Notes from Athens

That’s one (very Acropolis Now) view from Greece, recently. (Photo via GreekSky).

Credit Suisse economist Giovanni Zanni has also been taking in the view from Greece — undertaking a trip to Athens to meet ‘key officials and experts.’ He’s collated his views into a seven-page note on Tuesday. It kicks off, rather aptly, with a history lesson cribbed from the Acropolis Museum in Athens:

“The fate of Athens after its capture by Sulla in 86 BC now depended on its relation with Rome. (…) Thanks to the interest of many Roman emperors and the donation of numerous wealthy benefactors, Athens was able to [be] rebuilt

Anyway, it’s good reading ahead of the confidence vote this Tuesday evening. We’ve stuck the whole Credit Suisse piece in the usual place, and added some excerpts below.

Here’s a bit on the politics:

One comment we got from a well-respected Greek analyst is that the changes operated by Papandreou make the government more political but also paradoxically more technical to some extent, and more able to go against vested interests that are blocking reforms. Nevertheless, the situation remains fragile beyond the short term. Indeed, the government majority is thin, Europe is asking for broader parliamentary support to provide additional help and the current government is unlikely to get support from society unless some tangible signs of a turnaround in the economy, clearer fight against corruption and privileges, appear at the horizon very soon

And the (economic) policies:

A general comment from most of the experts was that the Greek crisis started just over a year ago, and that most empirical evidence shows that transforming an economy takes time, more 5 to 10 years rather than 1 to 3. A second comment however was that most of the measures that Greece needed to pass over the past year had been passed, and broadly in time, by the parliament. This is despite some signs of fatigue in the last six months and some more worrying signs of uncertainty over the past couple of months in particular, before the presentation of the mid-term economic plan. If the mid-term plan gets the green light from parliament by early July, then a very large portion of all the reforms and measures needed to overhaul the Greek economy will have been transformed into law already, meaning less stress on the strict political/voting front.

And the privatisation:

This is now a crucial part of the overall strategy – if it works, it will likely change the world’s perception of Greece. If it doesn’t, then the crisis will deepen further, in our view. The first upcoming privatisation deals will be important in that respect because if they are seen as successful, they will draw investors’ attention and interest in the whole programme … The list of what will be privatised in the next several years has been now clearly defined and made public. The government expects to receive €5bn from sales by the end of this year and €15bn by the end of 2012. These targets are viewed as ambitious but not impossible by most experts. The privatisation plan is an integral part of the mid-term plan and it is key to show that Greece is really moving ahead, in our opinion. Once a privatisation is decided by the government, the asset is moved to a fund to mark the irreversibility of the alienation. The fund will legally be a ‘societe anonyme’ (SA), all the legislation of which will be included and approved with the overall mid-term fiscal plan.

And, of course, the big stuff –default, restructuring, or Vienna-Plus?

Nobody we spoke to was ready to discuss a hard default scenario other than saying it would be catastrophic for the country and for Europe. Only one official we met tried to debate the effects of a ‘selective default’, for only a few days, suggesting that was the potential risk of some of the options on the table at the European level (although we think this seems less likely after Chancellor Merkel’s speech of Friday). The general comment was that the debate on default/restructuring was only diverting attention to what Greece had to do: improve its competitiveness and get to a significant primary surplus so as to stabilise and then reduce its public debt. Another comment that was aired more than once was the following: why should anyone want to open this Pandora’s box now, just for €20/30bn of financing (the amount of private sector involvement discussed)? Some form of Vienna initiative was seen as the most likely outcome, with bonds, loans or private placements to replace the maturing bonds. We would add, in agreement with this week-end comment in the FT from Mr Munchau that probably (one of) the best options would be for the banks to agree to support and co-finance the Greek privatisation programme.

Head over here for the full notebook.

Related link:
Greek PM faces confidence vote, fights to avert default – Reuters
Syntagma Square and the price of sovereign equity – FT Alphaville
China is finally buying fewer US Treasuries, StanChart says – FT Alphaville

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