Greek Bailout Fund, a crowdfunding venture seeking to pay off Greece’s latest debt payment due June 30, was kicked off this week and has already received over 160,000 euros.
However, in order to pay off Greece’s latest debt payment, the initiative needs 1.6 billion euros. Proponents of the campaign say this equates to every European paying 3 euros.
As Greece lurches towards default, this crowdfunding venture is admirable, but will most likely fall short of its goal for a number of reasons.
29-year-old London-based marketing manager Thom Feeney deeply believes that the will of the people of Greece should decide their country’s fate, rather than European bankers. And to that end, he has launched a valiant effort to keep the Greeks afloat through an Indiegogo crowdfunding campaign.
“All this dithering over Greece is getting boring,” says the website. “European ministers flexing their muscles and posturing over whether they can help the Greek people of not. Why don’t we the people just sort it instead? The European Union is home to 503 million people, if we all just chip in a few Euro then we can get Greece sorted and hopefully get them back on track soon. Easy.”
The Indiegogo page has several incentives to donate to the campaign, ranging from a postcard of the Greek Prime Minister, Alex Tsipras, sent from Greece, to a bottle of authentic Greek wine, to a “Greek holiday for two” if you donate 5,000 euros to the cause. While these efforts are admirable, Mr. Feeney’s campaign is not grounded in reality, and any potential donor needs to ask four serious questions before chipping in.
(1) How will the money even get to Greece?
The Indiegogo campaign answers several questions about its motivations and the such on its page. One of those questions being, in my opinion, the most important one: how will this money even be transferred to Greece? Will the money go to the National Bank of Greece (NYSE:NBG) or to the government directly? Seeney’s tongue-in-cheek answer is as follows: “That’s one for IndieGoGo to help me with! Thought I suspect that there’ll be plenty of people, better qualified than I am, that would be willing to help.”
Seriously though, this crowdfunding venture is a legal nightmare if it actually succeeds in its goal. How will Feeney navigate the sea of red tape to get this money from the donors to the Greek government? It’s unclear at this time. Even if the crowds do fund Greece, if all the money has to be returned because of legal technicalities, it all would come to naught.
(2) Can the kickstarter reach its goal in time?
160,000 euros is an impressive showing for a 2-day old campaign, but with 1.6 billion euros needed, and the campaign’s self-imposed deadline of ten days to raise this money, unless donations come streaming in much faster than they are now, the campaign will not be fully funded. And according to the Greek Bailout Fund, if they don’t reach their goal, all money will be refunded anyway. Which leads to the third question…
(3) Isn’t this simply delaying the inevitable?
The crowdfunding campaign is only going to be able to cover Greece’s debt payment for this quarter. But what happens when the European Central Bank comes a-knockin’ again three months down the road? And three months after that? And another three months after that? Isn’t this crowdfunding simply going to pour money into a fiscally irresponsible country and be a “big fat Greek bailout” all over again? The Greeks need to learn that they can’t spend more than they take in. That takes me to the fourth, and final question…
(4) Why not just buy Bank of Greece, a Greece ETF, or purchase Greek goods directly?
Think of it this way. The people funding the Indiegogo campaign are doing so in a noble effort to save the Greek economy and government. But with serious doubts as to the campaign’s legality and feasibility, wouldn’t it simply be better to invest in the Greek economy directly if you want to save it?
Take the National Bank of Greece. Europe’s leaders are ending emergency lending to the Greek banking system, and according to Seeking Alpha writer George Kesarios, “I continue to think Greek banks and NBG have little or no value left. NPL issues aside, the problem today is liquidity. And as things stand at the moment, all indications are that the collateral in the Greek banking system for these operations is limited, even if the ECB does not cut Greece off completely. The fact that ELA did not increase probably means that Greek banks have reached their collateral limits.”
Liquidity issues are central to the Greek banking system. Investor and consumer confidence, key engines to an economy, are very low in Greece for obvious reasons. So if investors pitch together and infuse liquidity and confidence through buying shares of Greek banks, perhaps the system could be saved.
Please understand this is a tongue-in-cheek proposal. Greek banks are about a good of an investment idea as an “inflatable dartboard” company at this point. The National Bank of Greece is in as poor of a position as all the other Greek banks.
Ok, so that’s a bad idea. How about the leading Greek exchange traded fund (ETF) on the market, Global X Funds Greece ETF (NYSEARCA:GREK)? This ETF is a benchmark indicator for investor confidence in Greece. If it falls, that means things are probably going poorly in Greece, and if it rises, it probably means investors are more confident that Greece can turn things around. This morning (June 30th), for example, GREK rose over 5% and the National Bank of Greece rose nearly 9% on news that a debt payment deal could be reached.
But this is also a risky and ill-advised idea, unless you are very confident you can swing a trade the right way to profit off of fast-moving events in Greece. Anything related to Greece on the market at the moment is most likely going to see major price movements in the upcoming days and weeks due to “news,” whether good or bad. As it is difficult to time trades correctly, unless you can see the future or are a financial genius, it’d probably be another bad idea to “get your money to the GREK.”
So, the only real option left is to put money into the hands of the Greek people directly by buying goods from them or going on vacation there. Just be sure to avoid the parts of Athens overtaken by protesters.
Ultimately, Greece is in a very tough spot due to poor financial decisions over the last few years, and now it seems that even a crowdfunding venture can’t save the ailing Greek economy. Times will most likely be very tough for the Greeks for the next few months or years, and investments in Greece such as the Bank of Greece are toxic to your portfolio’s health at this time.
If you’d like to read more of Evan Buck’s investment and stock market analysis, feel free to check out his work over at financial analysis website Seeking Alpha.