I was reading these lines and I wanted to express my opinion as well. As I am a Greek, I think that I am in position to know a lot more things about the situation in my country and the reasons behind this "sudden" debt crisis. Please note that I currently live in London (since 2007 with a small brake) but I keep track with things going on in Greece.
A little information about me. I placed my first trade in the Greek Stock market in 1999. As I was born in 1984 that would make me one of the youngest investors...:cheesy::cheesy: I am not quite sure whether there is indeed a natural tendency to become a trader or not, but I can confidently say that by that age(15 years old) I was very sure about my future studies (Economics) and my future career (a trader or a broker). The capital was "donated" by my father who was very proud about his son's activities. The capital was equal to 150, 000 Greek Drachmas (as that was the national currency in 1999). This equivalent amount in Euros is 440, but taking into account the time value of money this capital was around 1,000 Euros in today's world. Not bad at all for a 15 years old guy. So very summer that the school year would end , I would every day visit that brokerage firm where my father was a client. The Greek investors were not used to trade through trading platforms so the brokerage firms were pretty busy executing those trades manually. My brokerage firm was offering direct access, so I got used to the ladder. I had also the chance to interactive with various investors and traders and I could spot a lot of differences. I wanted to interact with as many as possible as I knew that this would be very useful for me. By contrast, all of my friends would spend their summers going on holidays but for a strange reason, I was very happy not going on holidays and spend my summers trading...
As expected, in 2002 I was given admission to the department of Economics at my city's university. I would enrol in October. The owner of that small brokerage firm (and head broker) having seen my strong interest in the Financial Markets, had a proposition for me. He was in need of an employee and he proposed an internship to me. I accepted it immediately. I was pretty much doing anything there, from administration to execution of trades and liaison with clients and the major financial institutions. I started my internship in June 2002 (before I become 18 in July) and left that company in August 2004. My remuneration was travel expenses only, but this was my very last concern...
Simultaneously, I was studying. I have to point out that my studies were to last 4 years as every other undergraduate course in Greece. In Greece when you study Economics, you undertake modules on various other subjects and not just purely Economics. Those modules were related to Accounting, Logistics etc. One of the modules that were taught at my uni was National Accounts. The alternative name for this module is Macroeconomic Accounting. If you want to find out what happens to an equity you have to look at the balance sheet. With the same token the National Accounts ("The balance sheet" of a country) would reveal important information about a country. Alongside with the module of public Economics I had developed a lot of skills in order to be able to understand the financial situation of one country. So I started to look at the case of Greece...
There we go:
None of the fiscal years from 1974 and on wards had a surplus. All of them had deficits...Some of those deficits amounted to the 10% of the GDP.
Debt levels were increasing every year. From 1981 they debt increased exponentially. In 1978 the debt was around 20% of the GDP and by the end of 80's it was around 100%...
The three pillars of the Greek Economy were (and remain) tourism, shipping and property development. They amounted to nearly 40% of the Greek GDP. However, tourism in Greece faced a lot of competition from other countries (like Turkey) that didn't adopt Euro and were far cheaper than Greece. A lot of ship owners were deserting Greece and were going to other countries with better tax regimes. The property market was clearly a bubble. In 2006 prices were up from 50 to 200% from 1999...As with dot.com I could see the outcome of that bubble. Anyway, the demand would not be sustainable as the demographics were indicating that the population was reducing and not increasing. So there were not any fundamentals reasons for those increases in value...This mixture was really "explosive"...
Trade balance: Most of the years, it was negative. From 2002 and on wards the trade deficit was increasing exponentially...This is because in 2002 Greece adopted Euro replacing the Greek Drachmash. A strong currency like Euro meant that products from other EU countries (especially from Germany) would be cheaper for Greeks. They were happy so they started to consume them massively. They were not concerned about the borrowed money they were using...
Employees in the public sector were doubled within a decade. So their wages. The word performance was not known to them, so they didn't bother to work hard. I doubt that some of them had ever worked properly... The public sector was increasing and the private sector was shrinking...A lot of businessmen faced enormous obstacles in investing and dealing with the public services. A lot of bureaucracy so even if you had a splendid business idea, you could not run a business without a lot of hassle... Sometimes you had to bribe or have a "link" in the public services to surpass those obstacles.
