Postwar market rebound will not solve existing problems

The outbreak of the war took away most of the element of uncertainty affecting markets. The end of the war, now in sight, improves the outlook even further, allowing hopes of at least an initial market rebound. However, the substantial question remains: Will the end of the war bring us again face to face with the problems and incongruities which the crisis of the last two years has brought to the surface? Or will the disappearance of uncertainty, bolstered by low oil prices, provide the much-needed tonic to the economies driving the forces of globalization? The instinctive reaction is to accept the view that investors, rid of the anxiety of war, will focus their attention on the economy and the fundamentals of companies. As a result, stock markets should dress in pink and return to the bull years. «The disappearance of uncertainty, strengthened by a smooth course of oil prices, can lead to a rise in investment,» says Michalis Masourakis, chief economist of Alpha Bank. It sounds a rather optimistic view, contrasting with the recently expressed reservations of Bank of Greece Governor Nikos Garganas, in part endorsed by Economy Minister Nikos Christodoulakis. «On the assumption that the war comes to a swift end and oil prices stay at their present lowest level,» Masourakis’s prediction agrees with the head of the government’s economic think tank, Vassilis Rapanos. He notes that the US stock market has already undergone an adjustment, which could also take place in Europe within 2003. Takis Politis, director of the Foundation for Economic and Industrial Research, notes that most Greek enterprises already appeared satisfied with the level of consumer demand before the war broke out. «The return to normalcy will quickly spill over into the business climate,» he says. On the whole, the Greek economy remained immune to the crisis and retained a «deceptive optimism» at a time when other large economies experienced the effects of a serious slowdown, largely kept afloat by rises in incomes and borrowing. The resurgence of optimism should not be interpreted as an end to the dangers that have accumulated in the global economy. No one seems to believe that the turnaround will be speedy, impressive or definitive. A rise in investment will take time, as companies give priority to straightening out their portfolios, bolstering their provisions for past or future losses and, particularly, seeking out ways for growth. The Greek economy will face additional dangers. The biggest, says Masourakis, «is observed in the abandoning of fiscal discipline.» The great burden remains the public sector, says Politis, who thinks this is amply depicted in the low absorption rate of European Union investment subsidies; either firms do not submit plans for approval or public departments are unable to process them adequately. At the same time, the dualism in the private sector, where the good firms keep improving and the bad ones keep deteriorating along with the level of services, looks likely to continue marking the Greek business scene. For the time being, banks are coping adequately with the pressure exercised by the large debts of a series of midsized and big firms that attempted to expand hastily during the stock market spring of four years ago. But they have left the smaller firms to their fate; and so, the end of the war will not change anything in the continuously deepening crisis which the backbone of our economy is facing: Family enterprises in commerce, farm production and small manufacturing are losing the game. Evidently, this is what keeps unemployment at high levels. Bringing it down will require extensive structural changes, just as it did before the war started.