Tuesday, May 9, 2017

The Gut Says: "Greece Is On The Rebound!"

My wife and I always spend springs (typically 2 months) and autumns (up to 4 months) in Greece. I admit that the microcosm in which we move may not be typical of all of Greece but it is always the same microcosm: a mixture of big-city life in Thessaloniki, visits to villages, trips to tourist areas in Chalkidiki, travels throughout Northern Greece, etc. This microcosm may not reflect Greece overall but it serves well as a basis to measure trends. And here is my surprise for you:

Greece is on the rebound, no doubt about it!!! I first had that feeling last spring and it intensified last fall. After having been here for 3 weeks this spring, I am now convinced. I sense a level of positivism if not optimism which I haven't sensed since 2010. In the villages, I see 1-person shopmen who suffered terribly in the past and who now say that they have quite a bit of work. Some of them even in the construction industry. For my car service, I used to get an appointment at Hyundai with a week. Last spring it was already 10 days and this time around it was a little over 2 weeks. I see traffic jams in down-town Thessaloniki which I haven't seen since 2010, and this at gasoline prices 30-40% higher than in Central Europe! When I look out at the Thessaloniki harbor, I now see up to 10 freighters loading and/or unloading freight. I could go on and on. If the official stats do not show that, it's because the official stats miss a lot of reality.

Barring unforeseen surprises, Greece will sign a deal with creditors soon and it is likely to start benefiting from the ECB's QE. Today, I even read that they are thinking about placing a bond in the markets next June. If some of that (or even all of that) really happens, there will be a lot of positive news about Greece. And positive news will feed upon itself, particularly when a record tourist season reinforces such positive news every day. The steady decline in Greek bond yields will also be a continuous reinforcer of the good news. Financial investors will start wondering whether perhaps they might be missing the bottom of the crisis to make good deals. That, too, could feed upon itself.

I have no facts to offer but my gut says that Greece is on the rebound. The key variable for increased economic activity in Greece is the net inflow of foreign capital. Foreign capital does not always flow on the basis of hard facts. Oftentimes, if not even very often, it is the 'leading steers' that make the herds move. It would only take a few 'leading steers' to set a trend in motion. Who knows? We may soon see the financial herds turning around and 'discovering Greece' anew!?!

Mind you, I don't believe that Greece today is a much better place to do business than 7 years ago. But once the herds start moving, they never pay attention to such details. Neither do I think that the bottom of Greek society will benefit all that much from the herds. As Adam Smith said: "The problem with fiat money is that it rewards the minority that can handle money." I recently read that about 1,5 million people in Greece are without income and assets. I don't think miracles will happen for them.

But there will be a fairly large section of society which will benefit from the renewed bandwagon. As I said, I don't think it will be a new start in a fully reformed country. Not at all!

But I think that there is a good chance that we will soon see a renewed herd movement. Essentially a repeat of the past. When money comes into Greece, Greece does well. The better Greece seems to do, the more money comes into Greece. And I am fairly certain that the herd will start moving again soon.

Until the next 'sudden stop' happens...


  1. And my gut says that the global economy is about to experience a China syndrom which will see Germany on its knees, unable to respond, and Greece stuck in permanent stagnation for another 25 years.

    How about this for being cheerful and perky on a Tuesday?

  2. Have you looked at the latest on exports?


    1. Below is the commentary. Yes, exports were great but imports were quite a bit greater, leading to a fairly large trade deficit. Incidentally, rising imports are always a sign of more economic activity (in Greece, that is).


    2. http://www.statistics.gr/documents/20181/6177bf6c-06ae-4041-b81a-8bfdb7082e04

      2.2 % y o y Intermediate Goods and 43.9% in energy?

  3. Kleingut:

    I have a bias against Greek statistics and ELSTAT in particular because even though I am Greek and speak the language I have no idea what they are talking about.

    This press release for March 2017 is totally meaningless to me. For starters it reports numbers as if Elstat is a radio announcer reporting on a football game.

