Greece: What the Heck Is Going On?

Protests, riots, bombs. Welcome to the catastrophe that is Greece!

Or so the headlines would say, anyway. If you're relying on mainstream media alone, you'd think Greece is teetering on a financial and social precipice. Thirsting to know the story behind the story, though, the Motley Fool has dispatched a team of analysts -- yours truly and Global Gains' analysts Tim Hanson and Nate Weisshaar -- to evaluate the events first-hand. Is Greece imploding, or is the market getting this just plain wrong? Are Greek stocks a screaming buy?

That's what we're here to find out, and you can follow our musings, research, commentary, and conclusions in real-time at www.FoolGreece2010.com. If you're like I was just last week, though, you could probably use a primer on why this situation matters. Here's a primer on the Greek situation.

Question: So, I'm an American. Why do I care?

Answer: Two reasons. First, the potential opportunity. Greek-centric stocks like National Bank of Greece (NYSE: NBG  ) and Coca-Cola Hellenic (NYSE: CCH  ) are deeply out of favor right now. Maybe they're value traps, or maybe they're fantastic values for the patient, opportunistic investor. That's what we're here to find out.

Second, don't lose sight of the knock-on effects here. Their chips could fall in a lot of ways that ultimately force the euro to take a fall against the dollar. Yes, even despite our own massive deficits. Among a litany of ways that could affect global trade and the geopolitical order, that's bad news if you're invested in euro-heavy international players like a Diageo (NYSE: DEO  ) , Unilever (NYSE: UL  ) , and Philip Morris International (NYSE: PM  ) .

Question: So with that out of the way, what exactly is going on in Greece?

Answer: Here's the deal. Greece, like the U.S., has been spending more cash than it's been taking in for a long time now. The deficit clocked in at 12.7% of GDP in 2009, well above the 3% threshold the EU has mandated for any country that wants to use the euro.

Unlike the U.S., though, Greece doesn't have the financial horsepower to keep the game up for much longer. In fact, it needs to roll over close to 17 billion euro -- about $24 billion -- over the course of the next two months. That's money Greece doesn't have, and very possibly won't be able to raise from investors. That means they may need to lean on outside help via the Germans or the International Monetary Fund (IMF) in order to stay afloat.

Both to appease potential bailout buddies and to actually bring some order to its economy, the Greek government is raising taxes and slashing subsidies and wages. Naturally, Greeks aren't too happy with the situation.

Question: So, who is in charge here?

Answer: A socialist coalition that recently took power after a special election in which a conservative coalition was ousted.

Question: So, commies are running Greece?

Answer: Not exactly. If anything, the head of research at an investment bank we spoke with today told us that he reads the governing socialist coalition as being quietly market-friendly. And for all us capitalists out there, keep in mind it was a supposedly fiscal conservative outfit that ran this truck into a ditch in the first place.

Question: So does Greece need a bailout?

Answer: Maybe not. They could still somehow convince private investors to swallow down billions in Greek debt over the next two months, though that's a tall order. But that's really only a bandage on the wound. According to the BBC, Greece spends about 12% of its GDP on debt servicing costs. Ouch.

Question: So, enter Germany?

Answer: Good chance, yeah, though German citizens aren't wild about the idea of bailing out the fiscally irresponsible Greeks. Plus, a bailout opens the door for Germany having to pony up when Spain probably starts crying wolf in the next year or two. This could be a terrible precedent for the Germans, who don't want to become the sugar daddy of the EU.

Question: So, are people freaking out?

Answer: Actually, the situation on the ground is easier-going than you'd expect. We saw a protest today, but nothing above and beyond those which we see in D.C. all the time. All that, coupled with the confidence we saw from talking to investor insiders today, are starting to give us the feeling that Greek stocks just might be really, really cheap.

Question: Sweet. Where can I learn more?

Answer: We're documenting all of our research in real-time at www.FoolGreece2010.com. That includes what we're hearing from companies and investors as well as a running tally of every time I get hit by a car (don't ask).