No stability in tax regime or any other law. The tax levels would change according to the needs of the Government! The same would apply for important laws. So investors could not be sure what to face in the near future. I felt sorry about investors that invested based on some rules and tax regime which were radically changed in a very short time and found themselves "trapped" in their investments...
Growth was quite robust I have to say. Some of the years we experienced growth of 4.5% and even 5%. A lot of bridges, new roads etc were being constructed. This resulted in GDP Growth. However, there was a reason. Most of those projects were subsidized by the EU. Some of them amounted to 50% of the total value of those projects. There were also allegations that many construction companies were reporting extremely high construction costs so they could get a greater subsidy..Sometimes the project would cost them only 10%...There was also a research paper that advocated that had it not been for the EU subsidies, then the growth would have been anything from 0 to 0.5%...
So everything was indicating that the situation could only get worse than better. I inquired to one my professors about the situation and we came to the same conclusion. When I asked why the lenders are lending us money and how are supposed to repay them (since we never had any surplus) I got this respond. On the assumption that the GDP would continue to rise and as a percentage would remain more or less the same they were happy to give us money...I was shocked by that answer! It could only frustrate me rather than explain me any reasons...If I was a bond investor I would never buy a Greek bond! Not with that yield! (Only 1 to 2% more than the German ones).
I have to say that I have always been in favour of the free markets and Capitalism. I have several times stated my views and that the structure of the Greek Economy had to be radically changed. I was opposed about my views by many Greeks. Some of my friends included. They could not see why we had to change anything since everything was "o.k." by that time...But this was not the only price I had to pay. I would soon have to pay a greater one...
In 2006, I was in the last year (actually in the last semester) of my studies. As I was ambitious I decided to pursue a Masters Degree so I decided to study in England. The prospects of finding a job there after my graduation were much greater than the ones in Greece (nearly zero...). But I had some modules left to pass...Then the Government decided to introduce a reform about the University Studies. This reform was in line with the Bologna process. The most important term of that reform would be to allow private universities to operate in Greece and there was a potential introduction of course fees to the courses in public universities (they were and are absolutely free). Private universities were operating at that point in Greece but the Degrees were not "recognized" by the Greek Education authorities. That meant that if you studied in a private university in Greece your degree would not be recognized. That meant that if you studied at the department of Sheffield university at my city (Thessaloniki, there is one over there), your degree would not be recognized. You had to go to England. Even for the same degree with the same structure (sic!).
Needless to say that there are political parties involved in the Greek universities. I will not comment any more but the Greek universities are extremely politicized. So the left parties were opposed to those reforms...In Greece there is a term that the university students can hold an assembly and vote for important decisions. I f there is a simple majority (more than 50% of the voters) they can take important decisions. So the left parties convinced the majority of the students and the decision was made. In late May, one week before the examination period, the university were to be locked up and shut down!!! Nobody would be allowed to enter. This decision was to be reconfirmed every week by the assembly... So the exams were cancelled! So I lost that examination period..Then I had only the chance to sit examinations in Sept where I didn't have enough time to pass all the modules (some of them were being examined the same day so you could not study both). So I didn't graduate in 2006 not because of my actions but because of the "right" of the students to decide to go on strike and not to let any examinations to be held... For the same reasons I lost the next examination period in January!! So I sat my last examinations in June-July 2007 and I graduated...
I lost one year of my life for no reason! Unemployment was extremely high (particularly among young people like me), reforms were being voted for but never imposed and nobody seemed to bother about the situation.. I felt sick about that situation!! I was ashamed to be a Greek! As I am a Patriot (and I am very proud of it) this was the most frustrating experience of my life. I knew that I could not change the whole world around me but only me. I wanted to escape this reality. As I was given admission from a UK university I left Greece in Sept 2007. When flying to London, I was relieved. I felt like I got out of the prison that I was living...
Here are some other examples of the Greek reality...
Back to my trading...I told you about my initial investment. As projected by any experienced, I soon blew up my account by 2002. I was unfortunate to trade in a falling market were short selling was not easily allowed and Derivatives were not present (they were introduced in 2002 but very few could open an account as there were strict criteria). Spread betting was something unknown to the Greeks and the only way to make money would be to buy stocks and sell them higher...You could not do the opposite... I reinvested and started trading and again I blew up my account by 2004 (the year that the bear market ended). The leverage was only 3:1 but there were wild moves on the stocks (a 12%drop in a stock within a day would not be that unusual...). So I decided not to give up and managed to gather some capital...This time I had a lot of experience and the bullish market that started in 2004 was in my favor. In 2006 (after 2 years) I managed a whole break even...I was very happy about it and thought that some profits would be very welcome for my future studies...
