Confidence returns to Greek economy

Animal spirits are returning to the Greek economy after a five-year slump and a narrow escape from crashing out of the eurozone.

The chief executive of a €100m investment vehicle owned by a successful Greek entrepreneur insists the country’s longest recession will end this year.

“We feel more confident now about Greece’s future ... We’ll be planning to move ahead in the coming months,” said John Karayiannis, who manages Olympia Development, with interests in mobile telecoms, manufacturing and retailing.

Olympia plans to spend up to €100m in Greece making acquisitions and upgrading existing investments. Because Athens-based companies face difficulty in raising bank financing, Olympia will make use of income earned by Play, a profitable telecoms operator in Poland controlled by Panos Germanos, the company’s founder and main shareholder.

“The external environment is better, we feel safe in the eurozone and the government has got reforms back on track,” Mr Karayiannis told the FT, echoing opinions voiced by a growing number of Greek businesspeople.

Greece’s business confidence index jumped almost five points in December – when the cash-strapped government received a €43bn aid tranche after a six-month delay – according to IOBE, an Athens-based think-tank. The index dropped one point in January, but is still at its highest level for almost two years.

“The uncertainty noted in previous months has clearly abated, as the continued funding of the economy (by the EU and International Monetary Fund) has built credibility,” IOBE said in its monthly survey.

While the economy is set to contract this year by another 4.5 per cent, bringing the cumulative decline since 2008 to about 25 per cent, forecasts by Greek banks point to a recovery beginning in the third quarter.

Several multinational companies, among them Unilever, Henkel and Procter & Gamble, have announced plans to increase output at their Greek units over the next three years. Unilever, for example is expected to transfer production from Poland of some consumer items, making Athens a base for exports.

Such moves reflect Greece’s increased competitiveness following a 30-35 per cent fall in wage costs over the past two years, and improved labour flexibility under legislation agreed with EU and IMF as a condition for bailout aid. The power of Greek unions has also been curbed as companies are now able to sign individual contracts with employees.

Greek households are still the most pessimistic in the EU, according to IOBE. Yet despite higher taxes and cuts in public sector wages and pensions from January, consumer confidence fell by only 0.2 points.

Alexis Pantazis, a former Goldman Sachs employee who last year co-founded Hellas Direct, a company selling car insurance online, said sales had doubled last month.

“We get a feeling that some trust is returning to the broader economy ... We are not sure whether this will be shortlived but there has definitely been an uptick in e-commerce since the beginning of the year,” Mr Pantazis said.

This marks a sharp contrast with last October when Angela Merkel, the German chancellor, visited Athens for a day – a trip now seen as a turning point in the government’s efforts to avert a “Grexit” from the euro.

“There were barely any transactions during her trip,” Mr Pantazis said.”Now consumers are returning to the market for basic financial services.”

Michael Petersen, a young Athens-based entrepreneur, won his first export order in January from the United Arab Emirates. His start-up company, Miterra, set up last year with a Greek partner, sells high-quality Greek olive oil online, packed in olive-shaped bottles.

“The order came after we won two design awards on the internet for our packaging,” Mr Petersen said.”Now we’re getting inquiries from importers in Hong Kong and Japan ... We’re optimistic we can become a reliable supplier of branded Greek food products.”

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.