Economist and Hedge Fund Manager Shayne Heffernan of takes a look at Greece

All indications are that unemployment in Greece will continue to rise. The economy has shrunk by around a fifth since the recession started in 2008 and youth unemployment has pushed far above 50 percent. The economy is expected to enter a sixth year of recession next year. “This is a very dramatic result of the recession,” said Angelos Tsakanikas, head of research at Greece’s IOBE economic research foundation.

Excerpts from the International Monetary Fund (IMF) report were presented to the Eurogroup Working Group (EWG) — junior finance ministers and treasury officials who prepare meetings of euro zone finance ministers.

“It is clear that Greece is off track and there is no chance they will cut the debt to 120% of GDP in 2020 as envisaged. It will be rather 136%, and this would be under a positive scenario of a primary budget surplus, a return to economic growth, and privatization,” a eurozone official, who insisted on anonymity, said.

The Greek banking sub index plummeted 13.59 percent over unresolved recapitalization, tied to last-minute efforts to complete conditions for new debt funding to avert bankruptcy for Greece.

And the main market index was showing a fall of 5.88 percent in afternoon trading after the finance ministry said that Greek banks would not be able to swap their holdings of national debt.

The ministry also said that results for the banks for the second quarter of this year would be delayed by a month until November 30 because of delays in recapitalization.

The ministry made its announcement shortly after a meeting between Finance Minister Yannis Stournaras and the Greek banking federation on Monday to discuss the urgent plight of the banks.

The ministry said that at the meeting, the possibility that Greek banks could swap their greatly devalued Greek bonds for bonds issued by the new European Stability Mechanism “was ruled out”.
Stock market dealers said that this caused banks share to plunge, dragging down the entire Athens stock index.

Greece hopes to help recapitalize its banks, hard hit by the national debt, deep recession and flight of capital, with money from the next installment of rescue funds from the IMF and EU, which still hangs on completion of new reforms.

The critical matter of recapitalizing the Greek banks, being kept going with various forms of funding on especially easy terms from the European Central Bank, is far behind schedule.

Recapitalization hangs on completion of the latest audit and agreement on extra budget action and reforms between Greece and the
International Monetary Fund, European Union and ECB. Without payment of the next installment, Greece faces bankruptcy next month.

The banks took a body blow when Greek debt was restructured under the latest rescue arrangements which forced private holders of Greek debt to take a big loss on the money owed.

Stournaras and Georges Zanias, head of the Union of Greek Banks, met to work out details of how to help institutions hit by the write down of more than 100 billion euros ($130 billion) in privately held government debt in March.

The European Union’s temporary rescue fund has earmarked around 50 billion euros for the task, and much of an EU-IMF lifeline worth another 31.5 billion is also expected to help banks restore solid balance sheets so they can provide more support to the wider Greek economy.

Greece, which has been in recession for five years, must set its financial sector back on its feet to underpin economic growth as the government enacts austerity measures worth 13.5 billion euros that have been demanded by creditors in exchange for their aid.

The German magazine Spiegel reported on Sunday that international auditors, including some from the European Central Bank, would demand that Greece carry out another 150 reforms to its economy, and suggest that holders of Greek debt, often the banks, accept further losses.

Citing an interim version of the findings of the so-called troika of creditors, Spiegel said that Athens would be allowed two more years to carry out the reforms in its programme but that this delay would cost billions of euros.

Greece has completed 60 percent of the reforms already demanded of it, the report says, according to Spiegel. Another 20 percent are being debated by the Greek government, while the rest are outstanding.

Talks between the Greek government and creditors have reportedly stalled on demands for more flexibility in its labor market, a position that is opposed by the left-of-center Dimar party, one of three parties that comprise a Greek coalition led by Prime Minister Antonis Samaras.


Shayne Heffernan

Shayne Heffernan oversees the management of funds for institutions and high net worth individuals.

Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reached a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.Read the Terms of Service

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