Greece 2.0: Materialising the Turnaround Story

MAY - JUNE  Issue no. 6 |  Debt Business Magazine

By: Nicolas Roth

Head of Alternative Assets

REYL & Cie, Switzerland

As opposed to many western countries, Greece entered the Covid-19 crisis in a very different shape and form. The country has been under new leadership since summer 2019 which brought a completely new momentum. The newly elected government from Prime Minister Kyriakos Mitsotakis has been firing up all engines on reforms, from tackling taxes to launching ambitious infrastructure projects such as Ellinikon and other much needed improvements in the field of digitalisation. In January 2020, the government put together a committee, led by Nobel Prize Winner Christopher Pissarides and co-chaired by Athens University Professor of Economics Nikos Vattas, whose goal was to develop a comprehensive blueprint that the government could use as a framework for future policies. Two months later, Covid-19 hit the world and Greece soon ground to a halt, potentially compromising all efforts achieved in the early reforms. However, the Greek government’s reaction is a textbook example of efficiency.

In the spring and summer of 2020, the European Council started work on a series of support packages for its member states as the European Union quickly understood that the initial aid measures such as PEPP would not be sufficient. Damage from lockdowns across Europe could not be addressed with the EU’s traditional fiscal emergency kit. After much debate and the usual north vs south squabbles, the EU adopted its biggest support package yet called EU Next Generation, consisting of EUR 750bn in both grants and loans to its member states - but this is not in the form of free stimulus checks and it comes with strings attached.

 

Its obvious first objective is immediate economic repair and relief of the damage in the aftermath of the Covid-19 crisis. The second objective is to ensure that the recipient countries undertake a green transition, a digital transformation, and become more sustainable and resilient. In this context, the EU tasked each member state to present a detailed plan covering reforms and investments in six policy areas: (i) green transition (ii) digital transformation (iii) smart, sustainable and inclusive growth and jobs (iv) health and resilience, (v) policies for education and (vi) upskilling.

 

By October 2020, Greece had sent its first draft proposal to the European Commission demonstrating how the country would use the recovery funds available. The draft paper extensively leveraged the work from the Pissarides Commission and worked with audit firms who signed off on the various budgets and reforms proposed. The plan nicknamed ‘Greece 2.0’, was finally presented to the Greek Parliament in late March 2021. As a result, Greece was able to secure EUR 17.8bn in grants and EUR 12.7bn in loans and seeks to mobilise a grand total of EUR 57bn by promoting private investments through public/private partnership loan agreements.

Greece 2.0 is built around the four pillars of the EU’s Recovery and Resilience Plan: green, digital, social and an economic and institutional transformation. The green transformation will focus on a massive energy-efficiency program for private and state buildings, improving the electricity interconnection between islands and upgrading infrastructure as well as a reforestation program among others. Within digital transition, the construction of a 5G corridor alongside highways with a view to facilitating the deployment of autonomous vehicles as well as underwater internet cables connecting the mainland to the islands in a bid to improve infrastructure are both ambitious landmark projects. The state will continue its digital renaissance that began during the crisis with the emergence of online prescriptions, for example.

 

The social aspect is very much skewed toward education and upskilling the workforce. As Alex Patelis mentioned, the government will not hand out free money for projects but will co-invest alongside banks and investors. Finally, loans will not be granted by the Greek state, but by reputable and experienced financial institutions such as EBRD.

Not only is this plan is bold and ambitious, but its entire construct is also a complete departure from the previous approach. As explained by Akis Skertsos during an address at the Parliament, in the past Greece would receive EU funds and then decided how to allocate it. Greece2.0 was built in the opposite way; a plan was first devised, before obtaining the adequate financing to execute. Thanks to the work of the Pissarides Commission, not only was it possible to create a detailed plan but also a once-in-a-generation opportunity to reboot the economy and steer it towards a more sustainable and inclusive path forward, a true inflexion point in Greece’s development.

 

Prior to the Covid-19 crisis, Greece was already well advanced in the process of cleaning-up its banking system saddled with non-performing exposures and managed to attract an impressive line-up of international investors. Greek banks sold to the market very large portfolios; the asset servicing ecosystem is very dynamic and rating agencies recently upgraded Greek banks which was an important milestone. Given that the banking sector is emerging in much better shape, Greece 2.0 comes at a critical point for the country and can rely on a functioning banking system. The government has already started to deliver on multiple aspects and Greece 2.0 is a once-in-a-generation opportunity to reset and re-orient the country and make it a much-anticipated successful turnaround story.

ABOUT REYL GROUP

Founded in 1973, the REYL Group is a diversified and entrepreneurial banking group with offices in Switzerland (Geneva, Zurich, Lugano), Europe (London, Luxembourg, Malta) and the rest of the world (Singapore, Dubai). The REYL Group manages assets in excess of CHF 15.5 billion and employs more than 245 professionals. In 2020, the REYL Group signed a major strategic partnership with Fideuram - Intesa Sanpaolo, a leading European banking player. Developing an innovative approach to banking, the Group serves a clientele of international entrepreneurs and institutional investors through its Wealth Management, Entrepreneur & Family Office Services, Corporate Advisory & Structuring, Asset Services and Asset Management business lines.

REYL & Cie Ltd is licensed as a bank in Switzerland and performs its activities under the direct control of the independent Swiss Financial Market regulator (FINMA) and the Swiss National Bank (SNB). The REYL Group's subsidiaries are also regulated by the LPCC in Switzerland, the FCA in the UK, the CSSF in Luxembourg, the MFSA in Malta, the MAS in Singapore, the DFSA in Dubai and the SEC in the United States.


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