ECONOMY

The most successful Greek product

Many economies have historically found themselves in the uncomfortable position of being overreliant on one or two particular products and having to learn to adjust to the realities of the specific market. Saudi Arabia, for instance, is dependant on the price of oil. Greece relies strongly on its tourism industry – although not as much as the public imagines. The greatest part of the country’s revenues originates neither in tourism nor in exports. Both these sources combined only just equal the country’s main export product, which is government bonds, as the table shows. The stock of listed companies is another Greek product gaining in the preferences of foreign investors. In 2005, capital inflows for the purchase of stocks exceeded 5 billion euros, that is about half the sum accounted for by exports. This sum was 50 percent higher than in 2004, when export earnings rose only 5 percent. There is obviously a lesson to be learned from the success of Greek bonds. The reason for their success is that they have higher yields than other eurozone bonds and are almost as safe – there is probably no other sector where the Greek economy serves its clients as efficiently. To be sure, like any other product, bonds are also subject to price fluctuations. Now that the international economy is entering a period of rising interest rates, the value of old bond issues, including Greece’s, is falling. New issues are expected to offer higher yields and will therefore be preferable to the older ones. The only difference from other, real products is that the new government bonds should be fewer, so that the debt servicing burden will be lighter. However, the higher the interest rates the harder this target becomes to realize. Therefore, we have to learn to live with high public debt as it is unrealistic to expect any doubling of the country’s revenues from exports or tourism. It seems that our client bond holders have no reason to worry; opportunities for investing in high-yield Greek bonds will continue in coming years. Of course, as the governor of the Bank of Greece. Nicholas Garganas. pointed out in his annual report last week, the number of issues of Greek bonds fell in 2005. But demand from Greek and foreign investors was four times what the government sought to raise. Demand was also strong for syndicated bond loans.