You need some room to manoeuvre

Last week I spent a few days in Athens, Greece. The weather was fantastic, the people I met wonderful, the food to die for and the taxis on strike. No worries about getting around as courtesy of the Olympics the tram and the metro system were excellent, cheap (for those of us who actually paid), frequent and clean.

I even admired the sites like the central square where the banners and tents of the protestors still featured prominently. I saved the more touristic sites for a holiday trip, as I was in Athens on business.

I could not help wondering about the state of the economy, which we have all read so much about. The EU has bailed the country out again and all I have read is that there is no hope for the country, but I could not help wondering what was really there.

Looking at Greece like a company I got the impression it could be solved with some good business practices. In any company I look first at the balance sheet, then at the cash flow and finally at the profit and loss account. Why look at Greece differently?

The balance sheet is not a pretty sight with a debt burden courtesy of excessive spending habits of European habits, which is terrifying. However my impression is that there are lots of undervalued or even unrecognised assets. The airport, the old airport (good redevelopment land), lots of islands and other land, utilities, etc. How much is all this worth? Start selling off some of the stuff and work on reducing the debt burden. Mrs Thatcher showed the world how to do it. This should give the corporate finance teams plenty to do for a while.

The cash flow is equally dismal and is the root cause of the debt problem. It is clear that taxes are something paid by suckers in Greece, so time to get that straightened out. Will take some effort, not to mention some strong politics, but it is doable.

Even the income of the public transport system can be strengthened. The almost ‘voluntary’ method of paying for a ride needs tightening up. On the train to the airport there was an electronic sign telling passengers that the ride required a special ticket costing €8. It was never revealed where one would get that ticket, nor was it asked for, so even I paid only the original €1.40.

Allegedly whole layers of government employees either do not exist or simply do not show up. They must cost a fortune, in cash, so time for some human resources reconciliation.

These actions are fundamentally no different from what I have look at in any company I have run over the last 25 years: shrink the balance sheet to the core assets and push the cashflow. It may be lightly easier in the companies as I did not have as much politics to deal with that Greece has. I did have corruption to deal with at times and that must be driven out – ruthlessly.

My conclusion is that Mrs Merkel was right to back Greece, even if it takes a leap of faith. She no doubt has a better idea of what the real balance sheet looks like and what the cash flow potential of the country could be and has the faith that with the right team it can be put right.

In the meantime, as I sat in some lovely cafes late in the evening enjoying a drink with my Greek friends I noticed the places were full of Greeks. These people could obviously still afford the inflated prices of the drinks, so not all hope is lost.

1 comment for “You need some room to manoeuvre

  1. 4 August, 2011 at 19:39

    Good article ! I’ve been in Athens many times (though I cannot say I know the rest of Greece!) and are always amazed by the friendliness and creativity, but at the same time their lack of what we would call a ‘sense of urgency’ of their people. Core problem in my opinion is the corruption and the total lack of faith in anything related to the government, hence the tax issue ! Let’s hope this crisis brings about the necessary change in mentality, but not in ‘joy de vivre’, so we can still enjoy the country as tourists !

    Hans

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