Greece has entered a virtuous cycle of growth and the coming years will be especially good for the economy and Greeks, as long as political stability is maintained and business-friendly policies continue. This is the assessment of the country’s largest foreign investor, Prem Wats, Chairman and CEO of Fairfax Financial Holdings. The main shareholder of Eurobank and Eurolife, who also owns significant stakes in other Greek companies and has recently increased his presence in Greece, explains why it is now “undoubtedly” better to invest in Greek banks than in US ones.

“We trusted Greece many years ago and remained loyal to her, despite good times and bad times. You are in a very good position. Even if you are not aware that you are. I understand that you’ve been through some very difficult times, but looking at our business in Greece and some of the key economic indicators, I’m very optimistic. Private sector debt in Greece is low. It is moving at 130% of GDP, while in other countries such as Sweden it is at 300%. The level of private sector debt in Greece is one of the lowest in Europe. So you have a very low level of private sector borrowing. Very few Greeks have mortgages compared to other countries. And your public debt, which you have a lot of, is long-term. The average time to maturity is 21 years and the average cost of servicing it is an incredibly low 1.5%, while the Treasury has accumulated $38.5 billion in cash. Why is this a large amount? Because annual debt service costs are a small fraction of that amount. This means that the country is in a relatively sound financial position and has improved significantly from the extremes reached in the recent past.

– The positions of Greek banks are also strong. As a shareholder with a 30% stake in Eurobank, I am well aware of this. But in a broader sense, the ratio of loans to deposits is only 60%, while in Sweden it exceeds 150%, and in Germany it is over 100%. Thus, there is a significant margin for borrowing in Greece, and the demand from the private sector as well as the public sector for bank financing is high. And banks can provide it. And in Greece there are practically only four banks. Do you know how many banks they have in the United States? They have about 4,000 banks.

– A difficult situation. However, the capital position of Greek banks is very strong. Their capital adequacy is one and a half to two times higher than that of the Americans. They are highly capitalized and will remain so, including not yet allowed to distribute dividends. It will most likely be allowed in 2024. In contrast to Greece, the problem with affected US banks was that higher interest rates severely worsened the position of their long-term assets, resulting in large losses. At the same time, central bank interest rates and long-term interest rates are rising. In the US, it’s about 0% to 5%. Therefore, if you hold long-term assets, you incur losses and there is nothing you can do about it. This is a question for insurance funds, and for insurance companies, and for banks that have such portfolios. In our own group, we didn’t want to take that risk. For many years, 50-60% of our portfolio was held in cash with almost zero returns. But we were worried about the coming rise in interest rates and didn’t want to take that risk. We weren’t looking for a refund. In Europe you had zero interest rates and now the cost of a decade for Germany is 2.5%. And many funds were made in previous years at low prices. Now everyone is looking for someone to write off their losses. And inflation hasn’t come down enough yet, so central banks can’t do QE to bolster the system.

The time for Greece has come. A significant influx of foreign direct investment began. You just need stability.

– It will subside. And it will decrease, because, for example, in the US, banks will begin to reduce risks and will certainly tighten access to financing. The money supply will decrease. Borrowing will be difficult, and businesses with low credit ratings will have to incur prohibitive capital-raising costs. It will be a difficult environment, but it will also bring inflation down.

– Undoubtedly. Especially when compared to smaller US banks. But also some of the biggest ones. If the still unrecorded losses from their long positions are taken into account in their core regulatory capital, they will fall below 10%. At the same time, in Greece, supervisory funds account for more than 15%. At Eurobank, where we have, as you know, an excellent CEO, Fokionas Karavias, we had a significant profit in 2022, after some difficult years of course. We are not going to sell any shares. This is an amazing bank and we think the next four or five years are going to be very good for Greece and, as you can imagine, when the economy is good, so is the banking system.

– Last year in Greece you had an increase of 5.9%, while in Germany it remained at the same level. You must understand that the time for Greece has come. A significant influx of foreign direct investment, as well as domestic and public investment, began. All major tech conglomerates such as Google, Microsoft and Amazon are investing in data centers and cloud services in the country. Greek emigrants, for example from Canada, come back to Greece and invest. But definitely one thing that is definitely needed is stability. You need stability in your political system. You know, I admire what this government and Prime Minister Kyriakos Mitsotakis have done. I was impressed with how far the country has come in these four years. Therefore, stability is needed. And I think people in Greece see progress and you will have stability.

– Definitely my first trip and vacation here many years ago, as well as the opportunity to meet such capable and nice people. Meeting with the then Prime Minister Antonis Samaras, who convinced me to invest in Greece, was certainly a good moment. But even after that with the next Prime Minister Alexis Tsipras. I went to Greece and met him when he was elected. And I told him, “If you don’t want us to be here, let’s go.” And he said: “No, we want you, you are the kind of investor we need.” And, of course, my meeting with Prime Minister Kyriakos Mitsotakis was very important. What he has achieved is important. Better than our expectations. He laid the foundation for a very good course for the country for the next five or six years, and maybe longer.

A few months after the election, the investment rating

– I would tell him that Greece is a great place to invest for all the reasons that I have given you. However, the basis of the economy is always stability. If you have business-friendly policies, like the one the government of Kyriakos Mitsotakis is following, then there is stability. I will tell you from my experience from around the world, Canada, the US and elsewhere: when there is a business-friendly policy environment, then investment flourishes for everyone. You haven’t had such an environment yet. You have it now. The country’s prospects in this light look fantastic. If you continue on this path, it will be very positive for Greece. I don’t think you’ll ever return to a non-entrepreneurial environment.

“These are movements that are explained by what I told you. Greece is in an amazing position. And with this as a given, it is natural to look for opportunities. Grivalia Hospitality, which, as you know, is led by Giorgos Chrysikos, another great leader, is investing in important international projects such as One&Only, which we expect to be operational soon, or Amanzoe. Therefore, we continue to invest in this direction. However, I must confess one more thing: we are also very sensitive to talent, to people. When we find the right managers, people-leaders, we support them and increase our investments. One such case is Alexandros Sarrigueorgiou of Eurolife. And you have such talents in Greece. They just need to be given a chance. And this is what the country must do, shaping its policies accordingly, creating an environment that is increasingly conducive to entrepreneurship. Look at Mytilineos, what a big company Evangelos Mytilineos is building. You have many worthy people in Greece.

– Are you satisfied with the return of your positions?

– The Athens Stock Exchange started the year with one of the highest returns in the world. And it comes from low levels. Banks only trade five to six times their profits. Given their good condition, it is reasonable to expect them to close the valuation gap compared to foreign banks. I expect the Eurobank to perform very well over the next 3-4 years, much better than anyone expects today. So we are long-term investors, we like to approach our investments with a long-term horizon in mind. So we remain optimistic (bullish) for Greece and optimistic for the companies we have.

– What, in your opinion, will be the next decisive step for the Greek economy and business?

– Upgrading a country’s credit rating to investment grade catches your eye. Who would have believed this 4-5 years ago? I believe that in a few months after the elections, Greece will be at the investment stage. I don’t know if you noticed that some time ago S&P Global Ratings rated Greece’s debt as one of the most favorable of all countries. Please note: from all over the world. I have no doubt that Greece will overcome this milestone, but we must remember that stability is key. We have a lot of investments in Greece and we believe that the future will be even better than their recent positive course.