The euro has dodged a couple of bullets recently. That may seem an odd thing to say in the midst of the crisis, but recent news could have been worse for the single currency.
Firstly, the Irish voted to accept the fiscal treaty last week. Then the latest euro-wide GDP figures also confirmed that the wider eurozone area grew in the first quarter.
However, next weekend, Greece goes to the polls. With last month's elections failing to produce a government, a repeat could lead to a collapse. The final polls gave little clue as to the result they show the far-left Syriza neck-and-neck with the centre-right New Democracy.
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One person who has strong views about what is happening in Greece is Katerina Sokou. Sokou is the financial news editor of Kathimerini, a Greek broadsheet. Here's what she had to say and what the investment implications could be.
Could Greece manage to muddle through?
Sokou thinks that a Syriza victory would be a blow to the idea of austerity. While the party claims that they don't want Greece to leave the euro, they have said that they will not only refuse to cut further, but will reverse many of the existing cuts. This would clearly make it very hard for Greece to stay in the euro.
Even if New Democracy is able to form a three-way coalition, the drama may not be over. Sokou points out that they have had to promise that they'll try to change the terms of the agreement.
However, she is cautiously upbeat. If New Democracy does win, she expects the verdict to be respected. While no one likes the cuts, the attempts to stop them through protests have little support among the wider Greek population. Indeed, most people now accept that the stakes are much higher.
There is also growing anger at the self-employed and businessmen dodging taxes, which could help the cause of reforms. She also thinks that the recent troubles in Spain have made it clearer to Brussels that they have to compromise.
Overall, Sokou thinks there is a strong chance that Greece may still remain in the single currency. At the very least, she reckons that the odds of an exit are lower than the market is currently predicting. That would make Greek banks, as well as food and cement companies, good value.
If Greece does leave the euro, Sokou thinks the effect would be extremely negative. She endorses the view of the National Bank of Greece, which claims that personal income would fall by more than half. Indeed, if the country is shut out of markets it may prove impossible to import enough fuel or medicine. Sokou also thinks any recovery will take a long time, as the disruption caused by the exit scares tourists away.
What we think an exit is both likely and desirable
We're less convinced that an exit would be a bad thing for Greece, certainly not in the long run. As Kathimerini recently reported, tax revenues are still falling. With growth estimates proving wildly optimistic, it is clear that even if cuts are made, the government will still be left with sky-high levels of debt.
At the same time, Berlin continues to block increases in the amount of European Union support for the peripheral countries.
The fact that the European Central Bank also decided to keep rates at 1% this week suggests that another round of LTRO (Europe's version of quantitative easing) may not take place soon. And while the eurozone grew in the first quarter, Capital Economics points out that the Spanish and German data provided so far suggest that, "a renewed fall in GDP is likely" in the second quarter.
We also think that a Greek exit from the euro will be a good thing for tourism. A study by the US embassy in Argentina found that after the country devalued its currency it took several months for tourist numbers (which had been declining since 1998) to stop falling. However, the figures then quickly started to recover.
At the same time many Argentinians decided to take holidays at home, further boosting the industry. In the longer run, the decision to let the currency float helped overall visitor numbers grow from three million in 2001 to five million today.
How to profit from a Greek devaluation
So what should you do? The Greek market has certainly been beaten down. If you agree with Sokou's take, then there is an exchange-traded fund that tracks the Greek stock exchange, the Lyxor ETF FTSE Athex 20 (Paris: GRE), which you could buy in anticipation of a post-election bounce.
Clearly this is a risky bet. The outcome of the election is anyone's guess. And regardless of what happens, we suspect that Greece will end up having to leave the euro, which will probably push the stock exchange back down.
However, if you have a very strong appetite for risk, then you could look at some individual Greek shares that might benefit from a return to the drachma. We recently tipped the Greek airline Aegean Airlines(Athens: AEGN).
Another firm that should do well in the longer run from any devaluation is Kyriakidis Marbles Granites SA (Athens: KYRM). The company quarries, then exports, marble from Greece to the rest of the world. They have provided marble for projects in Europe, the Middle East and Asia. This means that it should benefit from a cheaper currency. It is currently trading at only 2.5x its earnings and well below its book value. Saxo Markets currently offers access to the Athens Stock Exchange for retail investors, though Greek law requires you to hold any shares in a separate account, which takes a week to set up.
If you're not feeling quite bold enough to bet on Greece, then my colleague John Stepek looks at the best ways to play another beaten-down eurozone economy, -Italy - in the latest issue of MoneyWeek magazine, out now. Italy isn't quite as close to the brink as Greece, but it's certainly cheap. If you're not already a subscriber, then subscribe to MoneyWeek magazine.
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