The flow of U.S. investment to Greece is taking on a new urgency as the Trump administration looks to shore up economic and defense cooperation with a key NATO ally.
On Tuesday, President Donald Trump met with Greek Prime Minister Alexis Tsipras to discuss these issues. Foreign Minister Nikos Kotzias, Defense Minister Panos Kammenos, Minister for Economy and Development Dimitri Papadimitriou and Minister for Digital Policy Nikos Pappas accompanied the Greek prime minister.
According to diplomatic sources, the leaders are focusing on investments and collaboration in the field of energy. "Greece's contingent oil reserves are estimated at 950 million barrels," said Costis Stambolis, executive director of the Institute for Energy for South East Europe (IENE). "To date, however, 50 million of proven reserves have been discovered." Major energy companies are lining up to tap the country's hydrocarbon potential in the waters surrounding southern Crete and the Grevena region in northern Greece, close to the route of the Trans Adriatic Pipeline.
At the same time, "Greece is a potential customer for U.S. LNG exports. Greece has plans to increase LNG imports next year," Stambolis says. "It expanded its port facilities near Pireaus, and it's planning to build a floating storage terminal for LNG in Alexandroupoli, northern Greece."
Another top issue of the agenda will be the extension of the agreement for the use of the U.S. naval base in Souda Bay, Crete, and the upgrading of the Greek fleet of F-16 military jets. The base plays a crucial strategic role in the Trump administration's plan to combat ISIS and terrorism and protect energy routes in the Middle East and the Gulf. In addition, sources have reported there may be plans to build a second military base in southern Crete.
New French President Emmanuel Macron also recently spoke on increasing ties between France and Greece during a visit to Athens.
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With Turkey's political landscape becoming more volatile after the failed coup attempt in July 2016 against President Recep Tayyip Erdogan and Germany's call for Turkey's EU hopes ending, Greece could play a more strategic military role for the United States in the Mediterranean and Middle East, as well as North Africa. The meeting comes at a time when U.S.-Turkish relations are at a boiling point. Tensions are rising over a host of issues, including Ankara's warming ties to Russia as it pivots away from the EU and NATO alliance. Recently, the United States and Turkey suspended visa services to each other's countries following the arrest of a U.S. consulate employee.
It is expected that Trump and Tsipras will examine ways to open the spigot on U.S. capital flows to Greece. Right now the United States is the sixth-largest foreign investor in Greece, an indebted nation trying to pull itself out of a severe depression for a decade. Despite falling back into recession in the first quarter, the economy is projected to expand by 1.8 percent this year and 2.6 percent in 2018, the IMF reports. And the IMF and other Greek creditors are drawing closer to a deal over the country's €86 billion program (US$101 billion), following parliament's approval of additional tax and pension reforms for the recently completed second evaluation of the Greek program.
During last week's annual World Bank and IMF meeting, the Greek premier worked to secure a more flexible stance by the IMF to ensure that a third bailout review is completed by the end of this year and that Greece remains on track to exit the bailout next summer.
The Greek prime minister's objective is to regain full market access to international bond markets and to leave institutional help behind. In July, Greece dipped into bond markets after a three-year hiatus, issuing five-year debt at an average yield of 4.66 percent. Greece is expected to return to the bond market again in the next 12 months.
Already there have been signs that U.S. investors are more willing to take on Greek risk. Calamos Investments' recent acquisition of Ethniki Insurance, Greece's largest insurance company, was a vote of confidence in the economic turnaround. The deal for a 75 percent stake in the insurer — a subsidiary of the National Bank of Greece — was made in June through a consortium of Calamos and Exin Partners. Calamos Investments is a global investment firm with more than $20 billion of assets under management. Exin is a Dutch investor focused on insurance, reinsurance and asset management.
Star hedge fund manager Kyle Bass, founder of Hayman Capital Management, is also optimistic about the outlook for Greek stocks and bonds. He believes some sectors, such as bank stocks, are grossly undervalued — trading at a quarter of book value — and will rally next year if there is a political change of the guard.
Diego Ferro, co-chief investment officer of Greylock Capital Management, a $1 billion hedge fund involved in Greece's bond restructuring, says he's made good returns on bond investments in Greece. But not many investors are comfortable investing in undervalued, distressed and high-yield assets. "People are still worried about the volatility, although the Greek economy is much better," Ferro said.
The Global X MSCI Greece ETF (GREK) is up 32 percent in the past year, but the fund's five-year return is still negative 9 percent, according to Morningstar data through Oct. 13. The ETF has taken in $30 million from investors this year, according to XTF.com.
That may change soon, as many investors believe a market bottom has been hit and the Greek economy is poised for an upswing. On Monday the Hellenic American Leadership Council and the Chicago Council on Global Affairs jointly hosted Tsipras for a program on the state of economic and security cooperation between Greece and the United States. In addition, the prime minister visited 1871, a hub for more than 400 digital start-ups that houses accelerators, incubators, tech talent schools and the Illinois Science and Technology Coalition.
According to Endy Zemenides, executive director of HALC, a number of potential investors lined up to meet Tsipras over the weekend. They included John Calamos, founder of Calamos Investments; Richard Driehaus, founder of Driehaus Capital Management, the boutique investment adviser that invests in frontier markets and manages $9 billion in assets; Alexi Giannoulias, senior director, BNY Mellon Wealth Management; and members of the Mirkopoulos family, owners of Toronto-based Cinespace Film Studios.