Not only did the Greeks spiral into history’s deepest and longest recession but also, failed to make their International Monetary Fund loan repayments on time – they went broke. Their friends, the Germans, led the effort (paid most of the bills), leading to bailout loans in 2010, 2012, and 2015. You may recollect, the government raised taxes, cut spending and reformed their pension system leading to riots and nationwide protests – tourism suffered, nothing worked in the country. Banks closed, the country’s Gross Domestic Product (GDP) dropped to negative numbers. Oh, what fun.
That was then. On Friday (1/24) FitchRatings upgraded Greek debt up one notch to semi-lousy from lousy: Not investment grade yet, but better junk than before. But that is not all, investors are bullish – the Greek stock market scooted to a 49% gain last year.
Unemployment dropped to a whopping 16.6% in October the lowest unemployment rate since 2011. And, the administration’s GDP goals for this year of 2.8% seem doable: They are estimating GDP growth of greater than 3% in the future. So, what led to all this uplifting mayhem?
Sure enough a McKinsey & Company consultant, Kyriakos Mitsotakis, was elected prime minister. Enough is enough the Greeks said, let’s try something new. This fellow freed up the Greeks: 1. He cut the top corporate tax rate, 2. He cut individual and property tax rates, 3. Instituted a flat tax rate of €100,000 for wealthy foreign investors, 4. He’s allowing privatization of government owned businesses.
Instead of believing in terminal slow growth, relying on bail outs and central government dictates, the Prime Minister is believing and freeing capitalists. What a novel idea.
Our portfolios reflect a larger than average cash position.
Carlos Dominguez – CERTIFIED FINANCIAL PLANNER™, Portfolio Manager, RJFS
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