by Natassa Stasinou

 

 

2022, a year of international conflict and energy crisis, forced households, businesses, governments and central banks to face the great "enemy": high inflation. This“enemy”will be with us for a long time, warns Themis Themistocleous, head EMEA Investment Office at UBS (United Bank of Switzerland) in an interview with Naftemboriki. The Swiss investment bank believes that after a decade of transformation, lies ahead a decade in which everyone will seek more security: energy and food security, defense, as well as cybersecurity. This could mean a more "closed" world, a reversal of globalization and new major challenges. But it also brings opportunities. In order to be viable in the "brave new world", the Greek economy must continue to reform.

 

Central banks have always had interest rates as their main tool. What is different today compared to other crises of the past is that interest rate increases must necessarily be front-loaded. This is because the economy is already showing signs of weakening and therefore could not withstand a prolonged restrictive monetary cycle. "Under normal circumstances, central banks raise borrowing costs during booms and lower them when recessions begin. But today Europe may already be in recession and interest rates need to rise further to bring down inflation. This cannot be done for long, which is why ECB’s increases are front-loaded," he explains.

 

High interest rates, however, also mean higher burdens for borrowers. So how worried is he about the burden of private debt? Mr. Themistocleus appears reassuring. And this is because Europeans have put aside significantly during the pandemic, now they have the "cushion" of savings. For governments the situation is different however. They are burdened with higher debts, since they were forced to close their economies and promote stimulus plans during the pandemic.

 

So what is the big bet for Greece? "Continue the reforms. The effort to make the Greek economy more flexible, more adaptable, needs to continue. You need to advance the digital transformation in order to become a more attractive investment destination.”

 

What Greece has in abundance is good weather. "After Covid many people want to balance work and life, they are reconsidering where they will work from," he notes. Under these conditions, Greece is a natural destination for digital nomads. But it needs the right infrastructure. So it has to ensure that the right infrastructure is in place and the legislative framework is attractive and there is flexibility for technology companies that see Greece as a potential destination for their activities.

 

As for the rating agencies? "They will look at hard data and reforms – because that is the future growth rate," explains Mr. Themistocleous. Rating agencies want fiscal discipline and they are waiting to see if Greece can achieve decent growth in 2023 when the Eurozone is likely to be in recession. Greece’s upgrade to investment grade level could come in the second half of the year, he notes.

 

The upcoming election and the example of Italy. Of course, the rating agencies also have their radar on the upcoming elections. But these do not seem to worry UBS.

 

"We should note something in relation to those trying to predict what the outcome of the election means. We have the example of Italy. Many were worried about the outcome. But we have a government that seems to approach the economy with great care and embrace economic orthodoxy. They understand that European funds are very important and they want to continue receiving them. They are thus willing to operate within European guidelines," he notes.