We're going to conclude the trip with the our top investment ideas based on what we learned in this troubled market. Help us help you get a copy of that by providing your email in the box below.

Joe Magyer owns shares of Diageo and Philip Morris International. Philip Morris International and Unilever are both Global Gains recommendations, while Diageo is an Income Investor recommendation. The Motley Fool has a disclosure policy.


Read/Post Comments (31) | Recommend This Article (45)

Comments from our Foolish Readers

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  • Report this Comment On March 23, 2010, at 4:36 PM, TheBullet wrote:

    Guys, I've been living in next door Turkey for four years, and your article is as worthless as Greek debt. Socialists and Commies? And it does nothing to persuade the world that the US knows anything outside of its own borders. If you want to initiate some new kind of 'global research', please do it with far more integrity and respect (and RESEARCH) than this piece of white-trash scribble.

    Greece to refinance its maturing bonds. The fact that the new government was voted in on a spending crusade, and wage increases, when it’s public (global) knowledge that the deficits have been in existence for years, also seems to have by-passed your reporting.

    Are people freaking out? Riots and national strikes, completely stopping tourists seeing, among other sites, the Acropolis, would seem to me like “the situation on the ground is easier-going than you'd expect” is a complete farce, given it was written during the current riot season.

    This article is, pardon my Greek,

    Özür dilerim ama bu yazdiğiniz çok boktan!

    OK, it’s not Greek, but Turkish, literally:

    I’m sorry, but what you’ve written is to very rubbish.

  • Report this Comment On March 23, 2010, at 4:52 PM, dbonaro1 wrote:

    Thanks for the post, Joe. A couple of comments about the political situation:

    - First, neither the current nor the previous government is a "coalition". They are political parties that date at least as far back as 1974 (when the seven-year dictatorship was overthrown in Greece), and have some ties to pre-dictatorship parties. In other words, they are stronger political entities than what one might expect upon hearing the term "coalition". That said, neither party has a history of showing much back-bone in the face of adversity, so I don't mean to imply that a strong hand is or has been in control.

    - Second, the socialist/conservative distinction is different in Greece than it is here. For that matter, Greek citizens, themselves, feel differently about the role of government than Americans do. For instance, to make a blanket statement, I believe it's correct to say that conservative Greeks accept a larger role of Government than conservative Americans do. Additionally, in social matters, the conservative party in Greece is quite progressive compared to some conservative American politicians. On the other hand, the socialist party is far from communist (note: by this I don't mean to defend PASOK, the socialist party currently in power, or to disparage communism, but merely to say that PASOK is quite different from any notions Americans may have about communist parties).

    - Finally, just as American administrations and Congresses of both stripes, going back roughly thirty years, are to blame for our current situation, so Greece's current problems are attributable to both PASOK and New Democracy (the conservative party). One or the other of these two has been in power continuously since 1974 (except for a few months in 1989-1990), with PASOK governing roughly for 19 years prior to its current turn, and ND governing roughly for 15 years.

  • Report this Comment On March 23, 2010, at 5:09 PM, matthaios wrote:

    Oh no, it would be better to invest your money over Turkey, were the military governs! Do not be afraid of the Greek market, no matter what Greece will make it to recover, in fact without any help from E.U. People are mature enough to understand and value the situation, in fact that is why Prime Minister George Papandreou was elected for. Greece never asked for a bail out anyway, just to be able to get money from the banks with the same rate as other E.U. countries do. So go for it!

  • Report this Comment On March 23, 2010, at 5:19 PM, joroi wrote:

    Joe, the piece was a good idea. Probably a bit premature as you are still new to the ground.

    As TheBullet pointed out, the situation on the ground is far from calm. Constant strikes over the last month have paralized highway traffic through Greece. The economies of Turkey, Bulgaria and Macedonia have been severely impacted as migrant workers and exports cannot reach their destinations. Tourism, the main Greek industry, has taken a dive too.

