The Banking Problems in Greece
In recent years, the series of crises faced by the Greek economy has shocked Europe. Most Europeans had thought such problems were part of the past, at least in this region, while Greeks, who had previously enjoyed a fairly stable situation, largely failed to realize how dependent they were on the informal economy, and how drastically the reorganization required for membership of the Eurozone could affect things. Now, finally, there are signs of green shoots, but debate is ongoing as to what this means.
Because of its radical approach to the problem and its bold attempts to challenge debt obligations, Alexis Tsipras’ Syriza party is strongly associated with and sometimes blamed for the financial crisis, so it’s worth keeping in mind that it came to power after the economy had collapsed. Since making a deal with the banks last year, it has undertaken a series of reforms that have increased economic stability, albeit at the cost of some political stability. Now, Tsipras, the prime minister, says that he thinks this will be the year when things turn around and Greece really starts growing again. But is he right?
The state of play
Despite the unpopular austerity programme that was a condition of Greece getting a bailout, consumer spending in the country is now on the rise. This creates opportunities for business but is partly a consequence of poor rates for savers, which is less beneficial where it affects investment. Unemployment rates remain high, which provides flexibility for employers but creates social problems and puts a strain on public finances, potentially influencing infrastructure investment on which business depends. The biggest concern for investors at present is political instability if Syriza should lose power, but growth, though low, has been increasingly steady, and there is certainly the potential for a breakthrough.
Not every business has found itself unable to cope as a result of the crises, established business leaders such as Spiro Latsis are still among the world’s richest business people and his shipping empire is still going strong. Although Latsis took a serious hit from the country’s economic problems, he soon saw the opportunities that the crisis presented as smaller shipping businesses went under and surviving exporters and importers – as well as new companies emerging from the ashes – sought new arrangements. By acting quickly to fill the gap, this London-educated businessman has shown the kind of initiative that is enabling Greece to recover.
Sectors to watch
Recoveries are never even, so which sectors in Greece are leading the way? When everything else is taken away, this country still has a beautiful landscape, so it will come as no surprise that tourism is going strong, buoyed by the fact that visitors know they can get a lot for their euros. Backed by money from Russia and the Middle East, it’s expanding impressively and easing the burden of unemployment in many coastal areas. Mining is also doing well because Greece still has under-exploited deposits of relatively rare minerals, and there’s a burgeoning renewable energy industry seeking to take advantage of the combination of coast and sunshine. If Greece can effectively market this potential, it could well take a step forward in 2016.