Investors in New York See Potential in Greece but Ask for Reforms

Five of the most important investors with interests in Greece addressed the growth potential of the debt ridden country, during the 17th Annual Capital Link “Invest in Greece Forum” in New York last month.

John Calamos, Founder, CEO and Global Co-Chief Investment Officer Calamos Investments, George Logothetis, Chairman and CEO of the Libra Group, Wilbur Ross, Chairman and Chief Strategy Officer at WL Ross & Co., John Paulson, President at Paulson & Co. and William Vrattos, Partner & Portfolio Manager at York Capital participated in a panel and addressed global investors, bankers, business representatives as well as Greek Deputy Foreign Minister Dimitris Mardas.

Each of the five investors held their own views on developments in Greece with the most common line being that the government should continue with the bailout reforms.

George Logothetis appeared optimistic about the crisis that has been plaguing Greece for more than five years.

“The crisis will end,” he said. “Make no mistake about that. No crisis is perpetual. There is a beginning there is a middle and there is an end.”

The Libra Group Chairman believes that with everything going on over the past few months, and after the Paris attacks, Greece’s geopolitical significance has become very apparent, noting that Greece is the gateway to the western world.

John Calamos believes that the revitalization of the Greek private sector, with the proper regulation in place, should be Greece’s top priority if the country wants to attract foreign investment and reignite the economy.

“From an investor point of view we have to be confident that we have the right framework in which to make an investment. There are great ideas there, but we have to feel confident that they have the right framework in place that we can execute and really deliver on that basis,” noted Calamos.

While seeing the private sector reformation as necessary, Calamos claimed he is more optimistic this year than he was last year. In an interview with the Greek Reporter following the event, Calamos explained his thinking in making that assertion.

“I think that the recapitalization of the banks was a very key move. That was always something that had to be done before they could move forward,” he said, adding that last year the of potential banking collapse was significant concern.

Greece’s four systemic banks were recapitalized to cover their capital shortfalls. While the banks required a collective 14.4 billion euros to cover their needs, only 5.5 billion euros of the 10 billion euros that had been reserved from the bailout funds were used, as banks managed to raise the capital themselves.

Still, the recapitalization is not enough. The Greek government needs to demonstrate that it is implementing what it says it wants to do.

“I need to see some evidence that this is really going to happen going forward. If you have a great idea in Greece can you create the company and start the idea,” he questioned during the interview.

Greece could also benefit from the European economy which is showing signs of improvement, Calamos argued.

One of things that he did see as problematic, as far as an investment opportunity goes, is the pricing of the Greek real estate market.

“I would have thought the prices would be more distressed and therefore you are taking advantage of a crisis situation and you can profit when the economy comes back. But if it is priced like there are no problems, then why would you buy it,” he asked during the panel.

Vrattos, who noted York Capital has been involved in government bonds, banks and infrastructure in real estate in Greece,  was adamant that political stability is key for investment into Greece, underlining that political turmoil has spurred on the macroeconomic crisis.

“It’s hard as a foreign investor to get too involved. Because this has been more of a macroeconomic crisis than a credit crisis, outside of the banks there is not an enormous special servicing industry that an outside investor can tap into,” he noted adding that if they want banks should work with foreign investors to pour money into non performing loan portfolios.

Logothetis pointed out on his part, that there needs to be an infrastructure that enforces consequences for not repaying debt.

Ross on the other hand, provided a thorough blueprint for what must be done in Greece to catapult economic growth. Greece must and foremost implement the bailout reforms. The country then needs to regain access in the international sovereign debt market at rates below 5% interest rate, while the ECB should also accept Greek government bonds as collateral. Increasing capital investment is another fundamental component of recovery.

Greece should further increase its exports and reverse the declining trend with the assistance of improved government policies, according to Ross.

“I am struck by the fact…Mario Cuomo, Governor of New York, recently announced to a group of New York businessmen that there is now more yogurt being made in the state of New York than in the country of Greece,” he said.

Labor productivity and flexibility need to be augmented as well. Greece should also buttress its tourism sector, particularly plane tourism. Finally boosting corporate lending is another significant step that needs to be taken.

While Ross outlined his plan, Paulson claimed to be impressed by the current government’s work in terms of legislating the reforms. Once the first bailout review,which according to creditors should begin in mid-January, is concluded, there should be more stability that will push investments in. Ross sees significant potential in one place in particular.

“The Greek stock market is one of the most undervalued in Europe,” he said. “And as they implement these reforms, I think valuations will rise toward the European average,” noting that it could be the best performing Europeans stock market next year.

The Athens Stock Exchange has plummeted over the past five years as the crisis has unfolded. It currently stands at 623.07 points compared to its 1,444.19 points five years ago.

Despite the optimism, Paulson underlined that the government must go all the way with the reforms and expressed his belief that it will do so.

In the same light, Logothetis called for the Greek government to create a properly formulated communications plan. Showcasing success is necessary, he argued, as people in Greece are overwhelmed with negative news. The investor further added that maintaining political stability is necessary, claiming that it currently exists in Greece “relatively speaking.”