  • Report this Comment On March 23, 2010, at 5:49 PM, matthaios wrote:

    You going to eat up your words by the end of this year gentlemen!

  • Report this Comment On March 23, 2010, at 6:25 PM, holosys wrote:

    I've been just itching to ask this question even though it may seem "foolish" (pun intended).

    Why can't the U.S., Greece, and other countries with debt that's impossible to payoff, simply file the equivalent of a U.S. "Chapter 7" and wipe the slate clean, get a fresh start, beginning with a zero deficit?

    Aside from "it's never been done before" or "the Weimar Republic tried it in pre-Nazi Germany and look what happened," I would like a serious response to this question that's been nagging the back of my mind of late. Thank you.

  • Report this Comment On March 23, 2010, at 7:08 PM, holosys wrote:

    Someone just emailed one possible answer to my question in the previous posting; to sum up their answer:

    Nice idea: I cancel what you owe me, and you cancel what I owe you. Not so fast. Not all countries will agree to clean the global debt slate and cancel debts owed by other nations in a global "Debt Cancellation Summit." Countries that stand to gain the least, will dig in their heels. WWIII will break out before everyone agrees to start with a clean global debt slate.

    Is that pretty much the consensus at Fool.com?

  • Report this Comment On March 23, 2010, at 7:28 PM, IIcx wrote:

    Joe, Tim, and Nate -- is this the first time TMF has send reports into the field and is this your first experience?

    The only question I care about, a big one, is if the fools in Greece government will kill Global Shipping companies.

    Please check on that one while you enjoy the "view".

  • Report this Comment On March 23, 2010, at 7:32 PM, IIcx wrote:

    TMF requires a blige pump to see the next post ;)

  • Report this Comment On March 23, 2010, at 8:00 PM, IIcx wrote:

    "What the Heck Is Going On?"

    WOW its amazing what can change in day, let's start by realizing that Nothing from China this day forward is anything other then propaganda due to their retarded government. Their science is now highly suspect.

    Greece by contrast isn't likely to break any new science discoveries but is one of the most significant counties in the world.

    We need to know if the mess in Greek government will kill Greek shipping companies.

  • Report this Comment On March 23, 2010, at 8:52 PM, mberan wrote:

    I agree with TheBullet. Basically what you wrote is rubbish. A "fools" view of Greece and the economic mess they are in. I lived there for 2 years working for a US company that had to deal with the under the table dealings of Greek business and the government. The Greeks feel it is their "right" to not pay taxes. The government(s) have given home to local terrorists who bombed, and continue to bomb, US and international businesses. It wasn't until the IOC threatened to take the 2004 Olympic games away that some of that stopped and some were brought to "justice".

    Other than some feta cheese, olives, olive oil and some shipping the Greek economy contributes little to the world economy. There will be some short term ramifications globally for letting Greece fall off the economic cliff, but little long term effect.

  • Report this Comment On March 23, 2010, at 9:26 PM, xetn wrote:

    Greece and the rest of the PIIGS, are nothing more than a reflection of all countries who believe that more currency equals greater wealth and prosperity. All it really means is much greater debt. Debt does not equal wealth! As far as I can tell, every country is printing money out of thin air to fund their various schemes, both social and political. The history of the world is replete with example after example of attempts to debase the currency. No economy in history has been able to do so and all have eventually failed. Fiat currency is an addictive drug and ultimately leads to collapse (example Zimbabwe). The only tonic for this is a commodity based money out of the hands of any government which would put handcuffs on government attempts to fund programs without tax increases to pay for them.

  • Report this Comment On March 24, 2010, at 4:01 AM, TheQueenAnn wrote:

    I feel that there are better bargains out there right now, and betting on Greek recovery can be avoided altogether.