Then the Government decided to privatize one of its banks (Emporiki Bank). Credit Agricole was more than happy to bid for this bank. The idea of getting exposure to an economy with a growth rate of 4.5% and expanding consumer credit seemed ideal for the plans of that Group...They could see a lot of revenues...The profits were record high! The share was trading at about 21 Euros per share. Credit Agricole proposed a price of 23,50 Euros per share. Needless to say that the unions opposed this acquisition and the opposition parties blamed the government for selling off one of the most profitable organisations. They also pointed out the fact that this share was trading at about 80 Euros in 1999! So it would be very possible to reach that level again. Credit Agricole was desperate to get the deal and in an effort to entertain those reactions counter offered a price of 25 Euros per share which was accepted. It was premium of nearly 20% and Credit Agricole was a strategic investor that had the "know-how".
Remember, I told you that I have been investing in the Stock Market since 1999. I had experienced the bullish market that ended in a very bearish market some years later. I knew that we may be seeing the very last of the bullish market. I had seen that all before!!! A lot of companies were announcing share capital increases...As I was aware of the Greek situation and having read a lot of books about trading, I decided to withdraw all my money from my account. The waters were quite inhospitable and there were many "sharks" (in 2006, 50% of the daily volume was conducted by foreign investors as opposed to 10% in 1999. Many IB’s like Goldman Sachs were actively engaged with transaction in the Greek market) around. I didn't feel comfortable anymore and I decided to get out of the market as soon as possible...
The market kept on rising until 2007 (it was up more than 35 % from the level that I got out...). I felt stupid to be honest... I could see those potential profits..They could be a very significant contribution to my studies which were about to commence in London. At that moment, Emporiki bank was trading at around 35 Euros, 40% up from the price the French bank paid. Some other public companies (but not the ones that should have been first) were privatized. The opposition party (and now the governing Party Pa.So.K.) with his leader George Papandreou (and currently Prime Minister of Greece) was blaming the governing Party for those "sell offs"...
In late 2007 the Greek Market(in line with the other Stock Markets) started falling...Sooner or later the situation got much worse. The French would soon realize their deadly mistake! Just to let you know..In 1999 the General Index had a (all time) record high at 6,355. It fell to 1,400 in 2004! In 2007 it was trading at about 5,500(significantly higher than the previous low). Now it is trading at 1,251 units..
Emporiki bank was full of excessive employees. Credit Agricole tried to restructure the bank but their effort has not been successful until now. From 2006 only one fiscal year has been profitable. All the other fiscal years,the bank experienced massive losses..Now they are in need of capital injections...Please have a look at the chart of Emporiki bank for the last 25 years...
http://www.capital.gr/q.asp?s=%u0395%u039C%u03A0
This year the share was delisted... It was trading at 1, 72 Euros... Did I mention the 2(!!!) capital share increases that the French participated in order to support their investment???
This is the table with the major share holders:
http://www.capital.gr/xa/insiders.asp?s=%C5%CC%D0
Credit Agricole with a whopping 91% percentage... In their last (end of year) report the whole Group was performing reasonably well except from one of their subsidiaries...Needless to say which. It has been a nightmare to them! Poor guys...If only they knew in what sort of trouble they were getting into...But they were in position to know some things...In 2002 another public bank (Geniki Bank) was acquired by Societe Generale...Same story there...Heavy losses until now...The French seem to have not learnt their lesson!
The funniest of all was the fact that the current Prime Minister and leader of the opposition party in the past George Papandreou opposed and in some cases blocked many privatizations...In 2009 he committed to re-buy the Hellenic Telecommunications Organisation whose a minor part (25%) was sold to Deutsche Telecom. This was one of the main arguments before going to elections and winning them...He also advocated that there is plenty of money around and that the Greek should not worry at all. Everything was perfectly fine... Now the same person sold another portion of the National Telecommunication organisation at a price discounted by 50% of the original sale. He now tries to sell as many assets and privatize many companies that he originally opposed to. But now the prices that he could achieve would be only a fraction of what the Government would get in 2006 and 2007. On the other hand the (new) leader of the opposition Party (Nea Dimokratia, i.e "New Democracy") opposes to the privatization and sell offmany assets. He claims that he is able to manage a GDP surplus if he is elected as Prime Minister. The thing is that his party was governing Greece from 2004 until 2009. They could not achieve a surplus as "hard" as they tried..Now he claims to be able to achieve that. Some things will NEVER change...
