Greek Tragedy: Athens' Financial Woes

The Road Ahead
Brussels has okayed the Greek austerity plan but warned that it will be subject to unprecedented monitoring. Joaquin Almunia, the European Commissioner for Economic and Monetary Affairs said Athens' targets were "ambitious" but "achievable." Importantly, Greece managed to raise about $11 billion in its first postcrisis bond offering on Jan. 25. But relief was short-lived. Within days the spread over 10-year German bonds, the European benchmark, reached a record high. The bottom line: until the Greek government delivers results, the pressure won't let up.

In a report released Jan. 13, ratings agency Moody's said that Greece, along with Portugal, was likely to suffer a "slow death" as it uses more and more of its income to pay off debt. With the cost of that debt heading north, Greek banks could face further problems. "It's like they have a bomb in their hands," says investor Melissaris. "If rates keep climbing, it'll explode." (See the worst business deals of 2009.)

Those with healthy balance sheets, however, see a silver lining. Basil Stephanis, president of Selonda, a $167 million aquaculture company with fish farms in Greece, Turkey and Wales, says Greece's woes are "an opportunity to consolidate and buy up companies with liquidity problems." Constantine Petropoulos, chairman of Petros Petropoulos, a $158 million firm that sells cars, automotive supplies and industrial equipment, also plans to beef up his portfolio. "We will acquire businesses that we wouldn't have ever been able to consider in better times," he says.

Companies that have interests outside Greece are also likely to fare better. Kyriakos Sarantis, CEO of Sarantis, a $363 million consumer-products company, expects revenue to remain flat despite the problems at home, in large part because nearly 60% of his business is in Eastern Europe. "That exposure is helping," he says. Aegean Airlines, which may have to move to short-term leases for some of its fleet, is also looking outward. In the last six months, the carrier added routes to Egypt, Israel and Turkey. Greece's $40 billion shipping industry — the country controls 22% of the world's oil-tanker fleet and nearly 25% of its cargo ships — should also prove immune from the financial maelstrom because of its global reach, according to Theodoros Veniamis, the president of the Union of Greek Shipowners. "Shipping is a cyclical business that operates worldwide," he says. "The current crisis won't have a direct impact." (Read: "Is the Euro the New Dollar?")

To make a real break with the past, the Greek state must also go global, say business executives and business analysts. Athens needs to lure foreign investors aggressively, which means offering everything from tax breaks to helping investors navigate the bureaucracy associated with setting up shop. "We must transform Greece into a welcome place to do business," says Eurobank's deputy CEO Nikolaos Karamouzis. The potential for future investment — in tourism and renewable energy in particular — is promising. Wind-energy generation alone is expected to increase fivefold in the next decade. "The new Greek government seems determined to push the 'green economy' and is taking measures in the right direction," says George Peristeris, executive chairman of GEK TERNA Group, one of Greece's largest construction and energy companies. "But changes must be radical and drastic if Greece wants to achieve its goals."

That will prove difficult. For the past few weeks, farmers have ridden their tractors along Greece's highways to protest plans to cut subsidies. At one point, delivery of produce on the country's northern borders ground to a halt. The Prime Minister has appealed to the farmers' sense of patriotism, but a long season of strikes is almost a certainty; state employees have a 24-hour protest planned for Feb. 10. (See 10 things to do in Athens.)

It's not easy to be told that your attitude needs to change, but that's the Greek government's message. Still, even as Greeks grapple with changing their lifestyles, the fact that they like to spend could turn out to be a blessing. "Greece is a poor country with rich people," says Sarantis. "It's a strange thing." He has a point. Despite the economic downturn, Golden Hall, a luxury mall in the capital that opened in 2008, was packed on a recent postholiday weekend, and the shelves in many of its 131 stores were bare. And when a popular singer, Michalis Hatzigiannis, appeared on an Athens stage for one of his midnight shows, not a seat in the house was vacant, even at $125 a pop. Perhaps it's a final party before things get leaner. For the first time in decades, Greeks seem to have had an epiphany of their own and understand that they will have to start living within their means. A recent poll in the newspaper Ethnos reported that 73% of those surveyed said they were willing to make sacrifices to turn the crisis around. "Greeks know the easy days are gone," says the paper's editor George Harvalias. A sprinkle of holy water might also help.

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