    The 'Foolish' tenant, if I understand correctly, is to pick strong firms with competent leadership and solid balance sheets who are currently undervalued, or have growth potential. The Greek 'balance sheet' and my ignorance of current Greek governance tells me to stay away from this one. I may as well hit the casino and put my money on black or red...the odds appear the same to me.

    I do concede, however, that there is potential to make a lot of money in Greece (as there always is in crisis), but not without a steep learning curve for (U.S based) investors.

    - JB

  • Report this Comment On March 24, 2010, at 6:54 AM, blumelo wrote:

    After reading this post I get the idea that US american vision of the world is truncated. Even having access to a whole lot of information you seem to shape it wrong.

    For a start, socialism (the new european socialism) is way to far from communism. European socialism is NOT communism. Many european countries have socialist governments. You can think of it as being in between communism and capitalism, most of the times more close to capitalism thou.

    According to CIA World Fact Books of 2009 and 2010 Greece have a total debt of $553B, 164% of their GDP. In comparison Ireland with 1050%, Iceland with 924% and UK with 413% are the world top 3. US has 'only' 94%. The problem is that Greek government falsified last year's oficial statistics as well as the country deficit. And now they can't find loaners to, as joe stated, repay debt of about $24B in the next 2 months. They surely don't have that amount, that's where EU and IMF come in. And in order to be helped they must cut spending. Because of this cuts people are rioting. Situation is not 'easier-going' as Joe wrote, confrontation with police, global strikes freezing the country, we've seen violence against politics. Everything but 'easier-going'.

    If Greece fails, eurozone will fall. The sistemic quake of a euro-country fall could throw the entire zone in turmoil (as seen with Lehman and 'too big to fail' US banks).

    Fitch just cut ratings on Portugal and Spain. US and UK have been warned two weeks ago by Moody's. The so-called Western Countries can't keep spending more than they earn or they can fall in a deep crisis as latin-america were in the 80-90s

  • Report this Comment On March 24, 2010, at 7:46 AM, plange01 wrote:

    greece is in far better shape than the US at least there is someone running the country.the US doesn't even have a president!

  • Report this Comment On March 24, 2010, at 8:17 AM, JibJabs wrote:

    You have come a long way from looking at 10ks and perhaps you should consider turning back. This "journalism" is less than underwhelming; it's disrespectful to the intelligence of your readers, assuming you think we have any at all.

  • Report this Comment On March 24, 2010, at 12:31 PM, jfenlon wrote:

    The isles of Greece, the isles of Greece

    Where grew the arts of war and peace

    Eternal summer gilds them yet

    But all except their sun has set.

  • Report this Comment On March 24, 2010, at 12:42 PM, jfenlon wrote:

    What is needed is central planning, such as raised standard of living to high level in former socialist worker's paradise and is now happening in U.S.A.

    "The surest way to destroy a nation is to debauch its currency"

    "The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation"

    V.I. Lenin

  • Report this Comment On March 24, 2010, at 2:47 PM, TMFTomJacobs wrote:

    Folks, he's supposed to give the "Average Joe's" perspective, in no way representing the expertise shown here by people who live there or nearby.

    Captures the Average Joe perfectly!

    Have fun Joe, see you soon.

    Best, Tom

  • Report this Comment On March 24, 2010, at 4:47 PM, dc46and2 wrote:

    Geez guys, the author clearly did NOT equate the current Greek government or "European socialism" to communism as some of you seem to have inferred.

    To those of you calling this article rubbish, could you please clearly identify any factual errors so we can benefit from your knowledge?

    "the situation on the ground is easier-going than you'd expect" is obviously an opinion whose validity depends on the intended audience. In this case, the author is a member of his intended audience--American investors--and apparently the situation is "easier-going" than what HE expected.

  • Report this Comment On March 24, 2010, at 4:48 PM, dc46and2 wrote:

    Geez guys, the author clearly did NOT equate the current Greek government or "European socialism" to communism as some of you seem to have inferred.

    To those of you calling this article rubbish, could you please clearly identify any factual errors so we can benefit from your knowledge?

