11th December 2013
The recovery in Greece or ‘Grecovery’ is likely to be the most important European economic and political event of 2014 according to Barry Norris, chief investment officer at Argonaut Capital Partners.
The fund firm says it has made its first investments in Greece since 2006 with a focus on banking stocks which are geared to the Greek recovery.
In a note issued this week, Norris says: “With the Greek economy having regained its lost competitiveness upon joining the Euro, its current and fiscal account now in surplus, and its government debt restructured, Argonaut Capital Partners believes the emergence of Greece from recession should soon be officially confirmed. In view of Greece’s position at the epicentre of Eurozone stress, Argonaut believes the ‘Grecovery’ is likely to be the most important European economic and political event of 2014.”
The Greek economy has had six years of recession, with real GDP having contracted 26% from its peak of €233bn in 2008. Unemployment has now stabilised at 27% – from 10% in 2008 – with wages for those employed down around 25% on average.
Norris says this painful internal devaluation has resulted in Greece regaining all of its lost competitiveness since joining the Euro in 2000 with its current account moving from a deficit of 13% in 2008 to a surplus of 1% today and exports rising from 19% to 27% of GDP.
He notes that foreign capital is returning to Greece with more than €1bn of announced foreign direct investment or privatisations in the last month alone. “The Greek economy has actually been expanding on a quarter-on-quarter basis since Q2 2013 and the return to year-on-year growth is likely to be confirmed early in 2014 with the IMF officially forecasting a +0.6% increase 2014 on 2013”.
Norris has recently made the firm’s first investments in Greece since 2006 with a particular focus on banking stocks. He says: “The best time to invest in a country is often when its economy is emerging from recession and all of the bad news is in the rear view mirror. We have highlighted the European banking sector as the most obvious stock market beneficiary on many occasions, and it should come as no surprise that the Greek banks are the most geared equity investments to the Grecovery. They offer some compelling investment opportunities.”