Out With 'Grexit,' in With 'Greecovery'

Milos Bicanski | Getty Images

Greece's economy is showing the first signs of a recovery, reducing the odds of the country exiting the euro zone, according to a new report from analysts at Berenberg Bank.

The term Grexit was coined by Citi analysts last year, and became popular in the run-up to the 2012 elections. While the man credited with the term believes a euro exit for Greece is still possible, Citi's chief economist, Willem Buiter, recently said it was no longer likely.

"The current level of economic sentiment in Greece is roughly consistent with stagnant GDP. That is already a huge change after three years of depression. More importantly, the recent improvement in sentiment suggests the Greek economy will start to enjoy quarter-on-quarter growth from the third quarter of 2013," Berenberg analysts said in Friday's report.

According to Berenberg, the coalition government in Athens has been doing a fairly good job, and more realistic demands from the troika of foreign lenders (the International Monetary Fund, the European Central Bank, and the European Commission) have boosted prospects for the economy.

"The absence of negative headlines is encouraging tourists from Western Europe to return to Greek beaches in their droves (yes, hotels are now cheaper) and investors to take a closer look at Greek assets," the analysts said.

They added that if the current environment continues, Greece could soon enjoy a recovery or "Greecovery."

But according to Nicholas Spiro, managing director of Spiro Sovereign Strategy, Greece's recovery has been more about sentiment than the real economy, which is now in its sixth year of recession.

Figures released on Friday for the European Union, showed Greece had the highest unemployment rate in the 27-member bloc with 27 percent of its workforce out of a job.

On the other hand, the benchmark Athens stock index is up 98 over the past year and 12 percent so far in 2013.

"The most pronounced improvement in Greece over the past year or so has been the rally in Greek equities and bonds," Spiro said.

"More and more investors perceive the Greek story as a glass half-full instead of half-empty. The economic figures are still dreadful—it's just that many investors are choosing to talk up the less severe falls in output."