Here are some other facts for your information. ..
In 2000 elections were to be held. The Prime Minister at that time Kostas Simitis (the one that agreed the very well-known SWAP with Goldman Sachs) was eager to be re-elected. As the stock market fell from its record highs he was implying that if he would be re-elected the Stock Market would rise again!!! Then "suddenly", days before the elections the Stock Market skyrocketed...He was indeed re-elected. Afterwards, the Greek public would be informed that many Greek funds managing public and private sector employees’ contributions were heavily buying stocks. Needless to say, that those “investments” resulted in a loss of 80 to 90% overall. Those fund managers were appointed by the Government. I highly doubt whether they had any previous experience in the financial markets. They only had to be liked by those Ministers to get that position Allegations were made that they were instructed by the Prime Minister to buy those stocks in order to manipulate the market. They were not “sufficient” evidences...Now those funds are not able to pay pensions...
In 1999, the Stock Market skyrocketed...One share was trading at 500 Greek Drachmas in Jan 1999. By September 1999 it was at 190,000 Greek Drachmas!!! 380 times more than it was trading 9 months earlier...So 1,000 Euros/Dollars (whatever) would result in 380,000 within 9 months...The Greek Finance Minister Giannos Papantoniou was very proud as he thought that this was a reflection of his correct Economic Policy. He called the Stock Market the “mirror” of the Economy. He and the Chairman of the Athens Stock Exchange (Panayiotis Koumniakis) were very happy to comment on the performance of market stating that it would continue to rise. As if they were analysts!!Nobody informed them that this was not their responsibility and that they should only care about their duties (which they didn’t). From Sept 1999 the Greek Stock market started its correction....Both of them were replaced later on...I have not heard of them for quite a while...They didn’t face any consequences...
As for the private investors?? They were hammered!! It was plain butchery!! There was not the opportunity to short the market and were unfortunate enough to listen to various politicians and “analysts” that the stock markets always go up...So they remained long...Needless to say that from 1999 until 2004 90%of those stocks lost more than 90% of their capitalization...Around 40+ lost over 99%...Nobody warned them and I think that many “investors” and financial institutions made a lot of money short selling (it was allowed for big financial institutions...). I can imagine that Goldman Sachs having privileged information about the situation (as they issued that SWAP) must have made tons of money...Many Greek investors lost their lifetime savings..As for the brokerage firm that I was working for??? It went out of business in 2005...Nobody was willing to invest in the Stock Market anymore...
In 2006 many Greek funds bought some OTC structured products from JP Morgan. For some “unknown” reason many funds bought the same product at the same time...These were highly complex structured products and according to the rules of the funds managing employees’ contributions, those instruments were banned. However, they all bought those instruments..The thing is that the price they paid was excessively high!!! A sort of Orange County Scandal...Allegations were made that many politicians were bribed by JP Morgan to “convince” those managers (appointed by them) to invest in those products...There were not “sufficient” evidences.. JP Morgan, as an act of good will (they were doing plenty of businesses with the Greek Government)l cancelled all the transactions...Plenty of other examples that politicians committed crimes against the Greek public..However, none of them faced any consequences...They got their privileges but didn’t pay for their mistakes...History repeats itself..
I want to give you one last example of the Greek reality. Having finished my studies at Masters Level, I joined the Greek Army in 2009 for nine months..It is a compulsory service that you have to do... There were ways to avoid it (declaring myself permanent resident of the U.K.), but as I didn’t run away from anything in my life I decided to join the army...I would soon regret it!!! I was appointed to join the Greek Armoured Corps and because of my age (25 as opposed to most of the other privates who were 19) and my studies, I was trained and given the rank of First Sergeant. I became the Tank Commander in a main battle tank... I was sent in a unit very close to the borders with Turkey. Those two countries have a decent record of various wars between them... At that unit they were plenty of mercenaries that were superior to me. These were guys aged from 18 to 26 , that didn’t attend any military academy (so no chance to become officers) and didn’t have any accomplishments in my life at all...As they realized the fact that they were dealing with someone that had some accomplishments in life, they thought that they could take their revenge!!! And they gave hard time to me...I was ordered to clean toilets (I was ordered more times than the other privates as everybody had to do it), to mop floors and do various other things... The officers didn’t bother to deal with this matter...Again, I was sick of myself for letting me getting into that situation and again sick of my country...I was a Patriot that wanted to help my country (and not run away), and I was treated like an animal...
