The Greek economy has been hanging by a thread for almost a month. A Grexit went from pure speculation to an official- albeit temporary- alternative proposal by Germany. Greek banks reopened on Monday after three weeks, while cash withdrawal limits remain. Greece, after much deliberation and under capital controls, is finally heading toward the adoption of a third memorandum.
Greek Reporter spoke with Michael N. Bapis, the Managing Director and a Partner with The Bapis Group at High Tower Advisors, to get some insight on how investors from the other side of the Atlantic see the current situation in Greece and its future.
Bapis manages wealth for individual clients and families who invest their resources in places around the globe and he has been working in the financial industry since 1998. Although he was born in the US, Bapis knows the situation in Greece well since his family hails from Vlahiotka in the Peloponnese and from Mytilini on the Greek island of Lesvos.
In an interview with the Greek Reporter, Bapis noted that in the past few months uncertainty over Greece, which he called “extremely stressful”, has been high, with the reality of a Grexit being closer than ever and the Greek population seemingly divided over where they want the country to be.
With a preliminary 86 billion euro bailout deal between Greece and the institutions now in place, the money expert believes there is somewhat more clarity and certainty for Greece’s future, but that it will take more than just reforms to recover and to restore stability.
“There will be reforms but now it is going to take work on the Greek people’s part to say ‘ok now we have to move forward’. It’s that time. It’s time to become entrepreneurial. It’s time to fight for their own county and help their own country succeed in some economic way. They have tremendous resources. Natural resources, μυαλά, the mind of the people. Let’s put that to work,” he said.
Bapis does not believe this deal is part of an “extend and pretend” policy that would just be kicking Greece’s major problems -including debt unsustainability- down the road in an attempt to mitigate the negative consequences of a Greek bankruptcy and a Grexit.
Although the International Monetary Fund and the European Central Bank– two thirds of the institutions- have said that Greece needs a debt restructuring, Germany has repeatedly rejected an outright debt haircut for Greece.
Despite this, Bapis remains optimistic that the Greek debt will be restructured- as it should in his opinion. He also warns that the implications of a Grexit and its contagion effects are being underestimated.
“Historical precedent shows that it is impossible to keep a monetary union intact once the process of disintegration starts,” he said.
According to reports that surfaced this week, the European Commission has produced an analysis that assesses the multifaceted consequences of a potential Grexit.
Although Bapis believes the country’s trajectory may be more transparent now, he noted that the latest political developments in the country undermine the Greek government.
Following the July 5 referendum, Greek Finance Minister Yanis Varoufakis resigned from his post and voted against the Greek government’s bailout deal in the Greek parliament. Varoufakis was one of the 38 SYRIZA MPs who did not vote in favor of the deal, prompting Greek Prime Minister Alexis Tsipras to reshuffle his cabinet.
The experienced wealth manager said that this internal collision, especially Tsipras’s loss of Varoufakis’s support, does not a send a reassuring message.
“I think there is a hesitation of the people because of the defections that have already happened within the party,” he said and added “38 people in your own government don’t support you. That is difficult. That creates uncertainty for everybody”.
A number of fundamental internal changes must happen for investment confidence to grow in Greece, according to Bapis.
“Pension reforms need to be implemented. People need to pay for their crimes if you will. There has to be a crack down on white-collar crimes. There has to be an entrepreneurial mindset that comes to fruition where people start businesses, people are going out on their own,” he said.
Overall, the administration needs to build infrastructure and instill confidence among people in the reforms and measures it would be undertaking.
“At the end of the day success breeds success. If they create a successful structure people will buy into it and trust it,” he said.
Bapis, who said that he advises his clients on potential investments based on their risk tolerance, had and has clients who have invested in Greece. He noted that although there are opportunities in Greece right now, the potential for investments has to, and will, grow.
“There are going to be extremely distressed investment opportunities and it may take a while to turn around but eventually it will. I mean eventually there is always a bottom” he said and noted that it is hard to tell if Greece has reached the bottom.
The capital controls that have been imposed in Greece since June 28 reportedly cost the Greek economy 3 billion euros in the first 20 days.
Bapis opined that the recovery from the effects of this regime will be tough, “but will ultimately depend on the will of the Greek people to survive and create opportunities amidst this difficult situation.”
He also said the Greek Diaspora can help people in Greece by supporting tourism, by supporting the Greek people in their endeavors, and by recognizing the tough situation they are going through.
Bapis sees another important opportunity in Greece.
During the negotiations in Brussels, Greece agreed to create a fund that will monetize 50 billion euros of Greek public assets through privatization and other methods. Bapis believes the fund will work and called it a “tremendous opportunity”.
“Anytime you take something and privatize it and there is an opportunity for someone else to come in and operate it, if you the have right operator in place, it always creates opportunity,” he said.
Half of the 50 billion that would be raised by the fund will be used to pay parts of the Greek debt and the other half will go towards investments made by the Greek government.
For Bapis, it remains to be seen if Tsipras and his administration will be able implement the program and help investor confidence grow.
“In any case, I have faith in the Greek people and their ability to withstand testing times,” Bapis concluded.