John Calamos: "Lessons from Greece"

By John P. Calamos, Sr.

I have long believed opportunities exist in all market environments.

Progress seldom occurs linearly, and there are always hurdles to overcome. Often, the seeds of growth are sown as market participants look the other way. Successful investors take a patient and long-term approach, following the facts and not the media.

These views were affirmed during my most recent business travels to Greece, this past April. While there, I was honored to serve as a panelist at The Economist’s Europe Unbound conference series, “Overcoming Stagnation: Re-igniting Greece’s Potential.”

The conference provided the backdrop for many lively and thoughtful discussions among global business leaders, economists, academics, investors, and politicians, including Greece’s Prime Minister Antonis Samaras and Minister of Finance Yiannis Stournaras.

During this trip, I had the pleasure of visiting with Prime Minister Samaras. He clearly articulated the government’s commitment to unleashing the talents of the Greek people by encouraging the establishment of businesses and reducing unnecessary regulations. I came away feeling more positive about Greece’s future than I have been for many years.

Βetter prospects ahead?
For many U.S. investors, Greece has become an infamous example of government overspending and economic deterioration. There is no doubt that Greece still faces significant obstacles. Unemployment tops 25% and GDP is still sliding. Proposed cuts to public sector jobs scheduled to occur by the end of 2014 could also rekindle unrest.

It would be wrong to dismiss Greece as a lost cause, however. The country has made difficult choices with far-reaching and painful implications for its citizens. Austerity on this scale is extremely difficult, yet the Greeks have persevered. The threat of a euro zone exit has been mitigated, and international lenders have recognized Greece’s concerted efforts.

The stock market has recovered and there is increased interest in Greek debt, as well as in a variety of direct foreign investment. We have also seen significant strides in bank recapitalization.

The European Commission’s (EC’s) spring 2013 economic forecast put forth the possibility of economic recovery by year end. The EC cited the Greeks’ achievement of fiscal targets, reforms, cost competiveness and greater liquidity in the market.

Here is an excerpt from the ECs report:

“Greece entered the sixth consecutive year of recession in 2013, but a recovery is expected to start by the turn of the year, supported by improved confidence and the return of liquidity. While hard data is still generally negative, softer survey indicators continue to improve since the re-launch of the adjustment programme last autumn. Confidence is supported by the achievement of fiscal targets despite the recession, by the high credibility of the recently-legislated reforms and measures supporting the fiscal adjustment, by strong improvements in cost competitiveness and by the return of deposits and liquidity to the banking system following significant EU/IMF disbursements and debtreducing measures.” – European Economic Forecast, Spring 2013

Red tape to red carpet
Government involvement in the private sector remains high, but the Prime Minister and many other government leaders have committed themselves to making Greece a more desirable destination for global business and investors.

In addition to our most recent conversations, I had the opportunity to meet with the Prime Minister during the summer of 2012 as part of the Hellenic Initiative (a group of Greek American business people, led by President Clinton). Last summer, the Prime Minister spoke of his commitment to transform Greece from a country of red tape to one of a red carpet for investors. Since then, he and other members of the government have dedicated themselves to promoting market transparency, eliminating black markets, and reaching out to global investors. These efforts seem to be bearing fruit, as evidenced by increased foreign interest in privatization projects. Money seems to be slowly coming in.

Greece has the potential to grow rapidly, as it did when it was preparing for the 2004 Olympics and GDP grew at a robust 5% to 6% rate. During this period, new jobs were created as Athens was transformed into a truly international city with a new airport, roads and subway system.

Greece: a nation rich in entrepreneurial spirit
Greece is home to many strong companies and I know from firsthand experience over the decades that the country is rich in human capital and entrepreneurial spirit. Greece’s economic future hinges on finding ways to leverage this talent and capitalize on the things it can do best. In economics, this is referred to as “comparative advantage.” For Greece, comparative advantages include tourism, shipping and agriculture, among others. (In fact, in its recent report, the EC notes improved tourist receipts for 2013.)

In the past, burdensome regulation has hindered the ability of businesspeople to capitalize on their ideas, build companies and in turn, create jobs. We will continue to watch for conditions that can support innovation and the private sector—notably reduced red tape, increased access to credit for businesses and fiscal discipline at the government level. It is my hope that the Greek people support the Prime Minister’s plans for economic growth. A “rising tide lifts all boats,” and rewarding innovation and creativity increases productivity.

Inspired by their Greek heritage, individuals around the world have built businesses and achieved prosperity, including in the United States, Australia and Canada. We highlight one such journey in our article “Michael Johnson: From Obscurity to Fame in the Oil Business” (page 18). It is my hope that these global successes can now inspire the Greek people today, in the same way that a Greek
heritage has inspired so many, including me personally.

Lessons from greece, lessons for the global economy
A strong private sector, incentives for risk taking, freer capital markets, appropriate government oversight (not onerous regulation), and reasonable taxes set the stage for lasting and robust economic growth and increased productivity. A rising standard of living and upward mobility are the by-products of a society that champions entrepreneurial spirit. This formula is not unique to Greece, as many developed markets would benefit from similar measures. It was these factors that helped build the United States over the years. For immigrants in the U.S., these principles are the foundation for “living the American Dream.”

Conclusion
Economic conditions in Greece remain fragile, but I am encouraged by what I have seen and heard from Greek leaders and entrepreneurs. Although we cannot precisely predict the trajectory of the Greek economy, history has shown that countries can reverse their economic fortunes relatively quickly. We are closely watching how markets and investors respond as initial privatization projects reach completion and as the government moves forward with its reform agenda. As is so often the case in the global economy and markets, a turn may be well underway before many see it.

*John P. Calamos, Sr., is the Chairman, CEO & Global Co-CIO of Calamos Asset Management, Inc. The son of Greek immigrants, John P. Calamos, Sr. is actively involved in a variety of philanthropic endeavors in the Hellenic American community. He serves as the Chairman of the Board of Directors of the National Hellenic Museum in Chicago.