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Blue Skies Ahead For Greece?


All bad things, too, come to an end. Eventually.

That at least is the tone of this morning’s article in the FT on Greece’s tentative recovery. After six years of a brutal recession that’s seen the country’s output shrink by a third and its joblessness rate get as high as 27%, Greece is apparently poised to post modest growth numbers next year. Several large Greek companies with business abroad have managed to get around the liquidity crunch in the country by successfully issuing corporate debt in the past few months. And now hedge funds are getting back in the pool:

Fitch’s upgrade of Greek sovereign debt by one notch to B-minus last week still left the country deep in junk-rated territory. Yet the move prompted a rush by hedge funds to buy Greek bank shares ahead of a recapitalisation of the four-largest lenders financed mainly by the EU and International Monetary Fund, sending the Athens index soaring to a two-year high.

“Hedge funds made a killing last year buying Greek bonds . . . They see another opportunity now in warrants attached to new bank shares,” said an Athens banker who declined to be identified. However, he warned: “This rally could be followed by a sharp correction – it’s going to take time for the banks to restructure their balance sheets and resume lending.”

We’ll see how long this buoyant mood lasts. All this optimism may have more to do with depressed yields everywhere else than with brilliant prospects for the Greek economy. Investors have to go somewhere. And recent European growth estimates have acquired the habit of shrinking as we get closer to the date—like a mirage on the highway, renewed growth is always just ahead of us.

So we wouldn’t bet the ranch on Greek stock futures just yet, but we wish every success to those who take the plunge.

[Greek flag waving on blue sky photo, courtesy Shutterstock]

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  • ojfl

    The good thing about this piece of news is that all signs of recovery come from the private sector, not through artificial government stimulus. If it pans out that will be positive news and hopefully politicians will learn it is more important the private sector do well than the public sector.

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