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  GREECE

REPUBLICAN REFERENCE

Area (sq km)
130,800

Population
10,623,835

Capital
Athens

Currency
Drachma

President
Costas Stephanopolous

Private sector
% of GDP

over 60%

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Background:
Greece achieved its independence from the Ottoman Empire in 1829. During the second half of the 19th century and the first half of the 20th century, it gradually added neighbouring islands and territories with Greek-speaking populations. Following the defeat of communist rebels in 1949, Greece joined NATO in 1952. A military dictatorship, which in 1967 suspended many political liberties and forced the king to flee the country, lasted seven years. Democratic elections in 1974 and a referendum created a parliamentary republic and abolished the monarchy; Greece joined the European Community or EC in 1981 (which became the EU in 1992).

Update No: 061 - (23/05/02)

Greece is playing a leading role in reconstructing the Balkans after a decade of devastating wars. It sees itself as the natural leader of the region, the one country already in the EU and with a long tradition of commercial initiative and maritime expertise dating back to ancient times.

Balkans ambitions
Premier, Costas Simitis, visited Belgrade in early May. Greece has pledged 530mEuros over the next five years in the reconstruction effort. Funds will be set aside to build up industrial, communications, energy and transportation infrastructure in Albania, Bulgaria, Macedonia, Romania and Serbia and Montenegro.
Private investment is the more salient aspect of its Balkan expansion, however. Greek businessmen are entrenched as the foremost investors in Macedonia, as well as being front-liners in fellow orthodox countries, Bulgaria, Serbia and Montenegro. Despite a long initial antipathy the Greeks are strong in neighbouring Albania. They are assuming natural commercial leadership and a large measure of political leadership, which the socialist nature of that government assists, being socialist, yet committed to the West. 

EU reality
The top priority, nevertheless, for Greece is its anchorage in the EU. The key figure here is the governor of the National Bank of Greece, Loucas Papademos, who has been appointed European Central Bank vice-president. He was hailed by Chancellor Shroeder of Germany, who praised his appointment profusely, in an encomium of Greece's achievement in joining Euroland ahead of the UK and Denmark, which it did in January.
Papademos, in his last speech before taking up his new post, was cautious in his appraisal of Greece's prospects. He insisted that its role in the Euro zone depends on tax reforms. He is worried about inflation, which is likely to be 3.5% this year rather than the earlier forecast of 2.8%: "Inflation will exceed the two percent coiling set for ensuring price stability." March inflation was up 4.4% on the year.

GDP growth could slip
The central banker's warning about inflation, customary in his profession, was coupled with a prediction that GDP growth, which was just under 4% last year, would be 3.5% in 2002, below the government forecast of 3.8%.
The IMF has echoed Papademos in warning that GDP growth for the next few years could be only 2.6% per annum. Structural problems abound and reforms are needed in tax, pensions and market deregulation. These cause great embarrassment to the socialist government where reformers and the old guard battle it out in cabinet. The contest is not dissimilar to that between New Labour and traditional Labour in the UK, except that the traditionalists are far stronger in Greece, helped by the self-righteous anti-Western, especially anti-US, stance of the country through much of the Cold War, excepting the time of the Colonels, who discredited pro-Western policies.
Greece is, nevertheless, a prosperous land, with the prospect of a massive tourist boom ahead during and after the 2004 Olympic Games. Its classical heritage is once again standing it in good stead.

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AVIATION

Olympic Airways still searching for a life-line as government turns to banks

Olympic Airways faces the threat of becoming the third European carrier to collapse within a year. Although the Greek government announced an emergency restructuring plan in February, the state-owned Greek airline may follow Belgium's Sabena and Swissair into closure, New Europe has reported.
Greece's government recently said that it would not continue with its international privatisation advisor, Credit Suisse First Boston, electing rather to turn to private banks for quick cash. The search for a new advisor will more than likely delay the company's restructuring, which the government admits needs private funds if Olympic Airways hopes to survive beyond the summer season, dpa reported.
"Unless we sort out the precise financial factors, unless Olympic becomes competitive, the company will have no option but to discontinue its operation," stated main opposition New Democracy leader Constantine Karamanlis. Recent efforts follow the collapse of a lengthy privatisation bid in 2001 to attract buyers. The sale of a majority stake fell through, as one bidder did not meet a deadline for financial guarantees, while another withdrew and negotiations collapsed with a third.
Adding insult to injury, the air industry crisis heightened by the events of September 11th led to foreign investors keeping their distance. The failed sale moved the overnment to introduce a rescue plan whereby Olympic would slash 2,000 jobs from a 9,000 strong workforce, reduce routes and separate the core airline operations from the debt-burdened group.
While Olympic Airways has not turned in a profit in years, the government insists that restructuring could bring in €21.4m a year. However, many critics deem the rescue plan as being too little, too late for the airline which in 2001 lost €85.1m and is reportedly hundreds of millions of US dollars in debt.

