Greek Debt Restructuring Will Help Economy, U.S. Investors Say
A restructuring of Greece’s debt will ultimately boost the economy and attract investors, according to two U.S. money managers visiting Athens this week.
John Calamos, chief executive officer of Naperville, Illinois-based Calamos Asset Management Inc. (CLMS), and Stephen Cucchiaro, investment chief at Boston-based Windhaven Investment Management Inc., a unit of Charles Schwab Corp. (SCHW), both said they expect Greece to extend the timeframe for repaying debt.
“Any restructuring will be painful, but to be less painful in the long run, you can’t just restructure, you need to attract investors to fix the income problem otherwise you’ll be in the same place within a few years,” Calamos said in an interview at a conference in the Greek capital on June 14.
A year after the bailout that aimed to stop the spread of the debt crisis, Greece remains mired in a third year of recession, shut out of financial markets and saddled with the biggest debt load in the euro’s history.
Greek Prime Minister George Papandreou reshuffled his cabinet today, replacing Finance Minister George Papaconstantinou with Evangelos Venizelos, who had been defense minister. The premier will seek a confidence vote in parliament, expected next week, as he battles to get his own lawmakers to pass further austerity measures demanded by the European Union, European Central Bank and International Monetary Fund.
German Chancellor Angela Merkel and French President Nicolas Sarkozy will meet today in Berlin, with pressure increasing to reach an accord on a rescue package for Greece. EU finance ministers agreed on June 14 to convene again on June 19 after they failed to reconcile a German-led push for bondholders to shoulder part of the cost of a new plan for Greek aid.
“Investors are watching, waiting and thinking that there might be a very attractive entry point into Greece, but not until some of these uncertainties get cleared up,” Cucchiaro said on the fringes of the Greek Power Summit, which aims to foster ties between industries to improve Greece.
Concern over how the EU and the ECB will deal with Greek debt is hindering Greece’s ability to attract investors, Cucchiaro said. Moody’s Investors Service placed the credit ratings of BNP Paribas (BNP) SA, Societe Generale (GLE) SA and Credit Agricole SA (ACA), France’s three biggest banks, on review this week to scrutinize their holdings of Greek debt.
“The ECB wants to buy time to get European banks recapitalized so that when a default happens, the banks are better prepared,” Cucchiaro said. “It’s not just about Greece, but there’s a ripple or domino effect that could happen in Portugal and Ireland.”
Windhaven, with $6 billion in assets, holds some Greek stocks in exchange-traded funds, he said.
Calamos, which has assets under management of $38 billion, has no Greek holdings “because we need to feel that progress is being made on longer-term goals,” said John Calamos, who has Greek ancestry.
Greece’s 50 billion-euro planned state asset sale program “is very positive for Greece as it will grow the private sector and while we haven’t yet made any decisions, we’re closely looking at it,” he said.
Papandreou, 59, is struggling to win support from his party and Greeks for new austerity measures after 6.4 billion euros of spending cuts this year and another 22 billion euros by 2015. The aim is to get the budget deficit down to 7.5 percent of economic output this year and to about 1 percent in 2015. The economy is forecast by the European Commission to shrink 3.5 percent this year after contracting 4.4 percent last year.
Neither Calamos nor Windhaven is influenced in their investment decision process by rating changes such as Standard & Poor’s cut on June 13 of Greece’s sovereign rating to CCC, the world’s lowest credit rating, from B.
“Such moves just verify what the market already knows,” Cucchiaro said.
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