Greece: out of intensive care

Europe’s perpetual basket-case, Greece, is on the mend, says Andrew Van Sickle.

Andrew Van Sickle
By
published
in Features

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It's looking sunnier in Greece
(Image credit: Patryk Kosmider)

Investors should take a look at Greece, says Craig Mellow in Barron's. "No, seriously." Greece has suffered the equivalent of America's Great Depression. The economy shrank by 25% of GDP after the 2009 debt crisis struck, and unemployment hit 28%. It required three bailouts by the EU and the International Monetary Fund, and came within a whisker of defaulting and leaving the eurozone. But now Europe's perpetual basket-case is on the mend.

Growth returned in the first quarter and has endured so far this year. Greece hadn't managed three successive quarters of growth for a decade. Unemployment has fallen to 22%. Yields on Greek debt have slid sharply in the past few months, reflecting rising prices. In July the government issued bonds for the first time in three years, which also reflects a gradual return of market confidence.

Political risk has diminished too, Prem Watsa of Fairfax Financial Holdings told Bloomberg.Successive governments have been notoriously unreliable, but in recent years things have improved. "The prime minister and finance minister have done all that was requested by creditors," notes Watsa.Given this backdrop and cheap valuations, stocks have room to rise, says Mellow. Still, we shouldn't get carried away. The equity market "remains thin and easily spooked".

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And despite some structural reform, the system is still riddled with "oddities": most civil servants, for instance, have never had a job evaluation "because they go on strike if threatened with one". And the key problem endures, adds Capital Economics. The public debt pile of 180% of GDP is still unsustainable, so Greece can hardly stand on its own two feet when the third rescue package expires next August "unless the eurozone [has] a serious change of heart about debt relief".

Andrew Van Sickle
Andrew Van Sickle
Editor, MoneyWeek

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.

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