It seems like ages ago since the offensive moniker of PIIGS was popularized in the mainstream media and common parlance to describe Portugal, Italy, Ireland, Greece, and Spain as the pariahs of Europe at the height of the financial crisis in 2009. Now, Societe Generale (SoGen), cites in a report that political stability combined with notable economic growth in the once-derided European periphery are two primary factors for investors to consider for better yields, recommending these countries over larger markets like France and Germany.
Although somewhat delayed, compared to other global funds, like Goldman Sachs, which noted that funds had taken overweight positions in Greece, in particular, the Paris-based multinational financial services company sees the Greek banking sector, specifically favoring the National Bank of Greece (NBG) as quite an appealing option for investors.
In its report, SoGen explains that as a result of political stability and economic growth in the periphery, bond spreads could further converge with French yields (this has already occurred in Portugal), and the strong earnings momentum, particularly in the banking sector, is expected to support stock markets in the periphery.
Societe Generale highlights the importance of elections in Europe, with the regional elections in Thuringia and Saxony in early September confirming the weakening of the ruling coalition. However, these results shouldn’t be interpreted as indicative of federal elections. The elections also underscored the increasing fragmentation of the political landscape, presenting another headwind for the government in passing necessary economic reforms to address the country’s challenges. For markets, a key concern is the debt brake rule, which is becoming increasingly central to discussions ahead of the general elections set for no later than September 2025.
