By: Michalis Amourigianos, Athens University of Economics and Business
Over the past few weeks we have witnessed some indications of recovery by the Greek markets. The Athens Exchange index has been stable over the fragment of 1000 for the first time after 2 years (currently 1152), while the Greek economy is in its sixth year of deep recession. In addition the spread of the 10-year Greek Bond has decreased 30% in less than a week. The banking sector also had significant profits, nearly 20%, the past couple of weeks, influencing positively other stocks.
The boom mainly started with the first big privatization of OPAP (some 650m euro), which has the monopoly in betting activities in Greece (http://www.opap.gr/en/web/guest/corporate
), and there are more to come. This fact immediately launched an investment climate which was reflected in the stock market. Meanwhile, the primary deficit dropped to 0.6% of GDP at the first quarter of 2013 and there was an improvement of the Current Account caused by an increase of exports and a smaller increase of imports (these are some of the main fiscal targets the government had to achieve). Furthermore, the approval of the 4.2 billion for the financing of the second stabilization program by the Eurgoroup for the first quarter of 2013, and the 3.2 billion for the second quarter of 2013 indicate the increased confidence of Greece’s lenders about the Greek economy . Moreover, the upcoming completion of recapitalization for the leading banks, in a total of 48 billion Euros has given optimism in the markets. All these factors led to the upgrade of the Greek economy (from CCC to B-) and the four biggest Greek banks by the rating agency Fitch, giving perspectives of stabilization and enhancing the Greek bonds, which were ‘’dead’’ because of their very high risk, by attracting new investors. As a result the possibility of a default is decreasing exponentially. Simultaneously, the Greek Prime Minister’s (Antonis Samaras) business travel to China, seeking for investors, has brought some results, and there is a big interest for big scale investments considering airports, trains, ports, real estate, new technology and tourism, which might have a positive impact in growth and employment.
All the above have raised the expectations of recovery for the Greek economy , with estimations by the ministry of finance for development, primary surplus and lower interest rates by 2014. However, Greece still faces severe problems, such as very high unemployment rate (27%) , depression (4%), lack of competitiveness, inefficiency of the public sector, and uncertainty about the fiscal policy outcome for the upcoming years, especially considering the total tax revenues, because of the fact that Greece has a big underground economy (23% of GDP).
This is a very crucial period for Greece and its economy. Solvency, stability and structural changes might be the key for the country’s recovery. The macroeconomic effects of this euphoria remains to be seen..