Investments: What foreigners are afraid of in “Greece 2.0”
JP Morgan emphasizes that perhaps the most important message about Greece is that it has finally come out of the “lost decade”. [EPA]
Investors’ concerns about “Greece 2.0” project attempts to answer the JP Morgan after meetings he had at Athena with its officials government. As he points out, “Greece 2.0” remains the strongest impetus for the growth trajectory of Greece in the coming years, with the government’s forecast for development this year at 3.1% presupposes a contribution of 1.9% of it.
From the discussions that the American bank had with bank investors, there are two main concerns regarding the “Greece 2.0” plan and the Recovery Fund, as he notes. The first is related to the long-term ability of the country to absorb funds and their efficient distribution. Greek government officials stressed to JP Morgan the importance of the Recovery Fund structure, which is based on specific commitments. Each project has a timetable with precisely defined milestones, and failure to meet these targets may cause other Member States to stop disbursing future payments. The government has clearly defined the ownership of each project and the relevant accountability and has provided incentives to the owners to achieve their goals. Greek officials also stressed Greece’s strong progress so far, especially compared to other EU countries, which is an indication of the government’s willingness to implement the plan.
The number one concern is the absorption and proper distribution of funds, says JP Morgan after discussions with investors.
The second concern of investors is that “Greece 2.0” has not yet brought a real increase in loans to the banking sector. JP Morgan notes that project-related projects typically have a 40-40-20 or 50-30-20 financing structure, with the first 40% -50% provided by the Recovery Fund as a low-cost loan, the next 30 The% -40% is provided by private banks and the last 20% is the required investment by the project owner. As a result, all four Greek banks have announced optimistic loan growth targets that will be backed by Fund-related investments as early as 2022. JP Morgan estimated that while the Recovery Fund will give additional impetus to banks’ lending prospects, the real impact will come through its long-term impetus to the wider economy. At the same time, it effectively reduces the credit risk of banks, as their exposure is limited to 30% -40% of the total amount, while it will support loan repayments as the first pillar 40% -50% of total financing is provided by the government with low . costs, removing financial pressure from project owners.
Thus, JP Morgan predicts that the new gross lending of Greek banks will reach 15% of GDP by 2024 from 8% in 2019, with an average annual growth rate of 6% of the portfolio of non-performing loans in 2021-2024, which comes in in stark contrast to the other 1% contraction recorded in 2016-2021. However, JP Morgan emphasizes that perhaps the most important message about Greece is that it has finally come out of the “lost decade”.