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BANKING

Alpha Bank ends 2001 with creative moves

At the Alpha Bank's ordinary general meeting of shareholders, held recently, Chairman of the board of directors and Managing Director, Yannis S Costopoulos announced that 2001 was once again a creative year for the operation of the bank and the group, New Europe reported. Activities in key sectors of the market posted a considerable increase and good results, despite the global recession and the decline of stock markets, which affected the results of certain group companies.
The most significant events shaping the bank's course during the year were the great progress made in modernising the administrative structure and operational functions of the branches with the application of the "Proteus 21" Programme and the establishment of support centres, the effort to intensify market share in the consumer and housing credit sectors and the proclamation of the bank as Grand National Sponsor and Official Bank of the Athens 2004 Olympic Games. The group's profits before tax and after minority rights amounted to €344m compared to €373m in 2000, representing a decline of 7.8%, a press release noted. Net earnings from interest totalled €710m the previous year, marking a 35% increase.
Earnings from financial operations decreased by €148m and net earnings from commissions decreased by €60m. This was mainly due to the fall in commissions on mutual funds and in the revenue of the investment portfolio companies. The group's assets last year amounted to €29.9bn against €30.2bn in 2000.
Loans increased by 16%, totalling €14.6bn years end, compared to €12.6bn at end-2000. Reserves against doubtful claims amounted to €229m, while estimated bad claims totalled €23m, or just 0.18% of total loans. Loans in default for a period of over three months amount to €351m, or 2.7% of total loans (compared to 3.1% in 2000), the lowest percentage in the Greek market.

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DEFENCE INDUSTRY

EBO awards contract for VHF devices supply

The Hellenic Arms Industry (EBO) and Intracom have signed an agreement totalling €1.7m involving the supply of VHF ordinary communications devices (transceivers) within the framework of the Greek Army's ASRAD programme.
The ASRAD HELLAS programme incorporates the provision of 54 STINGER on-vehicle systems, catering for the needs of the Greek army's anti-aircraft defence, an Intracom press release noted. Over the last four years, Intracom has successfully manufactured the above-mentioned VHF transceivers within the framework of a contract for the procurement of 3,800 units to cover the needs of the infantry's ground forces communications.
Intracom's primary local partners in this programme are EAB (Hellinic Air Force Industry), Germanos Batteries, Miltech, Mikron and Axoon Machineries, New Europe reported.

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ENERGY

Government to invest €16.1bn in energy sector modernisation

Greece will spend US$14.5bn to modernise its energy networks and become the "energy hub of the Balkans," Premier Costas Simitis announced recently. The eight-year programme includes plans for Greece to link up with European energy grids and increase its imports of natural gas, New Europe has reported.
"Greece will overcome its position of isolation at the edge of Europe and will become the energy hub of the Balkans," the premier said following a three-hour cabinet meeting. By 2010, he said, Greece will expand and enhance its current electricity and natural gas distribution networks with government investments amounting to €16.1bn.
The ventures are slated to create 55,000 jobs and 91,000 part-time positions, AP reported. Also, Greece will complete its interconnection with the Italian grid, upgrade its Bulgarian link and, via Bosnia and Croatia, connect its grid to central Europe. "Greece will implement a new regulatory framework covering electricity and natural gas to bring the country into line with energy market standards in the rest of Europe," Simitis explained, adding, "This move is also aimed at attracting private investment in the sector."

SOCAR: Azerbaijan can sell 1.5bcm gas to Greece yearly

President of the State Oil Company of the Azerbaijani Republic (SOCAR), Natig Aliyev, stated that Azerbaijan has the potential to sell up to 1.5 billion cubic metres (bcm) of natural gas to Greece each year by 2007 from the Shah-Deniz field, New Europe has reported.
Headed by Greek Development Minister, Akis Tzohadzopoulos, a delegation of Greek officials met Azerbaijani counterparts recently in Baku to look at possible supplies of Azeri gas to Greece and then on to other European nations.
The Shah-Deniz field, the development of which will begin in 2005 at a rate of 4-5bcm a year, has reserves of 700bcm of gas and 300m tonnes of gas condensate, Dow Jones reported.
Aliyev said his country can initially only supply Greece with 1.5bcm a year, as Azerbaijan already has an agreement with Turkey to supply 6.6bcm until 2007.
"It's possible that, as a result of further talks between Azerbaijan and Greece, we can later increase gas extraction from Shah-Deniz and increase supplies to Greece," Aliyev explained, adding, "This is an economically feasible project for Azerbaijan and its European partners."
Tzohadzopoulos said other European countries should be interested as they are only able to meet 20-30 per cent of the local demand, having to import the rest from Russia which can now be replaced by Azeri gas.