    "the situation on the ground is easier-going than you'd expect" is obviously an opinion whose validity depends on the intended audience. In this case, the author is a member of his intended audience--American investors--and apparently the situation is "easier-going" than what HE expected.

  • Report this Comment On March 24, 2010, at 7:17 PM, dc46and2 wrote:

    I also wish MF would fix that double post bug.

  • Report this Comment On March 24, 2010, at 7:18 PM, dc46and2 wrote:

    I also wish MF would fix that double post bug.

  • Report this Comment On March 25, 2010, at 6:38 AM, blumelo wrote:

    Well, if that's an US american investor (or Joe's) perspective than stick to it. I'm not US american, should I skip reading?

    As MF is surely read world wide than this is a fool (in the real sense of the word) perspective. Not rubbish, I'm sure Joe intended well. In time I beleive he will change his narrow 'perspective'.

    The whole country is freezed on strikes, violent confrontations. I can't imagine what Joe expected the situation to be but this is far from 'easy-going'

  • Report this Comment On March 25, 2010, at 5:12 PM, Glycomix wrote:

    The Germans have always been very sensitive to hyperinflations since their experience in 1923.

    Obviously everyone's dead who experienced it. However, the hardships are likely to have established a place in their consciousness of a place that they "don't want to go." The Germans are in a spot, because they took the Euro and threw out the Deutschmarkin 1999.

    There will no doubt be some political turmoil with the stronger nations dictating terms to the weaker or throwing them out of the EU.

    Your numbers are compelling.

    Greece might go because it was only recently inducted into the EU, but Italy has been in the EU since its inception as the "common market" and is a central part of their consciousness. Italy is also an essential to their access to the Mediterranean.

    What are they going to do about Italy? They might exclude her or tell her that she's expelled from the EU unless...

    - she makes certain cutbacks and payments, or gives up autonomy insome way. (Payments sounds like the Versailles Treaty).

    My guess is that three countries be required to give up autonomy to the strongest countries.

    My uninformed impression are as follows:

    I don't know who that'll be but I nominate GERMANY.

    They ...

    - no longer have a national currency

    - have a huge emotional stake in avoiding a hyperinflation.

    - Have an extremely strong manufacturing base in the Chemical, automotive and Steel industries.

    NEGATIVES: Past European Domination. They have to get everyone else's vote that they're the right nation to lead the pack. Negative memories include every nation in Europe.

    France doesn't have any EUROPEAN negatives, but their government's actions have been truly arrogant and selfish over the past 50 years. They also appear to be too weak, but may have a place in this.

    The Czech republic has a good manufacturing base and they are competent. However, their manufacturing may be too mired in the past.

    They may also be too small.

    The Soviet Block area aready went through a hyperinflation in the 1990s. They won't want another. They'll look to the leaders.

    Great Britian is a very POSITIVE choice as a controller because they have a ..

    - colonial history of being nice to those that they control

    (Their colonies invariably fought for the British and against the Japanese).

    - Good rapport with the rest of Europe as a savior in WWII

    - History of granting autonomy to subcultures and trying to understand them.

    PROBLEMS with Britian. (as the Europeans see it)

    - They don't have a strong manufacturing base. They may have a weak economy.

    - They are a friend of the US. The only country to back US unreservedly in Iraq and Afganistan. They may have absorbed too many dollars.

    - They aren't tied in a death-grip with the euro. They still have Pounds-sterling. They won't die if Italy goes belly up.

    Sweden has a strong manufacturing base. I don't know anything more about it.

    If I had to vote, I'd say that Germany, Britian, France, and *possibly Sweden and would come together to run Italy, Greece, and a third country. As the strongest, Germany would end up running the show.

    My guess is that they will be foreced to make a pact with Putin for oil and mineral rights in Russia to fuel their economies for export growth.

    Putin wants to avoid problems with the Chechins. He can avoid every form of problem if he can please Iran and the other Islamic states in the region.

