Fairfax bets on Greek recovery

Fairfax Financial Holdings — which has seen its 2011 investment in Ireland’s biggest bank jump about 50% — is now focusing on Greece, betting that the worst has passed for the recession-battered nation.

“In terms of the economy, the last four or five years have been very tough for Greece,” Fairfax chairman and CEO Prem Watsa said.

“The economy has come down very significantly, unemployment is high. But on the other hand, we think that perhaps a bottom has been reached.”

Earlier Fairfax said it will invest about €164m in Eurobank Properties Real Estate Investment Co as part of a share capital increase, bringing the Toronto-based firm’s stake in the Greek property company to 42%.

Watsa said Eurobank Properties is raising money at the right time to take advantage of a “lot of opportunities in Greece”.

The country’s state-asset sales programme, which includes a large real estate portfolio, has the potential to generate “significant growth” from private investors. “We think that the prospects in Greece for Eurobank Properties will be very significant in the next five years, perhaps the next 10 years,” he said.

Shares in Eurobank Properties have more than doubled since falling to a low in Jun 2012, when the Athens Stock Exchange General Index tumbled as inconclusive elections stoked fears about a possible euro exit for the Mediterranean country. It has since gained 46%.

Greece is now in its sixth year of recession, with unemployment at 27%. The economy has shrunk by about a fifth since 2008. The European Commission forecast GDP will contract 4.2% this year.

Prime minister Antonis Samaras has vowed to meet budget-cut targets, implement structural reforms, and speed up state-asset sales to satisfy the conditions of a €240bn loan agreement with the euro area and IMF.

Greek stocks tumbled 6.1% at the close of trading in Athens as the Democratic Left party withdrew support for Samaras’s coalition government amid disagreement over the premier’s decision to close Greece’s public broadcaster.

Eurobank Properties still rose 9.8% to €7.32, its third day of gains and highest price since Mar 2010. The yield on Greece’s 10-year bond rose 62 basis points to 11.28%, compared with 27.21% on Jun 25, 2012.

“Greece as a country is on a long road of stability and growth from the very difficult times that it’s gone through,” Watsa said.

“We think the Greek people have really had tremendous hardship in the last few years but we do believe it’s now perhaps at the end of the tunnel and that its worst days are behind it.”

— Bloomberg