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INFORMATION TECHNOLOGY

State IT infrastructure in need of improvement

Prime Minister Costas Simitis says the Greek state's information technology infrastructure is in need of immediate and widespread improvement. Highest on the list is IT infrastructure in education, with schools committed to offering students greater access and help, the premier told nine women executives from IT companies he met for a debate on the sector, ANA reported. 
Simitis said the government was attempting to boost involvement by women in the new economy, including incentives for new enterprises.

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INSURANCE

Insurance subsidiary set up

The Commercial Bank of Greece and Credit Agricole, a strategic shareholder, announced recently that they have set up an insurance subsidiary, New Europe has reported.
The two banks own an equal 50 per cent of share capital in the newly established Commercial Life, which will operate in the Greek market through the parent bank's branches, senior executives informed a news conference.
The firm was set up by Commercial Bank, which is quoted on the Athens bourse, and Predica, Credit Agricole's insurance arm, Athens News Agency reported.
Dimitris Frangetis is Commerical Life's president, with Michel Zanatta taking on the managing director position. Predica, a European market leader in bancassurance, has premiums amounting to 10 billion Euros and capital under management of more than 70 billion Euros. Presenting the new company were Commercial Bank President Yiannis Stournaras and Predica Director General Michel Villatte.

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TELECOMMUNICATIONS

OTE, Germanos join forces in bid to enhance sales

Dominant fixed line operator, OTE, plans to use electronic appliance firm Germanos's retail network, as the former monopoly fights off competition in its domestic business.
The deal would give subscribers access to 263 Germanos stores around the country as well as OTE's own retail network, Athens News Agency informed. 
Germanos would imbue the concern's fixed line products and services with high-speed Internet connections and value-added voice services such as call waiting. Germanos has also expanded into other Balkan countries to offset slowing growth on the local front. The retailer currently has 450 other stores in six central and southeastern European countries. 
In other developments, Gemanos announced that it has reinvested all 2001 profits in 25 new stores with a total value of around US$2m, Bucharest Business Weekly reported.

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TRANSPORT

Airport rail link for 2004 Olympics


Transport and Communications Minister, Christos Verelis, recently repeated the government's pledge that a railway link to Athens international airport would be ready in time for the 2004 Olympics hosted by the Greek capital. Also slated for completion by the start of the Games was the Athens tram, whose construction had already begun, Verelis told reporters after a meeting with the prime minister on the use of European Union funds for railways.
At the end of February, an interim winner was named in a tender for the second phase of the railway project. The works include signals infrastructure, electrification, and three station buildings, for the airport. The suburban line, part of a wider network, is to centre in Aharnon. The airport stretch of the railway will help to cope with increased passenger movement during the 2004 Athens Olympics, in addition to easing daily travel for commuters. A station is to be built at the Olympic Stadium north of Athens in another phase of the project.
The lowest bidder for the second phase was a consortium comprising engineering contractors Avax, Gnomon, ETETH and J&P, which offered €295.134m to carry out the project. Previously, a consortium led by Athens-quoted engineering contractor Aktor signed a contract for €84.5m with Ergose, a projects subsidiary of state Hellenic Railways Organisation, to undertake the first phase of works for the railway, due for completion in 18 months. Aktor is joined in the consortium by Hellenic Technodomiki and TEB. Deputy Finance Minister, Christos Pachtas, who also attended the meeting with the prime minister, repeated that projects linked to the Olympics would be ready on target.

East-west highway to open ahead of schedule 

Public Works Minister, Vasso Papandreaou has announced that a key stretch of the Egnatia Way, linking Greece's northeast and northwest regions, will open earlier than planned at the end of next year. Papandreou has secured agreement from the engineering contractor in charge of the project for early completion of a section linking Grevena and Veria, including a bypass. The Egnatia Way construction was hindered by difficult terrain, Papandreou noted.
She attended the opening of a 4.7 kilometre road tunnel, Greece's longest, in the Ioannina prefecture.

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