    The best way to please Iran is to remove the US as a threat:

    1. Deprive the US of military bases in Europe, Africa and Asia (thought Germany and Great Britian).

    2. Isolate the US diplomatically so we can't help Israel or anyone outside of the Western Hemisphere. The US is the only nation that had the courage to confront the Islamic terrorists.

    Barney Frank is now trying to disassemble the military power of the US to provide more entitlements to the Dems.

    If Dodd and Franks succeed in the US, and Germany and France succeeds in isolating the US in Europe, then 1) we will have no defense department any more than George Washington did.

    The army only became viable after the war of 1812 to defend us against another invasions. We will be open to the threat of terror by nation or by groups who could strike without making a reply. Consequently, we will be a nations of "Has beens." that spent its wealth in deluxe unemployment payments with health insurance and in Borrowing amazing amounts of money, dissipated our wealth, destroyed the value of our currency and and our people's savings and retirement income for the sake of a dozen dead-end welfare programs. http://www.heritage.org/Research/Welfare/sr0067.cfm.

    1)Washington Post $9 trillion in debt.

    http://www.washingtonpost.com/wp-dyn/content/article/2009/08...

    2) Dr. Reid at Heritage foundation: O’Bama’s programs= $9.1 trillion in debt http://www.heritage.org/Research/Testimony/Facing-Americas-L...

    We won't even have decent infrastructure because O'Bama thought that bankrupting amounts of new welfare programs were the most important thing in the world.

    More important than repairing our roads and bridges. We will subsequently have more tragedies like the August 1, 2007 Minneapolis-St Paul bridge collapse on I-35 West. Since he cares so little about our plight and "wants his turn at the public trough", I hope that Clown Senator Al Frankin is driving on it when the I-35 West bridge collapses again.

    http://media.myfoxtwincities.com/special/35wbridgecollapse/i...

    Would someone ELSE provide clarity to the possible future with their thoughts?

  • Report this Comment On March 25, 2010, at 5:15 PM, Glycomix wrote:

    Here is a picture of some building blocks that Mr. O'Bama is providing for every child. No need to look for them. You already have them in your house.

  • Report this Comment On March 26, 2010, at 6:15 AM, blumelo wrote:

    Glycomix, I don't quite understand your point. Are you pick-pointing 3 countries to 'run' the eurozone - germany, UK and sweden? Of those only germany is in the eurozone...

    For some time now, germany and france are pulling the strings of EU. That will hardly change.

  • Report this Comment On March 26, 2010, at 1:01 PM, MNU34 wrote:

    >>>This could be a terrible precedent for the

    >>>Germans, who don't want to become the sugar

    >>>daddy of the EU.

    Wrong. They already have been the sugar daddy of the EU for the last 30 years. The simply are fed up with paying taxes as required by law and then seeing the government giving the money to other countries, where people do not pay their taxes, cheat whereever they can and in many cases as (Greece) where the government spends more time figuring out new fraud schemes than working.

  • Report this Comment On March 26, 2010, at 1:02 PM, MNU34 wrote:

    Throwing countries out of the EURO zone is a lot easier than throwing them out of the EU. The first can be done without the latter.

  • Report this Comment On March 26, 2010, at 11:59 PM, matthaios wrote:

    I said my opinion, looks I was right. The situation with Greece is over. Greek market hit more than 4 %, Greek banks lead the way with gains over 8,5%, and NOW... BEHOLD, Portugal, Spain, Ireland and Italy are comming! Let's see who has the real problem now, Game Over... Really now how made some money over NBG and ALPHA bank today? lol

  • Report this Comment On March 27, 2010, at 2:41 PM, billyheck33 wrote:

    GT 30 (Greece, Turkey) highest dividend yielding stocks top 15:

    http://www.topyields.nl/Top-dividend-yields-of-GT30.php

    (the euro is still a safe currency to invest in, don't let the media overhype the risks).

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