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London institutional roadshow

“In the past few weeks, there has been a marked shift in global market sentiment regarding Greece. We have already seen renewed and increased investor interest, greater understanding and improving expectations that Greece will remain in the Euro zone and will manage to resume growth”. This statement was made in London by the Deputy CEO of Eurobank Mr. Nikolaos Karamouzis, who led a delegation of senior Bank executives that visited the UK’s capital for a series of contacts with international institutional agencies and Group clients.

The delegation, which also included the Bank’s Financial Advisor Mr. Gikas Hardouvelis, the Head of Global Markets Mr. Fokion Karavias and the Head of the International Division Mr. Theodoros Karakassis, conducted meetings and presentations at international organizations and major international Banks, which revealed, for the first time after quite a long time, a strong interest in the prospects of the Greek economy.

According to Mr. Karamouzis, the London meetings showed that there is growing interest in Greece, as well as an improvement of investor sentiment, as far as international investment houses are concerned. More specifically, the daily turnover in the secondary sovereign bond market has soared from €20-30 million to €300-350 million in the past few weeks, while the prices of Greek government bonds have almost doubled as compared to their historic lows. Savings held in overseas banks and in private hands within the country continue to flow back into the banking system, which specialized investment houses have made their visits to Greece much more frequent, mainly aiming at playing an active part in the Greek economy’s restructuring. Moreover, the Bank’s Deputy CEO noted that the Greek Banks’ access to international markets has been showing considerable signs of improvement, despite the fact that it has not been fully restored.

Eurobank’s delegation presented investors and international banks with the progress made by the Greek economy in the key fields of improving competitiveness, reducing fiscal deficits and improving the external deficit, i.e. the trade deficit.

More specifically, as documented by the presentations that were made, Greece has now recovered almost 60%-70% of the competitiveness lost during the previous decade, while the primary fiscal deficit is expected to turn into a surplus, possibly in 2013. The external balance of goods & services, excluding fuel and the purchases or sales of ships, was positive, in other words in surplus, in 2011, for the first time after many years, and remained positive and, indeed, growing in 2012. However, the cost of the Greek economy’s adjustment is large, mainly owing to the slow adjustment of the prices of goods and services, combined with a deep recession for five years in a row, a cumulative GDP loss of almost 18% and a dramatic increase in unemployment, which exceeded 23%.

Foreign analysts also focused on the key fields and the major institutional reforms that are still pending; improved performance in these fields is essential to the country’s effort to resume growth and reverse the negative expectations about Greece that still persist in international markets.

The Bank’s executives made specific mention to the effort made in order to deal with, and implement, all the reforms that have been significantly lagging, which has, after all, already been acknowledged by international markets. These fields are the utilization of state property, the crackdown on tax evasion and the establishment of a modern tax system, the opening of products and services markets, the enhancement of competition, as well as the restructuring and upgrading of the wider public sector and State Enterprises and Organizations, in order to increase their efficiency and effectiveness. Moreover, a key issue is the restoration of the financial sector’s liquidity and financial health, in order to make it possible to finance growth and restart the economy. In the past few years, the above delays have, on one hand, undermined the successful adjustment of the Greek economy, and, on the other hand, have deepened the recession, have increased the adjustment cost and have led to an unfair distribution of burdens within the Greek economy.

The Greek delegation stressed to the representatives of international organizations and major foreign banks that it is very important to improve international market expectations and, above all, put an end to all alarmist talk regarding the probability of Greece’s return to the drachma. As long as such views –i.e. that there is a high probability of a Greek exit from the Euro zone– prevail in international markets, there will be a serious lack of foreign and domestic investment in Greece. As Eurobank’s executives pointed out, it is obvious that under such circumstances it is difficult to make any investment, liquidity in the market will remain scarce, interest rates will remain high, and the effort to restart the Greek economy will be constantly hampered. At this point, they stressed that Greece’s European partners must offer their assistance and, above all, their recognition of the progress made by the Greek economy. So, ill-timed statements not only do not help, but on the contrary, may actually undermine the country’s effort to exit the crisis.

“Apart of the painful fiscal consolidation effort made by the country and the Greek society, it is time to draw a comprehensive, multi-level national strategy for improving our image abroad” stated Mr. Karamouzis. “The aim of such an initiative, which Eurobank supports with all means available, is to provide comprehensive information and increase influence on loci of power and investment decision-making centres worldwide, such as international banks, international media, international institutional investors, business associations and rating agencies” he explained, adding that “apart from our struggle within our country, we must also emphasize on restoring our credibility and position abroad, through a comprehensive information and influence-increasing initiative, that will promote the achievements of the Greek economy in the fields of competitiveness, fiscal consolidation and financial reform. However, this progress is not sufficient, on its own, to lead the country out of the crisis. Today, more than ever before, it is imperative to combine fiscal consolidation with growth-inducing measures and initiatives aimed at supporting sound entrepreneurship and extroversion through the enhancement of exports, in order to create a strong policy mix that will improve expectations and reverse the climate that has had such an adverse effect on our country’s growth”.