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Down an austere path

Ancient Greeks looked to Poseidon to keep their sandals dry. Yet with public debt today more vertiginous than Mount Olympus, at 180% of the economy, modern compatriots depend on a more tangible flotation device; an eight-year EUR86 billion debt-relief program.

But the price has been austerity.

The consequent tax burden will affect 1 million citizens, while pensioners with a monthly income of EUR1,250 are set to lose roughly three monthly pensions a year.

Reading the macro entrails

Actually, there’s no need to read entrails when macro prints are available. GDP climbed 1.4% YoY in 2017 with a per capita print of USD18,646. In fact, Greece saw two consecutive quarters of growth for the first time since 2006. A year earlier the primary surplus of 0.5% was trounced with a positive performance of 4.2%.

Indeed, austerity may turn out to be a shorter-lived toothache than many had feared. As of March 2018, State General Accounting Office numbers revealed the net revenues of the state budget at EUR9 billion, or 14.5% above target. Furthermore, emergency central bank funding to Greek lenders shed EUR2.4 billion in February, or 13.5% according to the Bank of Greece.

Getting the investments right

Privatization and FDI is vital to a sustainable economic resurgence. Canadian mining giant Eldorado Gold stands to create 2,000 jobs in Northern Greece on a EUR3 billion investment. Yet permit delays have led to threats of withdrawal.

Such vicissitudes have rained criticism on Prime Minister Tsipras’ Syriza-led government. In his defense, Tsipras cites a 7pp drop in unemployment since 2015, a 7.5% export rise. Notwithstanding, youth is a leaden 45%. Such commercial wobbles therefore give pause. Meanwhile, the prospective redevelopment of Athens’s former Hellinikon airport was held up (perhaps rightly) by the Archaeological Council’s postponement of a redevelopment decision.

The EUR8 billion scheme would, however, be Europe’s largest foreign investment.
Elsewhere, Fraport, a German consortium managing 14 regional and touristic airports under a 40-year concession, has been heavily criticized by the government for not meeting commitments to modernize facilities.

The PM has cited the takeover of Piraeus port by Chinese shipping conglomerate Cosco as an example of such concessions done right; it will become Europe’s biggest port, and will revitalize shipping with infrastructure capable of reviving the broader economy.

The state of industry

Close to 10% of the world’s marble production takes place in Greece, and it is still the world’s third biggest olive grower. Off the land, the Greek merchant fleet comprises 70% of the EU total. OTE Group is looking after Greece’s technological future, having invested over EUR2 billion over the past six years, with EUR1.5 billion more expected before 2020 on optical fiber and 4G/4G+ technologies.

And then there’s tourism. Since the romantic poets of Europe took their grand tours, Greece has fascinated the traveler. Annually, 16.5 million visitors dwarf the 10 million population, generating around 16% of GDP. Revenues peaked at EUR3.5 billion last August. Foreign tourist arrivals climbed 17% YoY to 342,000 in January 2018.

What the Oracles say

In February Moody’s upgraded Greece’s credit rating by two notches to B3, confident of a return to market-based funding once the current (third) bailout program concludes in August. Then the nation will turn to the bond market to right itself.

The move mirrors those of Fitch and S&P, and yet the nation still junks it out in non-investment grade territory. Future upgrades now depend on fiscal performance and a material decline in the debt-to-GDP ratio. Postponed auctions in February delayed the payment of a rescue loan installment of EUR5.7 billion.

Socrates is perhaps best known for his paradoxical utterance “I know that I know nothing.” Hopefully readers are now one up on the old Greek.