Greek market needs 20 bln euros, study for investment fund says

The Greek market needs a 20-billion-euro liquidity boost, according to a feasibility study for an investment fund to prop up small and medium-sized businesses which noted that even a rise in funding of 5 to 6 billion euros could increase the country’s gross domestic product by a percentage point.

The findings of the confidential study carried out by consulting firm Oliver Wyman and seen by Kathimerini, underline the significance of the swift creation of the Hellenic Investment Fund to bolster beleaguered Greek businesses.

The fund is to have initial capital of about 500 million euros with the bulk coming from European structural funding and Greece’s public investment program, and around 100 million euros being put up by Germany’s government-owned development bank KfW, as confirmed during a visit to Athens last week by German Finance Minister Wolfgang Schaueble.

The purpose of the fund would be complementary to that of cash-strapped Greek banks which are currently unable to finance businesses because they are in the final phase of recapitalization and of restructuring their existing loans. Rather than operating like a new lender, the fund would rather function as a financing tool, curbing the almost total dependence of Greek businesses on the country’s systemic lenders.

According to the consultancy’s report, Greece’s economy and its banks have entered a process of deleveraging as debt levels reduce but this process is expected to last more than the usual seven years due to the “poor macro-economic environment.”

The establishment of the fund, which is to be modeled on Germany’s KfW and based in Luxembourg, has fueled some optimism about the prospects for economic recovery in Greece where a fourth year of recession has battered the business sector, leading thousands of businesses to close down and discouraging would-be entrepreneurs from opening new ones.

The support expressed last week by Schaeuble, despite his refusal to commit to a second Greek debt haircut in the immediate future, buoyed the fragile government of Prime Minister Antonis Samaras who is to meet US President Barack Obama in Washington on August 8.

Ahead of that meeting, US Treasury Secretary Jack Lew was visiting Athens on Sunday for talks with Samaras and other government officials on his way back from a G-20 summit in Moscow.

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