not get worse. Instead, it will get better and the improvement might even accelerate a bit. Here are some of my reasonings:

1) The completion of the review will trigger some form of renewed confidence. Mind you, there won't be a take-off or anything of the sort. But there will be some renewed confidence and confidence can breed confidence.
2) With the completed review, fresh money will come into the country. Mind you, there won't be a tsunami of fresh money but if the state can repay a billion here or there of its arrears, liquidity will trickle down into the economy.
3) The tourist season is expected to bring new records this year in terms of arrivals. To what extent that can translate into a record in terms of cash remains to be seen but it will certainly trigger economic activity.
4) The refugee crisis will undoubtedly have positive economic effects. After all, money is being spent which would otherwise not have been spent and the newly spent money is not offset by cuts elsewhere.

I will leave it at that even though I could easily add a few more points. One of the major points I see when I look out the window at the Thessaloniki harbor. There were times not too long ago when I was happy to count 2-3 cargo ships, and typically they were waiting to be unloaded. Today, I have counted 10 ships, all of them unloaded. I presume this mans that they will be loaded with products from Southeast Europe, including Greece.

The government has shown stability of grand proportions of late. Mind you: here we've seen that brutal austerity bills were railroaded through parliament and the 153 coalition deputies, breaking many oaths to the contrary of the past, signed off on them without a glitch. Well, not quite. One deputy dared to offer criticism --- and she was gone in no time and replaced by a yes-man. Now if that is not a testimony to stability, then I don't know what is. Of course, it also is a testimony to somewhat authoritarian government which, if a center/center-right government did that, it would be crucified by the international media.

Still, investors are looking for stability and stability is what they are presently getting in Greece, be it democratic or authoritarian.

In conclusion, I repeat that better times will be here again and we may even be surprised by the speed at which things get better. Unfortunately, I don't see this as a long-term trend.

Longer-term, the Greek economy can only blossom if there is foreign investment. Ever since I started this blog, I have said that there are only 3 solutions for the Greek economy: foreign investment, foreign investment and, again, foreign investment. I simply don't see anything this government has said or done which could prompt foreign investors to make longer-term investments in Greece. They may come to realize short-term opportunities but then they will leave again after they have done that.

My prototype foreign investment has always been Cosco. To Cosco, the Piraeus harbor seems so interesting that it justifies the struggle with the folly of Greek politics. I don't think the present Greek government has done anything to convince foreign investors that they are truly welcome. That seems to be a matter of ideology and until there is a change in that ideology, longer-term foreign investors will stay away (and perhaps even Greek investors will leave).


  1. How could there ever be serious investment in Greece when:

    1. All accounts above 100,000 euros could be confiscated at a drop of a hat?

    2. There is still an unresolved sovereign debt crisis? When Schauble says that we will discuss long term debt after 2018, is the investor not supposed to take such seriously?

    3. And what about the long term trend of the euro which all experts expect to be equal to $0.75 by 2018? Why would any overseas investor bring capital in Greece, convert it to euro for investment purposes and then see a catastrophic currency exchange rate resulting in a 40% or so guaranteed loss?

  2. Generally I agree. End of review means much needed stability, more money always helps in a cash strapped economy, tourism helps a lot. However I will add a few more that I think are more important as they signify more long term reforms. A) The Tax Collection Secretariat has become a truly independent agency,under direct EU supervision ( in Greek) b) the arrival of KKR signifies the emergence of serious money, which operates as a powerful motive c)clearing up Idomeni (taking place as I write this) which is vital for Greek exports to the EU d) private cargo trains are at the last stage of testing before commencing service (one with the Austrian Railways)e)the perplexing return of money to ELA has slowed down but still goes on f) the new super privatization agency seems to be exactly what the doctor ordered g) the peace in Syria and what it seems to be a neutering of Erdogan's threat to flood Greece with refugees means that the geopolitical picture is stabilizing. All good.
    Now let's move to the new hot spot. What on earth is going on in Austria? Given that the Green candidate won by a sliver on epistolary votes should we suspect that the powers that be in the EU massaged the numbers? Possibly with A. Merkel making noises about an Anschluss, apparently beloved by some Austrian right wingers?Is it a portent of instability? Will it influence the Balkans in the near future? Anay insider views?

    1. Below is my take on the Austrian election:

  3. "4) The refugee crisis will undoubtedly have positive economic effects. After all, money is being spent which would otherwise not have been spent and the newly spent money is not offset by cuts elsewhere."

    It depends on who you consider as benefiting. This is from the parliament, reply of the minister for european affairs. According to the G4 Directorate of the ministry of foreign affairs, the direct and indirect cost to the greek state since 2015 for the refugee crisis was 1.8 billion euros, as of January 29 2016.

    Francois Hollande 8 March 2016> "Greece will be receiving 368 million for the refugee crisis up 2020"

    March 1 2016:

    The money from EU to Greece, will be given directly to NGOs, not to the goverment:

    Maybe i am mistaken, but who paid for this other than the greek state? I mean: 1.8 billion (already paid, plus expenses up to 2020 for schooling, feeding, etc, but let's pretend that the expenses ended in January and there will be no more) - 368 billion = 1.432 billion missing and the 368 go to NGOs.

    So who paid for the 1.43 billion? No, because if this is so beneficial, we can take more. But someone must explain the math better to me, i am too old to understand.

    1. I obviously have no answers for the details but my impressions from media reports in the last months was/is that Greece will be paid handsomely for its refugee support. Frankly, I don't think that anyone could expect a cash-starved economy to use its own means to solve a European problem.

