Timeless Greek drama

Timeless Greek drama

Posted on 2 March 2015

"Like the infinite loop of elevator music, we will hear more about Greece in the months ahead."

I hold a weekly research meeting with my team to recap events of the past week, plan our agenda for the week ahead and debrief on the larger, salient issues facing investors at any one point in time. At our meeting this week, we covered the usual: results of the current earnings season and the publishing schedule, etc. Toward the end of the meeting, one of my colleagues suggested that we talk about Greece. I found myself gruffly retorting: “What’s there to talk about? The negotiations between the Greeks and the troika [now rebranded as the institutions] will go down to the wire with the usual sturm und drang and attendant posturing. The Germans will bluster about adhering to the terms of the bailout agreement, and the Greeks will rightfully claim poverty, and the saga rolls on.”
To this end, this week brought the announcement of a deal between the new Greek government and the troika.[1] The agreement buys Greece another four months under the existing bailout agreement. It also gains time for the new government to craft a “new and improved” program to support the country while it attempts to establish durable and firm financial footings. The terms made for interesting reading. The 63-point proposal was long on generalities and short on specifics. Moreover, it read like it was the product of a centrist or right-of-center government, and not the fiery anti-austerity pledges of a far left government. Such is the sobering burden the mantle of power brings. The idea of a new government tossing its economy into bankruptcy and forcing the attendant hardship on a populace suffering from an economy now 20% smaller than when the crisis started, an unemployment rate of roughly 26% and youth unemployment of 50% is hard to comprehend.[2]
In short, nothing has materially changed. Indeed the status quo ante prevails, and the “Greek Problem” persists. Like the infinite loop of elevator music, we will hear more about Greece in the months ahead.

[1] This is an agreement in the loosest sense. It really was a letter of proposed reforms that was backed by the troika to be approved by legislatures of the euro zone.

[2] Sources: Bloomberg, British Broadcasting Corp, Eurostat, National Statistical Service of Greece.

Hans Olsen, CFA Global Head of Investment Strategy

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