Tuesday, 15 February 2011

A small window of opportunity for Greek firms..?

In today’s post I want to highlight a potential opportunity for Greek firms, an opportunity that would probably would not be there (knowing the inner workings of the Greek psyche), had the crisis been absent.

I think it is more than obvious that consumer demand in Greece has collapsed and has, probably, still some way to go before bottoming out (always depending on developments though, which could skew it on the downside or on the upside). The recent raise in transportation fares gives us a whiff of the downside risks that are present and can materialize at any given time.

Trade balance figures confirm the collapse of consumer demand.

source: statistics.gr

But there was a, slightly, positive message in the trade balance press release and this was the uptick in exports. This can probably be attributed to the Euro’s decline during the first half of 2010 which needs a bit of time to get through to trade contracts and orders. Isn’t that exactly what the J-Curve effect proposed?

source: De Nederlandsche Bank

The positive message is that an ever increasing number of Greek firms are probably trying to strike new deals and contracts abroad since the internal market's prospects are not just poor, one could say that they are damning for a number of companies. I don’t know if this would have happened had the crisis been absent. Of course there are companies that always were outward-focused but now the export-oriented part of the Greek corporate universe has, at least, a pressing reason to increase its efforts at that direction.

Of course, this will be a rocky road for Greek firms. There is an opposite side to that coin. Some companies facing difficulties might have to sell foreign operations or could halt supporting loss-making operations abroad due to financial distress. So, is this “opportunity” just a case of large companies getting bigger? Or is it that any new companies formed now or sound SMEs (small and medium enterprises) will have learnt their lessons and start on a sounder footing? We will most likely see a little bit of both.

source: statistics.gr

Well, to start being my usual pessimistic self again, as we can see from the charts above, the decrease in the trade deficit was mainly due to the collapse of imports and not due to a magnificent rise in export…

P.S. I didn't have any specific firms in mind when writing this, this is purely hypothetical...

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