    Their whole analysis lacks context and connectivity with the overall picture. They have an obsessive habit of comparing a month with the same month of the previous year as if this means anything. Greece is not Germany pushing its limits on industrial production month after month so that looking at the month to month variations you may get a feeling about the appetites of its customers. Greece is a country of approximate behavioral patterns and what I mean by this is that when Greece decides to import more crude oil in preparation of the Easter season needing ship fuel to service its islands out of winter hybernation then you see some big impacts which are not repetitive thoughout the year. In one year Greece might decide to buy its fuel imports in March, others in April or May. The same with car rental companies as they renew their fleets. They decide in one month which varies from year to year to buy new numbers of vehicles and spend the rest of the year exporting their used cars in markets in the middle East.

    If I were an American bred manager(which I am) operating ELSTAT I would ask the people reporting to me to lose these meaningless press releases freezing in time undless ups and downs without context and instead use graphs, pie charts looking at the last 12 months, 5-years and 10-years. What Greece needs in its statistics reporting is not a frozen balance sheet approach, rather, an income statement approach which highlights benefits, misses and trend delineation.

    We can then see how the composition of imports and exports changes overtime and perhaps understand why.

    What I am trying to tell you can not be dismissed lightly because I have no clue what these people are reporting about or the usefulness of their data as reported. Reading this press release leaves me in total fog. These press releases are designed for people only answerable to themselves and can not be used to lay out national policy or meaningful management of commerce.

  4. Let's use your gut approach predicting a Greek rebound and apply it to the "consumption is returning big in Greece" theory.

    If we combine it with our brains regarding import/export statistics for Greece it is actually impossible to conclude that Greece is increasing consumption again. And this can not be for the following simple reasons:

    1. Greek citizens are bled dry in taxation and have little or no disposable income towards consumption (a fact that all political parties agree on and seconded by practical observations).

    2. There are still capital controls in Greece so even if the Greeks had money (which they generally don't) could not use it on consumption binges.

    So something esle is going on. What exactly requires going deeper under the surface and not get stuck on the total reported import number but rather trying to understand its components.

    My own review of the Panhellenic Exporters/Importers Association figures for the Jan-Feb period reveal a 69% jump in petroleum related imports and another impressive 65% jump in a category reported as "Michanimata & Yliko Metaforon" which loosely translates to Machinery amd transport material. I am not sure if my interpretation is correct (that's why we need reliable guidance in reported statistical figures rather then throwing numbers out there to see if they stick on the wall as ELSTAT does).

    A further examination of countries of origin for imports reveals that all the usual suspects such as Russia, Libya, Algeria, Iran, Iraq had more than 200% increases on imports Greece that can't be attributed to none other than crude oil and natural gas.

    As to the machinery and transport material think of the improvements at the Cosco Piraeus harbor, think of Fraport upgrades in 14 regional airports, think of tunnels and highway construction and think of major projects like the TAP gas pipeline under construction and nearly 50% complete. It looks like all these are one time big ticket item purchases by active private companies having to do with specialized heavy equipment and transportation related vehicles (trucks, train cars, construction type heavy equipment and the like).

    So before we press the panic button and make Berlin crazy again that the unreliable and pennyless Greeks are feasting again better we examine the numbers carefully and withhold emotional reactions that "happy days are here again" because I can assure you they are not.

  5. "What I'm trying to tell you cannot be dismissed lightly because I have no clue". Who am I to contradict that?

    1. Nice comments like this would propably earn you a seat in a Lower Saxony city council someplace but not in Greece. And so that we perfectly understand each other. It's not my job to hold private lesson with every citizen of the Rhineland so that they can stop embarrassing themselves with commentary which has nothing to do with the substance of Greece. It's not our responsibility to rid you of biases one picks in the flea markets of east germany or equivalent.

      So here is the deal: You want to comment? Then do your exhausting research and show us a faint sign of competency. Repeating propaganda lines from Berlin owned papers such as Kathimerini will not get you a passing grade but an assured recommendation to repeat the class next year.

      Sorry when other students enjoy the Greek beaches, this year you will sweat it out with the other piggies in the family barn.

      Bye, bye.

