Ahead of the weekend’s resounding “no” vote out of Athens, the main Greek stock market had had a surprisingly good second quarter: it was up by around 3 per cent, outperforming major European indexes such as the UK’s FTSE, down almost 3 per cent; Germany’s Dax, down almost 8 per cent; and the French Cac, down almost 4 per cent. Going back to the beginning of 2015, however, Greek equities gave a more accurate impression of the country’s economic turmoil; showing a fall of close to 3 per cent, while the FTSE, Dax and Cac were up by 0.3 per cent, 12.5 per cent and 13.5 per cent respectively.
Now we’ll need to look ahead at the implications of the weekend’s referendum and the resignation of fiery finance minister Yanis Varoufakis. Greece is a member of the Organization for Economic Co-operation and Development (OECD) – and is the only OECD country not to see an increase in GDP per capita between 2007 and 2014.
Regardless of the mess the country has got itself into, it’s hard to blame the Greek people for not wanting more austerity. Also, while Greek Prime Minister Alexis Tsipras and Varoufakis may be at fault for the chaotic negotiations with the country’s creditors, they are not to blame for landing Greece in such a terrible situation to begin with.
Late last week, I sat down with the secretary-general of the OECD Angel Gurria to talk about Greece. While the organisation hasn’t played a role in the fraught negotiations between Greece and the bodies monitoring its bailout – the International Monetary Fund, European Central Bank and its fellow euro countries – it has been talking to the Greek government, mainly on the structural reforms the country so desperately needs.
“Because there is a tomorrow, we have to prepare Greece and make it more productive and more competitive,” Gurria told me. “We need to help it promote integrity in its processes, make it more capable of collecting more taxes, and aid it in creating more competition. Clearly, we have to work on making the Greek government and the Greek institutions stronger, and to deliver on the policies they commit to.”
As the turmoil in the stock markets continued throughout Europe on Greece’s changing fortunes, there has been contagion in the bond markets. But Gurria told me that the swings in the bond market have been “typical”.
“First bond holders became wildly pessimistic, and then they became wildly optimistic… and that goes not only for the bond market but also for the stock market,” he said. “I think now there is more wisdom, and perhaps better buffers to deal with the outcomes.”
While the world has been gripped by the Greek drama and whether it would end in a “Grexit”, Gurria told me that a deal that works for both sides is vital.
“It is now crucial to move beyond short termism, and understand that it’s in everybody’s interest to keep Europe together. Europe is at stake. It took us many years to build it, but it’s always modernising itself, and it’s always changing and reinventing itself. There has to be room for that.”
“People seem like they want a positive result, though. It may take a bit longer, but it’s worth it,” he added.