Books on Greece
Area (sq km)
% of GDP
Update No: 089 - (30/09/04)
Economy boosted by Olympics
The Olympics may be over, but the economy has been given a more lasting boost.
Tourism was given a great fillip, but so was the whole economy. GDP is rising by
over 4% in 2004 and is expected to rise by 3.4% in 2005. By next year per capita
income, at present $18,700, is due to rise above $21,000.
But inflation was given a boost as well, which official figures of 2.9-3.1% are
clearly understating. Everything was bid up in the scramble to complete projects
in time for the events.
Official confession of past breaches of EU rules
Indeed, Greece has confessed to having been in breach of European Union budget
deficit rules since 2000, leading to suggestions that it may not have been
entitled to join the common currency after all, which it did in January,2001.
A change of government has made this possible. Finance Minister George
Alogoskoufis blamed the previous Socialist government, ousted in March, for what
he termed "creative accounting" and for misleading EU statisticians.
"The problem would not be so serious if it had happened only one
year," Alogoskoufis said during a parliamentary debate. "The fiscal
derailment is due to actions and omissions by the previous government and we
cannot hide behind our little finger anymore."
The confession came on September 22nd a day after the EU's executive commission
announced that Greece had revised its debt and deficit figures to correct errors
in data sent to Brussels in recent years.
Greece, the EU's poorest member at the time, failed to join the euro with the
first wave of nations in 1999 because of a high budget and rising inflation. Two
years of stringent economic reforms, including a 14 percent depreciation of the
drachma, got it into the club in January 2001, a year before the euro currency
The revelations this week have raised questions about the accuracy of EU
statistics, which rely on data from member states. Appearing before the European
Parliament in Brussels, the European Central Bank president, Jean-Claude Trichet,
described the situation as "a real enormous problem," according to
news agency reports."We have to be sure that the figures which are
presented are reliable.
Under EU rules, members must keep budget deficits to 3 percent of gross domestic
A review of state accounts ordered by Greece's new government shows Athens
repeatedly broke that ceiling. In 2000, the year the country's finances should
have met the criteria for joining the euro, Greece's budget deficit was 4.1
percent of GDP, the new calculations showed, far higher than the 2 percent
reported by the previous government.
For 2001 and 2002, the revised deficits hit 3.7 percent, more than twice the
originally reported figure.
Greece had already revised upward its figures for 2003 and 2004, largely due to
the costs of holding the Olympic Games.
Prime Minister Kostas Karamanlis has accused the Socialist government of
deliberately underreporting spending related to the Olympics and the military.
The Socialists say the conservative government was fudging budget figures itself
to tarnish the credit the Socialists won for securing Greece's admission to the
euro zone in 2001.
Alexander Radwan, a spokesman for the center-right bloc of the European Union's
economic and monetary committee, on September 21st called on the European
Commission to re-examine Greece's economic data for 1998 and 1999 - the years
its fitness for joining was assessed. Greece's entry to the euro zone was
"perhaps premature," he said, although it was unclear what the fallout
would be, if any.
Greece has until November to draft a plan to get its finances in order by next
year. "Conditions for the continuation of the economic recovery remain in
place," he told the European Parliament's economic affairs committee. He
added that high oil prices do not yet pose a risk of inflation in the euro area,
although they could "dampen somewhat" economic growth.
New attempt to sell Olympic Airlines
The Greek government will make a fresh attempt to sell national flag carrier
Olympic Airlines by the end of the year, possibly stripped of some non-core
units, financial daily Imerisia reported on Thursday.
Olympic Airlines was set up as the successor to debt-laden Olympic Airways in
December. The former socialist government had hoped to find a buyer for the
slimmed-down carrier but the process was stalled by March general elections.
The tender will be declared unsuccessful in the coming days, with another
sell-off attempt launched immediately, the paper said, citing unnamed Transport
Prime Minister Karamanlis, whose conservative party swept to victory in the
March polls, has said the government will push ahead with the airline's sale
next year, bidding to raise EUR1.5 billion (USD$1.84 billion) from privatization
Olympic Airlines will not be shut down regardless of the outcome of a new
tender, the paper quoted the Transport Ministry sources as saying.
The carrier will be sold off together with its handling and technical operations
or without the units if necessary, it added.
The European Commission earlier this week said it was considering opening a
second probe into whether the airline received state aid. It had launched a
legal case in March to investigate whether the Greek government's plan to create
a slimmed-down carrier involved government subsidies.
