Friday, October 18, 2013

More Good News From Greece

More good news from Greece.  This time it is from last week's New York Times article on the sentencing of former Greek defense minister and ex-leader of its Socialist Party Akis Tsochatzopoulos for money laundering.   During his trial the court was told that Akis pocketed close to US $75m in bribes when he was Greece's defense minister.   He received a 20-year prison sentence, on top of a previous 8-year sentence for concealing assets.

In addition, his wife, ex-wife, daughter and 16 others were also convicted and sentenced to 6-16 years for helping to launder the ill-gained loot (see a more detailed take on the sentencing in the Greek Reporter).

What is most significant is that Greek authorities are going after the well-connected and powerful.  As the New York Times article notes, "The conviction on Monday was unusual in a country where top state officials are rarely prosecuted.  But over the past year, the government of Prime Minister Antonis Samaras has intensified a crackdown on corruption."  

The article also noted that in early 2013 the mayor of Greece's second largest city, Thessaloniki, was sentenced to life imprisonment for embezzling some US$24m from the city.

As an investor, these are significant events that make me feel more positive about the country and its progress. Cracking down on corrupt officials and politicians is a significant change.  To me it is much more powerful and has more positive ramifications than Central Bank Band-Aids.

In all the emerging markets where I've analyzed companies there appears to be a circle of powerful business families, politicians, military leaders and other well-connected people that seem to look out for each other.  For an outsider like me, they seem to be above the law.   

Many times there are personal and family ties that bind these people together. The connections can also be school ties, club associations, business deals, co-investments, etc.  Money, licences, influence, and jobs seem to flow between those that are well-connected.  Typically the smaller the country the closer the ties between individuals.

For a smaller country like Greece with a seemingly long history of corruption, arresting and bringing charges against the powerful, rich and well-connected likely took courage, fortitude and persistence.

I suspect the country's dire economic situation is ultimately behind this change in attitude.  Several years into the Asian Financial Crisis, Indonesia implemented several significant reforms that ultimately helped the country to recover and move forward.

In a recent post I wrote about other reforms that should lead to a more stable and pro-business environment in Greece.  I suspect there is more to come.  "...virtually everybody I talked to said that the current system is not working and things had to change.   I also felt that many realised things were unusually good during the last decade or so and that the current status quo is unsustainable.", wrote after my trip to Athens last summer.  

Hats off to the current administration for their efforts to shake things up.  I hope they do more.   I met a lot of smart, switched-on, hard-working people on that trip.  They deserve - and should work for - a better business and political infrastructure.

1 comment:

  1. Just after I published the above, England's Financial Times reported the John Paulson's Paulson & Co. and many other large funds managed by Western advisors have also invested in Greek equities including York Capital, Och-Ziff, and Baupost. Hopefully the end game will be a case of "great minds think alike", rather than "misery love company". Time will telll. (link here: