Hoping desperately for a win, the people who promoted austerity as an economic policy for
Greece, with the results that the country
plunged into a nightmare recession, are now saying maybe
Greece has turned the corner and is starting to recover.
Perhaps ‘thriving’ is somewhat optimistic, but there are signs of a turnround in Greece’s austerity-hit economy. Deep spending cuts should produce a primary budget surplus this year, deposits are returning to the banking sector, business confidence is recovering, and after five years of recession the economy is forecast to start growing next year.
Of course thriving in the above sense does not mean reducing unemployment, or bringing a better life to working families. It means maybe a profit is to be had for hedge funds.
Hedge funds such as Farallon Capital Management, York Capital Management, QVT Financial and Dromeus Capital have signed up to help plug the capital gap in Alpha Bank, Greece’s second-biggest lender, and other hedge funds are understood to be considering participating in other bank recapitalisations.
“Obviously it is a judgment call: you need to determine whether Greece is bottoming out,” says Achilles Risvas, managing partner of Dromeus, a hedge fund set up specifically to target Greece. But “
is one of the highest potential return environments globally”. Greece
But in the real world, where people other than obscenely rich investors live things are not so great.
|The face of Greece today|
Thanks to European Imposed Austerity
This is all hard to square with some of
economic fundamentals. According to Greece ’s
economy is now smaller than it was in 2005, having shrunk a cumulative 28
percent since mid-2008. The European Commission forecasts a
further contraction of 4.2 percent in 2013, which will be difficult to achieve
given that the decline in the first quarter was so much larger. Elstat,
The nature of economic activity in
also suggests that the European Commission’s growth target is a pipe dream.
Although hedge funds have been active in buying Greek sovereign debt and made a
killing doing so, the number of investments in the private sector can be
counted on one hand. In addition to corporate-debt sales -- amounting to $2
billion so far this year, according to the consulting firm Dealogic -- Third
Point LLC announced a 60 million-euro investment in Greece’s Energean Oil &
Gas SA last week. These are very small numbers, insufficient to stimulate
growth across the economy. Greece
Furthermore, any lending to big companies in
isn’t being matched by loans to small companies or households. Borrowing costs
for small- and medium-sized enterprises in Greece Greece
remain far higher than for those in the other peripheral countries, let alone
in Germany or France.
According to the Greek central bank, credit to the private sector continued tocontract in
March, the latest month for which there are data.
And then there is this in a New York Times article about
With the country heading into the fifth year of economic depression, and unemployment near 60 percent for young people, greater numbers of women and men are offering their bodies for next to nothing to get any scrap of money. According to the National Center for Social Research, the number of people selling sex has surged 150 percent in the last two years.
And when hedge fund managers were asked about that aspect of the Greek recovery, or lack thereof their response was “we don’t care, we don’t see how we can make any money off of that. We're not pimps, you know, we are actually not that moral.”
Eventually the Greek economy will recover. The country has been around for a long time and is pretty hard to kill off. So in five or ten years or however long it takes austerity supporters will claim to be vindicated. And the ruin of millions of lives, hey, just part of the cost of doing business.