Hellenic Petrol ups earnings
Hellenic Petroleum posted a pre-tax consolidated profit of 130.6m in the
first half of 2004, the company said in a recent statement. The result matched
the one reported in the same period last year, as adjusted by the corresponding
results of the Elefsina refinery, it added. Consolidated EBITDA (earnings before
interest, taxes, depreciation and amortisation) grew 15.3% to 206.4m in the
reporting period. Consolidated capital spending rose to 138m from 84m. The
company said the increase was due to extra investment in the power generation
plant in the northern Greek city of Thessalonica. In refining, the company saw a
net production volume of 8,304 tonnes, down 7.2%, New Europe reported.
PPC strives to become major European player: Paleocrassas
Public Power Corporation (PPC), Greece's dominant energy producer, aspires to
become a European player in the liberalised market, with a strong presence
through Italy and the Balkans and is seeking investment to achieve this goal,
the company's chairman told businessmen, New Europe reported recently.
"We seek investment not only in Greece but beyond, with a special interest
in Southern and Eastern Europe, as well as in other business lines," Yannis
Paleocrassas said in his speech "The Greek Energy Sector in
Transition" at the Athens Business Club 2004 in the context of the Olympic
Games. "We have already gone into telephony, but real estate based on our
own considerable properties is our next target," he added referring to the
company's telecommunications subsidiary Tellas. Wind of Italy is the majority
shareholder and manager of Tellas.
The Greek Development Minister, Dimitris Sioufas, said the government wants to
ensure Greece's energy independence and make the country "an energy
junction in the Balkans."
Sioufas highlighted the government's commitment to push ahead with the
liberalisation of the energy market, with the active support of the Energy
Regulator (RAE). Paleocrassas said that after the establishment of an
independent Transmission Operator (HTSO) and the unbundling of the accounts of
the incumbent PPC, "we are now proceeding with the actual setting up and
operation of a pool energy market, based on hourly auctions. At the advice of
RAE, the government has granted eight licences for major power stations to
independent generators, two of which are under construction. Independent
suppliers are already actively supplying imported electricity to major
The chairman said PPC, especially since its conversion to a Societe Anonyme, has
an excellent financial record with an EBITDA (earnings before interest, taxes,
depreciation and amortisation) margin of almost 30% and an EBIT (earnings before
interest and taxes) margin of over 15% in 2003. "This has enabled us to
reduce our indebtedness which now stands close to the 1/1 target ratio between
own capital and debt," he said. Capital expenditure remains high at about
18% of total revenues of almost 3.900m.
Responding to a New Europe question on whether high oil prices would put a dent
in the company's figures, Paleocrassas said: "This is not something that
will change substantially our financial picture. Only 12% of our electricity
depends on oil. We have other means to compensate for high oil prices".
"We can use our lignite section more; we can use our hydropower more.
Fortunately, in the last two years in Greece precipitation was about normal so
we hope that this year we may also look forward to an increased participation of
hydropower in our total energy balance."
Demand for electricity increases in Greece at a very fast rate, especially on
the islands during the tourists season. If one includes those projected rate for
the next 5 years comes to almost 3.5%, while growth on the mainland
interconnected grid comes to almost 3.3%.
Paleocrassas said electricity, which accounts for about 57% of all energy
production, of which almost 60% comes from lignite, natural gas and oil come
second and third (14% and 12%, respectively), 9.0% is supplied by hydro power
and small balances by imports and other renewable sources of energy.
Sioufas stressed the importance of natural gas and alternative sources of
energy. Paleocrassas said PPC policies, while firmly anchored in business
development, have a strong devotion to environmental and social sensitivities.
He said the company is actively exploring the use of wind, solar tidal wave and
geothermic sources of energy.
To ensure the use of renewables, a new company was established in early 2000,
PPC Renewables. PPC is a totally integrated power industry, with four basic
business units (mines, generation, transmission and distribution) disposing of
43 thermal and 55 hydro units, as well as 41 power units on the islands.
Info-Quest reports 10% growth
Info-Quest, a Greek information technology (IT) company, announced recently that
its consolidated results for the first 6 months of 2004 stood at 233m
compared to 212m reported in the same period of 2003, New Europe reported
The figure was up 10%. EBITDA (earnings before interest, taxes, depreciation and
amortisation) totalled 9.4m compared to 5.2m, up 80%. Consolidated results
before taxes and minority rights reached 2.5m. "The main reason for the
consolidated losses is the significant cost of the reorganisation of the
franchises' network undertaken by ACS," the company said in a statement.
MINERALS & METALS
Aluminium of Greece boosts profit
Aluminium of Greece SA recently announced that its first-half profit for 2004
grew 10.1% to 178.3m from 161.1m reported in the same period of last year,
New Europe reported recently.
Earnings from operations totalled 38.0m, accounting for 21.3% of sales, which
climbed 85.4% in the reporting period. Pre-tax profit skyrocketed 126% to
26.7m, against 11.8m. Consolidated gross profit for the group and its
mining division, Delphes & Distomon, reached 26.0m compared to 11.4m.
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