The Macri effect

Financial markets are usually a step ahead of political developments. It’s their job to anticipate political events. However, Greece has so far left investors cold. The past few months saw Prime Minister Alexis Tsipras allow a big opportunity to slip through his fingers. Investors expected the country’s leftist leader to become a Mediterranean version of former Brazilian president Lula, that he would open up the market, push ahead with privatizations and create an overall more business-friendly environment. Tsipras, however, never really understood that investors judge countries and people by their own standards.

First of all, investors are unwilling to put up with Tsipras’s slow political reflexes. They have never had the experience of sitting through a Greek political party meeting. Another thing is they are allergic to is vague and contradictory signals. Listening to Tsipras in New York saying one thing and then reading the conflicting statements coming from the direction of his ministers, confuses them. They also hear stories coming from those who took the risk of investing in Greece and it’s only logical that they should lose heart. All of us, including Tsipras, believe we are the sole destination for investment on the world map and that all major players will wait indefinitely for us to sort out our problems and lift all obstacles to business.

Meanwhile, major foreign investors who have been to Greece once or twice are watching developments here closely. They are starting to believe that Greece, similarly to Argentina, will experience the so-called “Macri effect,” which saw markets joining a crazy rally when it became obvious that the country’s populist government was on its way out and being replaced by a reformist politician, Mauricio Macri. According to this theory, a few months before significant political developments take place, “intelligent” investors will start reappearing in the Greek market. If the possibility of a government with a clear message and concrete plan appears on the horizon, it will not be too long before the rally begins. The current government will have implemented a large number of the country’s pledged reforms by then, while certain privatizations will have moved forward. If the banking sector is reorganized and needless risks are avoided, Greece could move to the next level. Opposition leader Kyriakos Mitsotakis is very convincing when it comes to foreign investors. On the other hand, could Tsipras win the bet by persuading the markets in time? It seems like a long shot, despite his efforts to build a new brand for himself and SYRIZA. Brussels and certain European capitals may be ‘buying’ this scenario but not the markets.