  6. Lieber Herr Kleingut,

    The bottom in the Greek Economy will be reached once the cleanup of the Bank NPLs has started, especially the ones dealing with SME Loans and private mortgages. As long as Government, Banks and the public in Greece are not willing to address the NPLs, there can be no bottoming up (and the subsequent Aufschwung) of the economy.

    1. KK:

      If you knew anything about the Greek economy you wouldn't promote such uniformed opinions.

      The Greek banks are irrelevant to the Greek economy. They are state fed and stay alive by recycling 3-6 month treasury paper at 3%. There is no reason to have 4 of them; 2 will do just fine. Most of willling Greek borrowers are not credit worthy ( meaning those who mostly need loans to support their businesses don't have the collateral and/or credit profile for borrowing) therefore the only reason for the banks' existence is to control Greece for purposes of Berlin's dictatorship (in other words all Greek banks deserve a heartfelt death sentence never to be heard again because they are nothing more than instruments of a brutal occupation).

      Now, regarding the NPLs that's an ECB problem and mostly has to do with whether the Greek banks need to be recapitalized once again. The concerns that you raise don't affect the average Greek but are the concerns of Berlin and Brussels. And this is the part - if you are a Greek - that you could say to Berlin and the eurozone that is a very good day for them to go and eff themselves rather than Greece spending its time fixing another problem which the euroincompetents are unable to fix.

      Are we all clear on the above? So please don't you ever speak again of the dead (which is what Greek banks are) and their effing problems. It's not our problem to fix that which the eurozone has destroyed. Not with Greek money anyway. With German money you can do whatever you wish including fixing the disaster your brutal invasion left behind.

      I hope sincerely that this is the last time we ever speak of corpses called Greek banks. They are gone, they no longer exist and whatever happens to them is not our problem.

      Goodbye and please close the door as you leave the room.

  7. Perhaps one day you'll realize that there is absolutely no such thing as "a fully reformed country", at least not out of the (hypocritical) political rhetoric and / or hardcore fantasies of the ideological dogma and / or the national(-istic) blocks you identify with. I guess this will be the day when one comes and announces his intend to "fully reform" your microcosm...

  8. Hirings are up in Greece but these are not the jobs you want:


  9. I hope none of you or your family members drive BMWs:


    And this on top of the VW diesel scandal.

  10. "they no longer exist and whatever happens to them is not our problem". How profound and eloquent.

  11. Axiom #1: Greece is always on the rebound at the beginning of the tourist season and this happens year after year. To say with certainty that Greece is on the rebound one has to wait until the November/December numbers come out. To confirm such rebound one has also to have back up from the 1st quarter of the following year.

  12. 300 Million euro investment:


  13. There are a lot of "if's" I'm not too sure about after having re-read the draught of the fourth memorandum and Schaubles repeated words about "our agreement of May 2016". Regardless, it will not be a herd in stampede like last time, more likely the usual stray animals. Domestic optimism and activity (mostly driven by spending the money that has been squirrelled away) will not influence the market in a major way. As for jumping the band wagon, for the financial investors it is too late, for real investors who wants to create wealth (for themselves and for Greece) it is way too early. Greece must make up her mind how and where she wants to increase her productivity, failing that the living standard will remain as it is.
    Look at realities, McKinsey described how they might get 500000 people in work within 10 years. That required a lot of reforms, meticulous planning and following up on the plans. There were no shortcuts or jump starting there. Tsipras has just declared that after implementation of his new 5 year plan there will no unemployed people in Greece. Mind you, the plan has not yet been published and produced. Greece is still waiting for an outside force to save them, and that is the very reason outside forces are reluctant to do so.

    1. So in your opinion the McKinsey report took austerity into account? What use could a McKinsey report have when it used all the wrong assumptions?

    2. @Phoevos:
      So in your oppinion the McKinsey guys assumed the ongoing funding of the greek welfare state?

    3. Urs:

      It's obvious that the McKinsey guys had no idea of the severe recession to hit Greece, the capital controls issue, the disagreement between IMF and Berlin on the debt issue, the rise of anti-eurozone sentiment throughout the continent. I am fairly sure that a report put together 10 years ago using erroneous assumptions is meaningless today and if McKinsey were to publish a new report on the Greek economy today, its recommendations would be quite different from the old report. It's only logical to expect that there is an entirely new base case today with 30% of the Greek GDP and a whole set of new constraints that one has to take into account in advising Greece going forward. Otherwise the McKinsey recommendations are nothing more that recycled opinions on off the shelve ideas which could apply on many other situations; in other words a generic type of a report without any particular depth and hence of limited utility.

    4. Urs:

      I am assuming you already know that the original McKinsey report was wortless, right?


    5. When someone calls the McKinsey report 'worthless', my juices start flowing. There are two subjects to which I dedicated so many articles that they could make up a book: the McKinsey report and the EU Task Force for Greece. Both, if properly implemented, could have put Greece on a path to prosperity. Both were underutilized and/or simply ignored. For those who are interested, here are links to both of these subjects:



      As far as I know, the McKinsey report was not entirely original. Around 2006/07, a commission appointed by the Greek government prepared a report about Greece's future path. I can't find it now but I remember reading it at the time. In a way, McKinsey only developed this report further.

      At least two reasons why the McKinsey report was more or less ignored. First, it came over the signature of McKinsey. Instead, if should have come over the signature of some Greek entity (perhaps a commission) albeit with input from McKinsey. Secondly, no Greek government ever 'owned' such a report. Without that, there is no hope. Here are 20 key priorities/measures recommended by McKinsey:


    6. Kleingut:

      If I remember correctly one of the McKinsey recommendations was to engage in domestic pharmaceutical production. That's a fine idea but financing is the key. So to be able to implement such part of the strategy other factors weigh in like: equity, funding to construct the facility, equipment, markets to sell the drugs and most importantly pricing. So to say that there is an opportunity for pharmaceutical production to the point of acquiring and maintaining a comparative advantage is a very long way and I think all consultants are silent about such. They can spot likely targets but making them bullet proof no consultant can do such.

      That's way we call the report worthless. The Mckinsey report was not ignored by the state. It was ignored by the private sector which had every right to disapprove because it would be its capital at risk in implementing its various components. Tourism which was a strong McKinsey recommendation was not ignored because this is a field that the private sector could see a competitive advantage. So tourism became the tool out of the crisis and we see new records every year in such field.

    7. To blame non-results on the lack of financing availability is always a good discussion stopper but it is not correct. I once looked into the Greek pharma companies (see 2 links below) and found that there were some real jewels. Several of them were flush with cash. Regrettably, one of them (Pharmaten, a true gem in my opinion) was sold meanwhile to foreigners. It seems that the Greek owner no longer had confidence in the future of their country.



    8. Kleingut:

      If I am not mistaken a key pharmaceutical player was a Cypriot (whose name escapes me now) involved in Marfin Bank and who ended up with a pile of legal issues. As to the Greek owner who received an offer he couldn't refuse I think it has little to do with confidence in the country or its government.

      As Samantha says this is all "gone for good". For good or bad that's the question we need to answer:


    9. Btw, Kleingut:

      There seems to be an endless list of pharma companies in Greece, some in Kavala too. Problem is (as we both know) that Greek companies are not meritocracies but rather family businesses passed on down from father to son. Most sons are clueless though not to say anything about the fathers who started them:


    10. The Cypriot's name in pharma was Lavrendiadis. Btw, a rumor that is going around printed in more than one greek newspapers is that the Chinese are prepared to invest 40 Billion euros over the next year in Greece in areas of tourism, logistics and energy. Such if true, could be the balsam poor Greece needs.

    11. And here a bit of background profile for Mr. Lavrentis Lavrentidis:


    12. I remember the name Lavrentidis except that I don't remember it in a favorable context.

  14. Because the port of Piraeus has come up before it's nice to keep score of what a true investment is and what it means for Greece:


    1. Below is what I think was my first (of VERY many!) articles about Cosco, written almost 5 years ago. When I first heard about Cosco, my reaction was that this could be a very interesting foreign investment for Greece. The more I heard about it, the more I wrote about it and over time I became convinced that Cosco could be seen as a prototype for the kind of foreign investment Greece needs. At one point, the projection was that Cosco would add 1,5-2% to the Greek GDP by 2018.

