Dear Mr. Berko: Now that the European Union has accepted Greece’s austerity program, do you think it’s time to invest in Greek bonds and equities? If so, what issues should I buy? If the answer is “no,” please tell me when would be a good time to invest.
— S.C., Erie, Pa.
Dear S.C.: The answer is “no.” The Greek government and people are pathologically unable to manage their economy. And the punters in London reckon Greece, with a new government, will be back at the money table sooner than one can say “bingo.” The investment climate in Greece is in shambles; there are no quality long-term stocks to own because the long-term outlook for Greece stinks. There may be some speculative opportunities, but they’re out of my ken. Just beware of Greeks bearing gifts.
There is no way on this good earth that Greece can repay the billions of dollars it owes. That’s like asking a one-legged man to run a marathon. Alexis Tsipras, who just resigned as prime minister, knows it, and Yanis Varoufakis, the finance minister who resigned and rode off into the sunset on his Ducati, knows it, too. Greece has been insolvent for decades and should have never been admitted to the EU. But a secretive currency swap engineered by Goldman “Sucks,” making billions of euro debt temporarily disappear into the ether, too easily fooled the EU, and Greece became a member in 2001.
Most folks don’t know that Greece received its first bailout package, totaling $125 billion, in 2010 and a second bailout package, of $149 billion, 20 months later — a total of $274 billion. Greece is an economic and cultural failure. It lacks the ability to support and engage a manufacturing sector, which is a vital part of the goods-producing super-sector. A manufacturing sector comprises businesses that are engaged in the physical, mechanical or chemical transformation of materials, substances and components into new products. Greeks can’t produce cellphones, auto parts, computers, printers, sporting goods, pharmaceuticals, bicycles, appliances or turbines for export. In 2014, exports totaled $35 billion. Mineral fuels generated 35 percent of exports, and ouzo, feta cheese, olives and olive oil, red saffron, halvah, and yogurts accounted for 60 percent, while textiles, chemicals and electronic equipment totaled only 5 percent. Together these dinky products can’t even pay the interest on the interest of Greece’s billions of national debt.
Meanwhile, the Greek government is as crooked as a shillelagh. Many members of Parliament have bank accounts outside the country. Corporate executives have bundles of EU notes in their hidey-holes. And those in Greece’s successful merchant class, few of whom pay taxes, are equally prepared. Greece has morphed into a bureaucratic five-star welfare state, and everybody gets a piece of the pie. But in reality, Greece is a one-star economy. The pensions and entitlements are bounteous and consume 52 percent of government income. About 33 percent of Greece’s labor force works for the government, and many retire at 57 with 80 percent of their working benefits. Tax evasion and corruption are an accepted national sport. Political corruption is epidemic. The cops are on the take. Corporate corruption is explosive, and enforcement is almost nonexistent.
Many believe that neither the government nor the people have the tools or discipline to participate in a 21st-century economy. Greece needs a large manufacturing base to support its economy. But that won’t happen, because the country lacks a skilled labor force, necessary natural resources and an infrastructure (transportation, banking, a legal system, a cooperative parliament and a workable bureaucracy) to make it work. And many believe that the Greek people, who have spent so much of their lives on the government’s teat, lack the will to compete in the 21st century. So Greece will remain a tourist attraction (tourism was 18 percent of the country’s gross domestic product in 2014).
Malcolm Berko addresses questions about stocks. Reach him at P.O. Box 8303, Largo, FL 33775 or firstname.lastname@example.org.