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Opinion
Matthew C Klein

Greek 'Recovery' Is Just More Agony

The troubled Mediterranean nation has regained access to the capital markets but hasn't yet turned the corner economically.
Been down so long it looks like up in Greece. Photographer: Kostas Tsironis/Bloomberg
Been down so long it looks like up in Greece. Photographer: Kostas Tsironis/Bloomberg

Financial markets respond more to changes in people's beliefs than to changes in reality, which helps explain why Greek stocks and bonds have been doing so well recently even as the economy keeps shrinking.

Reuters's Hugo Dixon makes the optimists' case, arguing that the troubled Mediterranean country is "undergoing an astonishing financial rebound" thanks to the combination of fiscal austerity, useful reforms of the public sector and relatively generous bailout terms.

Last June, I wrote about the Greek government's relatively successful efforts to attract foreign investment by offering valuable assets at rock-bottom prices. Even though the Athens Stock Exchange General Index has done much better than the German Stock Index during the past year, Greek equities have a price-to-earnings ratio of just 4.2 compared with 18.3 for German shares. You could make a lot of money buying Greek stocks if valuations ever converge.