A few weeks ago, an inspired email exchange between ourselves and some research partners made it too hard to resist posting Why not just eject Greece?. After that the matter seemed to pass and markets quickly forgot about the problem.
But, given recent events and our little downdraft yesterday, we find ourselves returning to the topic. The other solution we discussed was that Greece should simply sell off some of its islands. Greece has about 6000 islands, most of which are uninhabited but potentially quite valuable.
They are beautiful and a very popular vacation destination for the population of richer countries like German and France. Also, just think about how much Nordic countries might like a warm oasis down south!
Since many of the islands are uninhabited and have no infrastructure, Greece would also stand to gain valuable short and long-term economic growth from the additional infrastructure investments and nearby population growth.
In short, selling off a hundred islands or so would be a huge win-win, and such a number is still a very small fraction of what Greece owns — so they wouldn’t even really need to enact radical reforms since they could finance future expenses with more island sales.
This strategy would get them through approximately the next 100 years, depending on their economy and the ultimate prices realized from the sales. Of course, I’m sure they would want to draw the line at inhabited islands or, in the very worst case, Crete.
Some have pointed out that this “can never happen” because it’s somehow “wrong” for rich countries to “take advantage” of poor ones. All I can say to that is “WHAT?!” This is a country of adults who can well decide for themselves how to run their country, and they are hardly poor. Add to that the fact that the government engaged in what most agree was fraud in overstating revenue and understating expenses to avoid harsher punishments earlier in the process — so why not?
As we wrote earlier this month, if you want a union of equals then the countries have to take responsibility for their own actions. This is a “crisis” that was brought about by a simple lack of caring, honesty and attention. If there was a natural disaster, of course help should be forthcoming, but I fail to see any compelling reason for there to be in this case.
My business partner is fond of calling Europe “a beautiful museum,” and so it seems fitting that if money needs to be raised, a country like Greece might call on Sotheby’s to showcase and hold a fine auction of a hundred or so of its islands. That way rich individuals, corporations, and countries can bail Greece out cheerfully in exchange for a small piece of waterfront property. (Didn’t America do this once in the 1980’s with Japan?)
Our friends at GaveKal argue that if Greece doesn’t get bailed out, it’s clear that country risk will return to the fore of yesteryear. It’s also been made clear that the Euro will not shelter Europe from any crisis, as it once was thought to be able to do. Given these realities, some major waves of asset pricing will have to roll through the Euro zone before the dust settles.
“Fasten your seatbelts. It’s going to be a bumpy night.” — Margo Channing (Bette Davis) in All About Eve
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