Greek railroad tragedy: Dark clouds after the “gray rhinoceros”

If the pandemic and the war in Ukraine were for some, as rare and unexpected events, two rather “black swans”, according to the term introduced by the Lebanese-American philosopher, essayist and former derivatives trader Nicholas Nassim Taleb, the Tempi tragedy , as the third extreme event during the period of the government of the country under Kyriakos Mitsotakis, rather has the characteristics of the “gray rhinoceros”.

According to the specific term, which was also introduced by Michelle Wooker, an American writer, commentator and political analyst, as the state of the country’s railway network, but also of the OSE as a whole, was systematically devalued, this tragedy was waiting to happen, ultimately causing shock in Greek society,  just before the upcoming elections and the return of the so-called political risk in the country.

It is characteristic that recently Greece’s borrowing costs for 10 years were better or the same as Italy’s, despite the fact that Greece has not recovered the investment grade, while in the last 5 months the shares on the Athens Stock Exchange have risen by 43% , gaining 20 billion euros, before the tragic events of Tempi halted the momentum of the market which saw losses of around 4 billion euros in the last few days, although for some anyway technically (the market) was ready for a correction. The climate has worsened by the collapse of the American Silicon Valley Bank.

Stournaras appeal for “prudence”

The governor of the Bank of Greece, Giannis Stournaras, however, reported to the “Financial Times” that Greece is close to regaining investment grade in 2023, urging the country’s next government to maintain fiscal prudence. Rating agencies, he said, will upgrade Greek bonds within months if MPs signal their intention to continue reforms and use the “window of opportunity” to significantly reduce the public debt burden.

International investors, however, seem somewhat numb, trying to understand the impact of the Tempi tragedy on the electorate, but also the possible changes in political correlations in the run-up to the upcoming elections and whether these (correlations) and the return of political risk could to change the emerging course of a stable government (in any form) under K. Mitsotakis that would not substantially change the country’s economic policy.

Two bets and numbness

A group of Greek and international powerful investors is even convinced that the country has turned the page, the Greek economy will continue to grow in the coming years well above the Eurozone average, while investments will continue closing the investment gap created by 10 year debt crisis. The Hellenic Statistical Agency-ELSTAT announced e.g. stronger growth of 5.9% last year, while the government forecasts a corresponding 1.8% this year, some foreign banks have started to upgrade their estimates for GDP growth above 3% in 2023.

The first figures from tourism are pointing in that direction at a time when growth, now appears to have truly sustainable characteristics as the economy becomes increasingly extroverted. At the same time, the country has two bets in front of it (investment grade for Greek bonds and recovery of developed market status for the Stock Exchange) that will give it new dynamics, as the funds that could potentially be placed in the domestic market are ten times what they are now.

For some international fund managers, the imprint of the Mitsotakis administration on the Greek economy, investments and the market is generally positive, and it is unlikely that the tragic events of Tempe will lead to a substantial change in the country’s economic policy. Some even remembered that neither the deadly fire in Ilia with the famous “general wind” nor the tragedy in Mati substantially changed political relations, as voters (for better or worse) ultimately vote with different criteria. However, if there are no convincing answers to the Tempe tragedy, it is estimated that the lack of trust in the political system will increase, with effects on the anti-systemic vote and the extent of abstention from the elections.

Caution due to risk

On the other hand, however, long-term funds looking for investment opportunities in Greece consider that the emerging political risk in the country has not yet been clarified and are rather cautious, as easily if there is a political stalemate for a period, the need for achieving primary surpluses this year that could also prevent the acquisition of investment grade, will be jeopardized putting the country a in adventures.

For example, last Wednesday, amid protests over the conditions under which at least 57 lives were lost, one such group of international investors, after listening attentively to the presentation of the country’s positive prospects and investment opportunities, moved through the streets around the Syntagma ( beyond the range of the protesters) was trying to decode the Molotov cocktails being hurled at police. And if for one of them, as he was originally from Colombia, things were somewhat easier to comprehend, for the others it was difficult to understand all the facts of an otherwise mature Western democracy, let alone to interpret why some desecrated the monument of the dead of Marfin to “honor” the dead of Tempi.