Greek Americans love their homeland, but there are limits
Just before dawn in New Jersey 40 years ago, Nick Paravalos jumped ship, sneaking toward an American dream that he had nurtured for decades, leaving Greece behind for good.
Starting with $20 in his pocket, the Piraeus-born seaman began to bounce from job to job, washing dishes and busing tables for years before settling in upstate New York, marrying, and setting up the first of three diners in the sleepy town of Scotia.
The tale is a template of the American promise of upward mobility, one that millions of hardworking immigrants have realized in the course of several generations. But for Paravalos and his 2.5 million compatriots in scores of cities across the United States, heart-swelling national pride and nostalgia for the old country linger.
“No one leaves [Greece] without dreaming of going back,” the 64-year-old retired restaurateur said during a recent telephone interview. “And even if it doesn’t happen, our heart is always with the patrida, our homeland.”
For Greek officials struggling to fix the nation’s broken economy and technocrats aggressively tapping all sources of financing to avert Europe’s first default on a country’s national debt, no other words and sentiments could sound sweeter these days.
Preparing to issue a “menu” of so-called diaspora bonds, cash-strapped Greece is counting on such heartfelt allegiance and fervent flag-waving to raise money needed to service its nearly $400-billion debt and, ultimately, boost Athens’ chance of returning to the world’s bond market by the end of 2011.
“The idea is to access investors who have not [yet] been exposed to Greece’s sovereign risk,” said Petros Christodoulou, director general of the Greek debt management office in Athens.
Are Greek Americans willing to do so?
Paravalos, for one, is emphatic: “No.”
The U.S. economic slowdown has many retired immigrants like him reluctant to make any sort of investment, he said. “Plus if patriotism is in the calling, then I’d rather give money directly to a distressed friend or family member in Greece than see it go to the hands of the state,” he said.
Decades of reckless spending plunged Greece into a debt crisis last year, weeks after the newly elected government announced that its budget deficit was 12.7% of the country’s gross domestic product, a figure that was later revised to 15.4%, or more than five times the limit allowed under rules set by the Eruozone, the 16-nation club using the euro as a common currency.
As borrowing costs surged to prohibitive levels, the International Monetary Fund and its European peers stepped in seven months ago, cobbling together a $146-billion bailout loan in return for draconian austerity measures and sweeping structural reforms that the government has been implementing in a frenetic pace despite growing social unrest.
Still, locked out of international bond markets and with borrowing needs expected to soar to $99 billion in 2014, Greece has skittish investors wondering whether Athens will be able to pay off its debt.
“We’re doing everything possible to diversify sources of funding,” said Christodolou, an ex-Wall Street financial executive now working to help guide his country out of its burgeoning debt.
Details of the diaspora bonds are not yet final, including the price at which the paper will be sold, how long it will earn interest and how that interest will be calculated. It’s also unclear how the bonds will be designed, or even the name they will carry. But officials say they intend to make the bonds attractive to investors.
Once registered, the diaspora bonds will be sold the same way all other securities are made available in the United States: at banks and credit unions, through brokered dealers and over the Internet.
The ambitious bond plan may be a first for Greece, but the method isn’t new.
In recent years, Israel has raised more than $31 billion by reaching out to Jewish communities globally. India raked in $11 billion in three separate issuances in the last decade alone, offering expatriates as much as 8% interest to raise $4.2 billion soon after its stock and currency markets took a nose dive in 1998. Even the United States used the fundraising technique in 2001 with Patriot Bonds, resurrecting “war bonds” to help finance the Bush administration’s fight against terrorism.
“The Greek Americans are an affluent, entrepreneurial lot and, with the right marketing pitch, Athens may raise an easy $13 [billion] to $15 billion from the U.S. campaign alone,” said Dilip Ratha, a World Bank authority on innovative financing mechanisms for poor countries. “The key will be making expats feel good about the Greek government and convincing them that good use will be made of the money they invest.”
That may be tricky. This year, for example, Greece’s parliament appealed to its citizens worldwide, asking them to contribute to a solidarity fund set up in March to help service the country’s crippling debt. The Bank of Greece would not provide details on the amount gathered, but financial experts familiar with the project said the drive proved a dud, with less than $1 million collected thus far.
Even so, Greek Americans like Angelos Menagias are confident that the U.S. fundraising drive will succeed.
“It makes good investment sense,” he said, contacted at his Blue Ribbon Diner in Schenectady, N.Y. “But for most people, like myself, it will boil down to a matter of national pride. I hate having customers come in or congressmen crack jokes about my patrida.”
Second- and third-generation Greek Americans may be less emotive, but groups like the American Hellenic Educational Progressive Assn. say they stand ready to rally overseas Greeks to the national cause.
The fate of the bond offering may make or break Greece’s hope of a comeback to the global markets by the end of 2011.
“It will send a powerful message to institutional investors,” Christodoulou said in an interview. “If investors of Greek origin put their full faith and support in the government, then that may encourage foreign investors also.”
Others remain cautious.
“So long as debt will be climbing, any talk about a Greek comeback to the markets, no less in 2011, is premature,” said Miranda Xafa, a senior strategist at IJ Partners, an asset management firm based in Geneva. “I think investors will wait until they see the debt declining firmly, and they consider a relapse to old fiscal practices unlikely.”
Carassava is a special correspondent.