    2. My impression for the media, unfortunately, is that once more, Tsipras has taken a friendly pat on the back and the only net beneficiaries from this, are the various NGOs that will receive a fraction of the money spent by the greek citizen, as Tsipras never even had anything new other than that package up to 2020.

      The only other support that Tsipras had got in exchange, was the famous relocation plan, who he tried to present to the greek audience, as a slow, but sure solution. Look how well that worked:

      Mind you, this was signed by heads of state.

  4. An addition: In case you find it odd, that all those honorable gentlement signed to relocate 160.000 and after 6 months have relocated 660 and you are wondering "but, surely, signatures of heads of states can't be ignored", let me tell you a greek proverb: "nothing is more permanent than the temporary". The plan is this: "We sign to receive 160.000. Then we delay. As time passes, these people, by force of reality, will have to make a new life in their new trapland, Greece. Once they do, they won't even want to leave anymore". SYRIZA has been already preparing for positions in schools for the refugee children and even free access to the greek universities for those of higher age, despite any lack of documentation from their home countries that would qualify them to do so and SYRIZA's only obstacle, was whether other european countries would object to that or not.

    So, once your son starts going to school, learns greek, you find a house, possibly a job or in absense, the small monthly money for minimum income that SYRIZA will give you, you are making a life. 3 years later, a piece of paper arrives and tells you: "you are now qualified to be relocated to Portugal. Please contact us". Do you think that he will want to go?

    Advantages of this solution: The Europeans get to appear as magnanimous and adhering to UN refugee law, while in reality the bulk of the problem is unloaded elsewhere. You then sprinkle the whole story with non binding, generic and ambiguous words about "support to Greece", which at the end, doesn't even cover half the costs.

    Brilliant, isn't it?

  5. The saga of COSCO-PIRAEUS is much more of a success than most Greeks wish to admit or remember. Let me give you some key figures from my diary and notes.
    2003 turnover is 1,6 MIO TEU's.
    2007 turnover is 1,4 MIO TEU's.
    2007 the long strikes in the port begin.
    2008 turnover is 0,4 MIO TEU's.
    2008 COSCO takes over one of the two piers.
    2008-2016 COSCO invests MIO's in cranes, piers, storage areas and transport vehicles.
    2011 total turnover reaches 1,4 MIO TEU's again.
    2015 total turnover is 3,6 MIO TEU's (COSCO 3,0 and Piraeus Port Authority 0,6)
    2016 COSCOS's April monthly TEU's is 267.100 (+18,6% y-o-y).

    Industry experts (Greek as well) estimate that the added value per TEU of transit traffic (ship to shore) is 4 times higher than that of transshipment (ship to ship). In spite of the unique position of Piraeus nearly all the traffic is transshipment, because the rail service is a joke. Of all the Mediterranean container ports only Thessaloniki offers better position for transit traffic, but they don't have the port infrastructure.
    Piraeus treats the cruise traffic the same way. There is not a lot of money to be made on cruise passengers as such, unless you are an embarkation/disembarkation port. Just imagine how many restaurants, taxis, busses, airplanes and hotels xx MIO transit passengers would fill.

    PS. COSCO is not your typical investor, they have deep pockets and long timelines for making their profits. Greece cannot hope to get many of those sorts. The general opinion in the industry is that COSCO has not yet broken even.

  6. If I can ad to your list?
    2016 May, Piraeus container port is on strike again.
    OK it is only pier 1 that belongs to Piraeus Port Authority

  7. I do not share your sentiments that there will be "peace for our time" in Greece, I rather envisage the following scenario:
    Tsipras will, with his self-proclaimed victory, be able to keep the lid on until the holidays start. Greece will not implement the outstanding prior actions, but they will get the 7,5 BIO shortly before the British referendum on the 23 of June. Parallel to that Europe will keep the lid on the migrant question , at least until the 24 of June, preferable until the 1 of September. Depending on the outcome of the referendum Europe may or may not be busy over the summer, I think the Brits will opt to stay.
    When Greece return from holidays in late August they will face the missing prior actions and the 1 September milestones in order to get the last tranche of 2,8 BIO. Greece may well decide that the outstanding reforms are worth a lot more than that, the more so since there are no upcoming debt payments. The average Greek will, latest by then, have realized that the cries of victory sounds rather hollow, the new taxes will also have made themselves be felt, they may well decide to gamble again. Having passed that the October review will be due, and latest at the years end the budgets will slip and the contingency measures will kick in. meanwhile the migrant situation will have deteriorated, inflows increased. Schengen will exist, but with free movement temporarily suspended.
    Should EZ and Greece iron out these hurdles Greece may have 2 years tranquility until the present program expire. During that time living standards for a large part of the population will be lower than today, the remaining fat will melt out. It will become painfully clear that the business model does not work, that you cannot balance your budgets with high taxes on few people and "one of" savings. Well, we shall see.
    PS. Mr. Tsipras, congratulations with your heroic victory, may you have many more like this.

  8. A friend pointed out that I have forgotten the highest hurdle. Provided the IMF participate, and it looks like it, they will have their own program, with their own reviews, by their own people. That program will be presented to Greece before the end of the year, but it is not hard to guess what it will look like, have a look at IMF's latest Debt Sustainability Analysis. IMF has rightly claimed that sustainability is a product of structural reforms and debt relief, since they did not get much of the later, they will want more of the former. Due to the lack of implementation, they mention in their DSA, their milestones will be based on that, not agreement, not voting into law, but implementation on the ground.

  9. 2016 June, the sale of the remaining part of the port to COSCO has again been obstructed by PPA.