ΑTHENS – The Georgetown University Alumni of Athens presented a timely panel discussion titled ‘Implications of the Ukraine Crisis for Greece’ on June 14 in the gardens of the Goulandris Natural History Museum in Kifissia.

Albertos Bourlas, President of the GU Alumni of Greece and Commercial Partners Director at Microsoft, introduced the panelists, Yiannis Stournaras, Governor of the Bank of Greece and Spyros Theodoropoulos, Vice Chairman of the Hellenic Federation of Enterprises. The Moderator, Vassilis Antoniades, also an alumnus, is Managing Director & Senior Partner for the Boston Consulting Group.

Antoniades framed the discussion dramatically: “After going to sleep the night of December 31, 2021, we woke up not in a new year but a different world: an energy crisis, the highest inflation rates in 40 years, war in Ukraine.” He then asked: “how did we get there and what happened?” A fascinating and informative discussion followed.

Stournaras began by noting that “risk…can be modelled, but uncertainly cannot,” though he and Theodoropoulos said Greece is doing well compared with other countries.

While the West is holding together well regarding its response to the Ukraine war, he noted substantial differences between U.S. and EU situations that create tension, most importantly , the former is a net exporter of energy and the latter a net importer. He also emphasized the stronger U.S. stimulus package in response to the pandemic, which caused it to export some inflation to the EU.

Theodoropoulos described additional dichotomous situations, among companies and consumers, that pose policy challenges. For example, many consumers can spend because they could save during the pandemic, others are struggling, and those companies who rely on producing good quarterly numbers must pass on higher costs to consumers while family businesses do not feel such pressure and they have opportunity to increase market shares with lower prices. He believes, however, that “little by little” inflation will fall, before making the general observation that “every crisis produces opportunities.”

Stournaras said, echoed by Theodoropoulos, that Greece is holding up well – due to the rebound in tourism and the strong shipping sector, but also because its economy gained flexibility after the financial crisis. Theodoropoulos also noted that Greece’s production is characterized by light manufacturing, so higher energy costs cause less pain than for countries like Germany.
Stournaras took the opportunity to note what is overlooked by the media: for Greece, the real interest rate of its external debt is negative. While some political and media scream of “usurious interest rates,” under the bailouts, he noted that the restructuring of its debt left Greece paying average interest rates of just 1.4% – but he tempered his optimism with a dire warning that if Greece slips back into fiscal and governmental irresponsibility, EU nations will never offer Greece such favorable rates again.

He believes Greece will avoid falling into recession, and on the energy front he said Greece is fortunate to have LNG facilities. Stournaras also emphasized that the bulk of inflationary pressure is coming from food and energy, which is largely a function of the Ukraine crisis. At the current level of conflict, governments are able to respond, but all bets are off if the war leaps to a greater intensity.

Stournaras also expressed optimism regarding the United States, noting that its inflation situation does not come close to what occurred in the 1970s.

COURT REFORM, PLEASE

Antoniades asked the salient question of what Greece must to attract the foreign investment needed to generate jobs and grow out of its debt. The speakers were loud and unanimous: comprehensive reform of its court system, noting serious investors cannot tolerate the uncertainties and years of delays of the Greek legal system.

Antoniades followed up by asking what Greece must focus on to secure its economic future. Theodoropoulos said there must be breakthroughs in education and training, redirecting the focus of universities to the economy and job markets. He also believes there is potential for Greece to greatly benefit from investments in its energy networks.

Of course, attention focused also on the old dream of bureaucratic reform.

Stournaras added there is room for more privatization and that the Greek baking system is stronger than it’s begin given credit for – but that banks must take care not to fall behind in the digital revolution. What Greece is given credit for is having many well-educated technologists and hard scientists, but the country must take better advantage of that. Finally, there is potential in the defense industry, following Turkey’s example.