In all the duration of my service, I could see that those mercenaries didn’t do their job properly... On top of that I could see that a lot of supplies were being wasted for no reason... I could see a lot of LEO 1 A5 battle tanks in my unit (around 60) that cost a lot of money... However very few were being used...When I found out the operations costs of my unit, I was shocked... The Greek taxpayers were paying a lot of money and they (mercenaries and officers alike) were fooling around..They were only concerned about their salary (which was by far higher than working in the private sector) and nothing else...This was a luxury that the Greek taxpayers could not afford!! As for readiness of that unit (which was close to the borders with Turkey)? At the end of my service the unit was to be relocated to another campus with other units so the operation of all those units could be improved. The distance between my unit and the new unit was 10Km (around 6 miles). So those tanks had to cover that distance...More than half of them could not do it as they were not maintained properly. The idea that those tanks were supposed to prevent any invasion and counter attack to the enemy was pretty frightening...
I, eventually became friend with one of those mercenaries. He was friendlier than the others. I asked him about his motivations in joining the Greek army. He admitted that he could not find any other job and the money offered was sufficient enough to go through all that hassle. He expected to retire at the age of 43. This was usual as if you served in the army for 25 years you had the right to retire! So guys who joined the army at 18 years old, they could retire at the age of 43 9and happened a lot in the past). I asked him whether he considers that socially fair. He said yes as he was doing a very dangerous job and after all he was providing a very significant service to the Greek public. He was 26 years old... As it was the time of the first Greek bailout and having an idea what would happen, I informed him that he would be very lucky to get even a pension after 40 years of service...He looked at me quite aggressively. I didn’t react. There was not any point. I knew that he would soon realize his mistaken point of view. Recently the old rules were revised and now military stuff have to work for 35 years before they retire...I bet that those rules will be revised again and they will be forced to serve at least 40 years before they retire... Did I also mention that that guy had a mortgage? He could not understand terms in his mortgage about M1, M2, M3 money supply and other terms and he just signed it...He could not even understand the difference between the ECB rate and the Euribor rate..As I knew what they meant, I went through the contract. When I explained to him various terms and conditions, he changed his mood...I could see some cold sweat running on his face as well...He was not much different than the other Greeks...He was not aware of a situation (as he could not understand it) that would have significant effect in his future life...
Eventually my service ended. The last day of my service was one of the happiest of my life! I just wanted so badly to put an end to that nightmare! I left that unit having fulfilled my duty. I did what I had to do for my country. I didn’t say goodbye to most of the mercenaries over there. Some of them wanted to say goodbye to me. I didn’t bother to talk to them. They were pieces of sh.t and they were not worth anything. They will remain pieces of s..t for the rest of their lives...To my mind they were traitors... I left driving my car. Just a few miles away, one of the unit’s officers in charge of one track carrying equipment spotted me. He raised his hand to greet me and say goodbye. I responded...I raised my middle finger towards him!!! He was shocked, but he could not do anything...I was not a soldier anymore and he had no authority on me. It was one of the most exciting moments of my life! On Sept 1st 2010 I came back to London. I have not been to Greece since that day. I am planning some holidays to Greece very soon. But I was informed that the general mood has changed. In fact, a lot of things have changed!!! Nothing is the same any more...
I am very sorry about this very long post but I wanted to share with you some of my experiences. I think that those facts provide hindsight about the situation in Greece and hold various lessons for all of us. I kept myself away from speaking badly about my country and various fellow Greeks. But I cannot any more. I had enough! Crimes have been committed against the Greek public and nobody has ever paid for them. Now, they are sending the bill to the taxpayers, advocating that everybody should contribute to save the country. However, they didn’t mention that it is not the taxpayers’ fault rather than theirs!!! They are a lot of things that need to be changed in order Greece to get into the right track again. First of all the mentality of the Greeks needs to be changed. And this is not easy... Please, do not, for a single moment, assume that I am against my country or the rest of the Greeks. I was, am and will remain a Patriot that would do anything for his country! My hurt cries every day about what happens (and will eventually happen) to Greece which affects my family and friends as well. It is not pleasant at all.
I hope my post had been helpful!
Evangelos