      As happy as I am that my first reaction is proven to have been a good one, I cannot ignore how much flak I have received for my positive views about Cosco over the years. Not only in this blog but also in various other media where I commented about Cosco. The safest bet was to say something positive about Cosco in Varoufakis' blog and the attacks would fly in my face immediately.

      I was accused of promoting Chinese sweat shops in Greece. The Chinese were only exploiting the poor and unprotected Greek workers. The government had sold Piraeus far too cheap. Etc. etc.

      Sometimes I wonder what those fierce critics of Cosco at the time would say today. Would they still hold on to their damning positions or might they have changed their views?


    2. Kleingut:

      I agree. This has become easily the best FDI deal ever for Greece.

  15. Here is another troubling sign. ELPE (Hellenic Petroleum) just reported for the Q1 2017 an increase of exports by 18% and a net earnings increase by 287.5%.

    When you have an economy where 24% of all exports are petroleum based products then you know that you are in real trouble.


  16. One thing is abundantly clear for Greece. The EU is no longer where opportunity could be found as it is a declining market whereas the rest of the world is full of promise for Greece:


  17. You bet the McKinsey plan included balancing the productive capacity to living standards (in modern Greek austerity), all plans, taking political realities in Europe into consideration, would have had to do that. Greeks however, denying realities, reacted by rejecting all proposals, refusing to make their own, and crying the ever impotent OXI!
    As a consequence, debt or not, Greece will start the next decade with:
    -No plan.
    -Lower productive capacity.
    -Massive unemployment.
    -Lower living standards, and falling.
    -Lower personal wealth, and falling.
    -And, worst of all, a political system (the voters) that has been tried and found wanting from the right to the left. A system where the only sensible vote is the one chosen by the 1/2 million who did so with their feet.

    1. Lennard:

      The McKinsey report was a mickey mouse report whose only objective was to win clients for the Athens office. The racket usually works like this: You publish a "can do" report like this totally ignoring the idiosyncracies of the local economy and then you are flooded with phone calls by clients who want to take it to the next step. It didn't work. I have the strong impression that the McKinsey office in Athens (which happens to be in the Syntagma Square) lost its clientelle and has underperformed after publishing a report using 2010 and 2011 data which made the 2012 publication of this report pretty useless. Don't confuse consulting advertising with results on the ground. If McKinsey knew what they were talking about they would have published a follow up report by now projecting things forward taking into account all constrains based on today's reality. I am not sure they are still in business in Athens.

    2. Lennard:

      You are exhibiting high naivete in politics based on what you say. So you want the reigning government of Greece to publish an action plan so that it can earn the honor of being harrassed by the oposition on a constant basis? These things don't happen in functioning political landscapes. Of course there is an action plan but if we reveal it to you we would then have to kill you because it's highly classified. Only an uber naive government would give a blueprint of its business plan to its foreign and domestic enemies to rip it apart and ridicule the government in the process.

  18. This article is for those who are not aware of large projects which will benefit Greece because such projects are rarely talked about. Thank God, Greece has Israel and Cyprus by her side:


  19. So you tell us to export more and when we do we face German fraud. Best remedy?


  20. And while Greece waits for the Chinese to invest 40 billion, the tourist season to produce another year of record (diminishing) profits, the Israelis and Cypriots to make her a world power, the gold to come out of the mountains and the olive oil prices to raise to EUR's 1000 a kilo, the world moves on. The ultimate would of cause be a torrent of hydro carbons, making them all as prosperous as -----------Venezuela?

    1. No Lennard. The per capita GDP of Greece places her into a far higher category than all Latin American countries. And I mean all of them. Greece is far better than Chile, Colombia, Venezuela, Bolivia, Argentina and Brazil. Not even close for comparison.