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Interest rates will fall no sooner than September

09 April 2012 / 15:04:24  GRReporter
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Victoria Mindova

In just one year, the main index of the Athens Stock Exchange dropped by half. Shares of profitable Greek companies reached the bottom, and trade almost completely faded. Under these conditions, Greek companies continue swimming against the tide and despite the promises of economic growth in two years at the soonest, they are still operating and are seeking alternatives for economic development. GRReporter contacted the president of the Union of Listed Companies Panagiotis Drakos, who gave the perspective of big business for the development of the Greek economy.

What are the main problems that listed companies in the Athens Stock Exchange (ASE) have experienced through the crisis?

Recession, has many accompaniments: loss of sales, increase of losses, and loss of liquidity.  The first two a company can possibly survive with; the last is obviously the most onerous. 

2011 was a hard year for the Greek economy. What is the total cost of the losses that your association had registered for the listed companies through the last year?

The Union of Listed Companies is concerned with European and Greek rules and regulations.  We also follow developments across the Atlantic since the United States and the European Union are clearly bent on a path of close convergence.  Issues we deal in are European Union Directives, their adaptation to Greek Law, security regulators rules, stock exchange rules, corporate governance, corporate social responsibility including environmental issues, accounting standards and similar subjects. We avoid repeating the work of others and many analysts are best placed to quantify the proper answer to your question. 

Losses, however, are significant and as of yesterday, out of 264 companies listed on the Athens Stock Exchange, 160 are listed on the main market and 104 are in various divisions signifying these companies are under increased observation due to problems with the volume of trades in their shares or even their finances. 

How do you believe the privatization will affect the companies listed on the Athens Stock Exchange?

Everything that helps the Greek economy will help the companies listed on the Athens Stock Exchanges.  We expect that most of the state properties to be privatized will not be listed.  Those that are listed might eventually be delisted by the new owners, if the state has sold its entire portfolio in such a company.  If most of the new projects are successful this will lead to further investments from the new investors, it is possible that eventually new listings might materialize from such investments. 

One thing we worry about is the solution to be adopted for the recapitalization of the banks.  It should be undertaken in such a way that excludes the state from taking over management from today’s private bankers.  We must not forget that private bankers are partly responsible for any bad debts on the banks’ financial statements.  The other part of bad debt is generated by the recession, for which we cannot blame the banks.  Finally the debt write-off known as the Private Sector Initiative (PSI) is the state’s doing and private bankers are in no way responsible!

What sectors have been the most disturbed by the crisis?

Obviously, banks have been most disturbed by the crisis; also sectors with a strong dependence on the internal market; and finally, companies with investment plans under evolution which had put higher than normal demands on their liquidity.

What are your expectations for 2012? Which companies do you believe will be able to come out strong of the current situation?

Banks that manage to recapitalize themselves with minimal reliance on the state; companies with strong sales presence abroad; companies with successful foreign subsidiaries; and finally, all companies that manage to survive this “tsunami” of a crisis…   

Do you fear that the foreign investments can harm the established Greek businesses?  What is your opinion on attracting new financial recourses from countries with high growth ratio like Russia, China and India?

No foreign investments can harm any country for a very simple reason.  If the product or service proposed by a foreign investor is efficiently offered locally, the foreign investor will not proceed with such a project.  If it is not available locally, or is available in insufficient quantities, inadequate quality or uncompetitive prices, the country stands to gain.  Any local company will have to bring itself up to scratch to meet the foreign competition; in which case the foreign competition benefits the country once again.  In order to attract new financial resources from the BRICS, Greece has to be more interesting than investments in their own high growth economies.  Such is not actually the case, unless a particular investment is necessary to the mother country’s development; the container port leased to Cosco being a solid example.  Eventually with the country’s economy picking up, the BRICS might become interested; when they do, they will be welcomed as explained in the answer to the first part of your question. 

Many of the listed companies have business interests in Bulgaria. What is their strategy for the country in the coming years?

We are not aware of our members' business plans, but we would guess that, for a short period until Greece gets out of its recession, Greek companies with Bulgarian interests will hang on to them, provided they are not a drain on the mother company’s liquidity.

The credit interests in Greece are still high right now. Under what conditions do you believe that the banks will lower the rates?

Rates will come down after banks are recapitalized and after the deposit outflow is reversed.  Hopefully, this will become apparent starting in September.

Tags: MarketsCompaniesUnion of Listed CompaniesCrisisDrakos
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