Bourse worries the government

The rally of the Greek stock market in recent months and the specter of speculative excesses are worrying ministers, sources say. The widespread optimism, the proliferation of expectations of business deals and the intensity of rumors are causing concern that the particularly positive developments in the business sector are at risk of being overshadowed by stock market speculation. Speaking on television this week, Economy and Finance Minister Giorgos Alogoskoufis warned that the proliferation of rumors is a dangerous situation and advised investors to be particularly careful. Government officials are expressing fears that the current positive picture of the Greek economy – which results from the successful macroeconomic adjustment, the improved conditions in the business environment and foreign investment – will be hurt by stock market excesses and strong speculative fluctuations. To be sure, the stock market’s prospects are of worldwide concern. Optimism resulting from abundant liquidity, aggressive buyouts by private equity and hedge funds and the intensity of acquisitions and mergers are leading bourses to all-time records. In fact, the buoyancy and increasing aggression of private equity funds recently prompted two warnings in quick succession from European Central Bank President Jean-Claude Trichet about the dangers posed by their unchecked growth and activity. The intensity of rumors in the Athens Stock Exchange (ASE) in recent weeks is reminiscent of the bull market of 1999, which led the general index to its all-time high of 6,400 points. The rumors have referred to situations such as the privatization of Postal Savings Bank; buyouts of the country’s two major banks, National (by Citigroup) and Alpha; and mergers of banks National and Piraeus Bank, and of Alpha and Eurobank. At the same time, observers are noting a trend of dressing up balance sheets, as in the case of a bank whose main source of revenue appeared not to be its core business but stock market operations. Since the start of 2007, the ASE general index has outperformed major foreign bourses by more than 100 percent, despite this week’s losses. Rather curiously, domestic investors have shied away from the ASE in the last two years, in contrast to foreigners, who have increased their positions.