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Greek report
by Euro Reporter
2014-07-03 10:34:41
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Tourists return as austerity-hit Greece emerges from crisis

The golden sand, the flashes of bougainvillea and the clear sea as warm as the welcome - few places say "summer" better than Greece. And at the Kahlua beach bar on the eastern shores of Crete, the holiday season is in full swing. The chill-out music is playing, the sunbeds are full and Kahlua is now attached to a new hotel - all 40 rooms have been booked for the entire summer.  It's a pattern seen across Greece. Tourists are set to be up by 20% on last year and have almost doubled since 2010 when the financial crisis hit. Back then, worries about social unrest here and "Grexit" - Greece's possible departure from the eurozone - kept the holidaymakers away. But it's returning confidence that Greece may finally have turned a corner that has brought them back. "We make a new start", says Manos Arvanitakis, Kahlua's owner, sipping a fresh pineapple juice. "Things here are more stable as regards politics, the euro and everything. People from other countries feel more relaxed about coming to Greece: now they don't have a reason not to come and there are plenty of reasons to come."

Tourism is Greece's biggest industry, making up a fifth of GDP. As it slumped, so did the economy. I remember reporting from empty hotels and quiet beaches on the Ionian island of Zakynthos in 2012 at the height of the crisis. Now Greece is expecting its best year yet, with 19 million arrivals. And it's set to help the economy finally grow after six consecutive years of recession. On a packed beach near the Cretan capital, Heraklion, I meet Thomas, a young tourist from Germany. "When we speak to our friends back home, they tell us: 'Ah! You're going to Greece, what about the crisis?' And we say: 'Don't worry. We feel good here. Greece is a beautiful country'."  A few sunbeds away, Harold Bradel is relaxing with his family. "We're very impressed with what's happening in Crete," he says. "There are lots of new roads and new buildings here."  Does he get the sense of a Greek recovery, I ask? "Yes, definitely," he replies. In some ways, he's right. In the space of four years, Greece has wiped out its deficit, apart from interest payments on its 240bn euro (£191bn) bailout from the IMF and eurozone.

It's the biggest economic adjustment of any country since World War Two, but it has come at a huge cost, with biting austerity measures to slash public spending.  Taxes have soared, and salaries and pensions were cut by on average 40%. When you're among the one in four without a job here, a so-called "primary budget surplus" doesn't mean much. And for Nikos Britzolakis, there is simply no sign of recovery. I meet him at a hospital in Heraklion, where he's visited his wife Eleni since 13 March. On that day, unable to cope with debt and new austerity measures, she threw herself from an 18m-high (60ft) wall in the city.  Suicides are up in Greece by 45% since the financial crisis hit, according to the charity Klimaka.  Eleni's attempt was unsuccessful but it's left her paralysed and barely able to communicate. She lies in bed, connected to an oxygen mask and drips, crying in pain when they are moved. The only decoration is a postcard of a religious icon that she keeps on her bed. It is little solace.

Nikos takes me to the spot where she jumped on that fateful day. Two suicide notes - one for her husband, the other for her daughter - talked of how she could no longer cope with the 600 euros (£480; $815) that her family had to live on each month. "I lost everything I had in five minutes when she jumped: my home, my wife, my dreams," says Nikos, fighting back the tears.  "I feel like I want to end my life as well. What stops me is my daughter - and in the night I have to check on her to see she hasn't done the same. This life isn't worth living any more." For others too, the pain of the crisis remains acute. Three hundred people a day depend on the food handout in Heraklion. Most are the so-called "new poor" who used to have a decent wage and a stable job. And this is Crete, traditionally one of the richer parts of the country, thanks to its tourism. On the mainland, it's far worse. "Greece's macroeconomic figures are good - but this is not felt by people down the street," says Alexis Kalokairinos, a professor at the University of Crete and head of the soup kitchen foundation. "We are told we're getting out of the crisis but we feel we aren't. Most Greeks think that the medicine - the strategy towards Greece - has not been correct." As the sun sets over Crete, the evening charter planes fly in every few minutes from across Europe: Moscow, Berlin, London. Heraklion airport is heaving and the holidaymakers are overwhelmed by the beauty of this island. In many ways, the jewel of the Mediterranean is shining once again. But there is a darker side to this story and for so many Greeks, the prospect of "recovery" is still a distant point on the horizon.


Greece promises tax cut to attract oil and gas majors

Greece is planning to cut tax rates for oil and gas companies as it wants to attract them to help exploit its untapped offshore hydrocarbon resources, its energy minister said on Tuesday. Under the plan, oil and gas explorers will pay 25 percent tax, down from 40 percent currently and 5 percent of the tax will go to local communities. "We have done this in order to incentivise our investors to invest in the future of Greece," Ioannis Maniatis, Greece's Energy Minister, said at a conference in London. He did not say when the new tax rates would come into effect.

Debt-laden Greece, which spent 15.6 billion euros ($21.2 billion) to import fuel last year, or about 8.6 percent of its gross domestic product, has launched an ambitious programme to discover big hydrocarbon reserves. It has been inspired by large gas finds offshore from nearby Israel and Cyprus. Maniatis also announced the tender of Greece's first large-scale oil and gas exploration licenses after several fruitless attempts over the past decades to make big oil discoveries.

A group of Greek government oil and gas experts was meeting representatives from BP, Shell, Total and ExxonMobil and other oil companies in London on Tuesday and Wednesday, a Greek government source said. Once the tender is officially published in the coming weeks, oil and gas producers will be able to bid for licences covering 20 blocks located south of Crete and in the Ionian Sea. "We will evaluate all the available data regarding the 20 offshore blocks which will be included in Greece's new concession round," said Mathios Rigas, chief executive of Energean Oil & Gas, currently Greece's sole oil producer.


Is Greece eyeing the bond market? Again?

Typical. You wait four years for a new Greek government bond, and then two come along at once. (Kind of.) The grand post-bailout return to the bond markets came in April with a blowout transaction that drew plenty of enthusiastic buyers and a slender price tag for Greece. Since issue, the bond has done well. Now Greece is expected to come back again, and soon, officials have indicated. A three-year transaction is seen as likely, prompting some weakness in the bond issued in April as investors sell some of that to make room for the new debt.

Why pounce now? Firstly, in the current environment of low interest rates investors are thirsting for relatively higher yields. Greek yields have come down a long way, but still, when compared to their euro-zone peers, Greek bonds fit the bill. Secondly, Greece’s recent €3 billion ($4.02 billion) bond issuance in April was a resounding success. The 2019-dated bond was issued at a yield of 4.95% (the country’s 10-year bonds yielded more than 11% just a year earlier), and now, less than three months later, it’s trading at 4.18%, according to Tradeweb. In other words, investors who bought the bond have made a profit on their investment. Prices rise as yields fall.

Thirdly, following Greece’s €200 billion debt restructuring in 2012, where the shortest-dated bond became one maturing in 2023, the country has lacked short-dated bonds. Greece has begun to fill this gap with the 2019-dated debt but analysts say it has always been clear that its intention was to build up the curve again for shorter-dated paper. “This scarcity value should continue lending support to Greek government bonds with demand from high-yield investors outstripping supply,” said David Schnautz, rates strategist at Commerzbank. In his view, a three-year bond at around 2.90% would offer plenty of sweeteners–around 1.30 percentage points–over Portugal’s 2017-dated bond, and would probably still leave plenty of potential to perform in secondary markets following the initial issuance.


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