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Books on Greece
REPUBLICAN REFERENCE
Area (sq km)
131,940
Population
10,647,529
Capital
Athens
Currency
Euro
President
Costas
Stephanopoulos
Private sector
% of GDP
over 60%
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Update No: 097 - (26/05/05)
Retrospective and prospective
In an address in late April, Greek Prime Minister Costas Karamanlis reviewed the
government's course of action during its first year in power. He and his cabinet
have been fighting an uphill battle, Karamanlis said, adding that this has stood
in the way of fulfilling all their goals.
Without directly blaming the previous PASOK administration led by Costas Simitis,
whose fiscal practices have been sharply criticised by the EU, Karamanlis said
that political tricks and ploys have no place in this government, and that he
will always be honest with the public.
According to Karamanlis, the first thing that must be done over the next two
years is to develop the national economy. "We must produce, we must export,
and we need to become more competitive. Today we are leader of the rear guard in
competitiveness among our European partners," he said.
Pledging bold moves to change the structure of the economy in the coming months,
he asked Greeks to be patient as his cabinet attempts to reduce the public
deficit and trim spending.
Widespread privatisation
To obtain the funds necessary to build an infrastructure that will appeal to
foreign investors, the National Bank of Greece -- the country's largest
financial institution -- will be privatised, Karamanlis said, adding that
controlling shares in many other public organisations must also be sold. The
energy market, meanwhile, will be deregulated.
In addition, the government -- with the help of the EU -- plans to continue
efforts to sell Olympic Airlines, the national flag carrier on the brink of
bankruptcy. At the same time, the highly profitable Athens International Airport
will be listed on the Athens Stock Exchange (ASE).
With the telecommunications market now reaping the benefits of four years of
deregulation, the government is willing to assign the development of national
roads to companies. Projects would be undertaken at no cost to the government,
in exchange for the right to operate private tollbooths. Greece is an important
player in Balkan transport, acting as an intermediary for commerce between
Africa, Asia and Europe. Therefore, any investments in transport will most
likely bring an immediate return.
Karamanlis' plan also envisions joint public-private ventures for building local
roads, schools, hospitals and other public facilities. While attempting to
increase revenue, the government will also seek to rationalise spending in
public health, education, local government and grants.
As for restoring investor confidence following the ASE fiasco of 2000,
Karamanlis said he does not plan to pursue charges against the politicians who
were allegedly involved. Too much time has passed for any wrongdoing to have
legal significance, he said.
Greece declares support for Turkey's EU bid
The elevation of Pope Benedict XVI has, if anything, confirmed the new Greek
government in its support for Turkish entry into the EU. The new primate in Rome
opposes it as a derogation of Europe's Christian heritage. Athens, drawing on a
far longer, indeed pagan, European past, can take a wider view.
Karamanlis's most recent affirmation that Athens supported and continues to
support Turkey's EU membership bid was made at a dinner organized by the UK
weekly magazine, The Economist, in honour of participants at a conference in
Athens. In his speech Karamanlis touched upon Turkish-EU relations and the
Cyprus issue.
"We sincerely support an advancement in bilateral relations and cooperation
with our neighbour, Turkey," said Karamanlis, adding that Athens supported
and will continue to support Turkey's EU membership bid. "All steps taken
by our neighbour will depend on not only international laws, rules, and
conventions, but also on their respect for religious freedoms, human and
minority rights," Karamanlis said. "This process also depends on
Turkey's establishment of good relations with its neighbours and its attitude
towards the Greek Cypriot administration," he added.
He stated that Athens wants a solution to the Cyprus problem, and said that
Athens wishes to see a permanent and fair peace in Cyprus, based on the Annan
plan and EU acquis communautaire.
Valinakis: Turkey's membership is good for both EU and Turkey
The overriding importance of Greek-Turkish relations is well understood in
the Greek Foreign Office. Greek Deputy Foreign Minister Yannis Valinakis
recently stressed the importance of bilateral relations between Turkey and
Greece in recent years, adding that the new European framework has created new
opportunities and occasions for countries to develop their bilateral relations.
He said that negative issues that have harmed relations between Ankara and
Athens for over 30 years will be solved as a matter of course in the era of
developing relations and cooperation. He went on to say, "Turkey's EU
membership will be positive for both EU and Turkish interests."
Counting on post-Olympic boom, Greece now faces tourism bust
The Greek economy has not fared as well from the aftermath of hosting the
Olympic Games in 2004, as was hoped. Greece's economy went into overdrive after
it was picked to host the Games. Since 1996, a year before Greece was chosen,
the economy has expanded an average of 3.8 per cent a year, the third- highest
rate in the EU after Ireland and Luxembourg, according to EU figures. Spending
to prepare for the Games helped boost economic growth to 4.2 per cent last year,
while swelling the country's budget deficit to 6.1 per cent of GDP and
increasing its total debt to 111 per cent of GDP, both the highest in the
European Union.
But GDP growth will slow to 2.9 per cent this year, according to the European
Commission, the EU's economic overseer. This is due not least to the failure of
a post-Olympics boost to materialise.
George Tsakiris, who owns three hotels in Athens, says he and other hoteliers
spent 1.5 billion euros ($2 billion) to renovate and supply rooms with new
furniture, televisions and Internet connections on a bet the 2004 Olympic Games
last summer would power tourism for years to come. The Greek government spent 10
billion euros on a new airport, subway and rail system and venues to prepare for
the Games.
Instead, hotel occupancy plunged 7 per cent in the fourth quarter to 57 per
cent, the lowest among 11 of Europe's biggest cities, according to a study by
Athens-based consulting firm JBR Hellas Ltd. London had the highest occupancy,
at 77 per cent. The number of visitors to Greece fell 3 per cent last year,
according to the Association of Greek Tourist Enterprises.
While Greece was gearing up for the Games, hotels and other travel businesses
increased their prices. The average rate for a room for one night in Athens rose
33 per cent in 2004 to 167 euros, the highest among six cities in a survey by
accounting firm Deloitte & Touche LLP. The average rate in Rome, the
next-most-expensive city, fell 1 per cent to 157 euros. In Istanbul, the least
expensive city in the survey, the average room rate rose less than 1 per cent to
99 euros.
Cheaper Destinations
The increased rates deterred some tourists, who chose cheaper destinations
instead. ''Greece was among the losers last year,'' says Anja Braun, a
spokeswoman for TUI Deutschland, the German division of Hanover, Germany-based
TUI AG, Europe's largest tour operator. ''People were put off by negative
reporting about price hikes.''
Greece's post-Olympic experience stands in contrast to that of Australia, which
hosted the Summer Olympics in 2000.
Australian tourism rose 11 per cent in 2000, according to a 2001 study by Jones
Lang LaSalle Inc., a Chicago-based commercial real estate broker and management
company that evaluated the impact of the Olympics on regional property markets.
The number of visitors peaked in December 2000, three months after the Games
ended.
Greece, birthplace of the ancient Olympics, did reap some lasting gains from the
Games. EU funds helped pay for a 2.6 billion euro subway system in Athens,
easing the capital's legendary traffic jams. Some EU money was also used to
finance the city's new international airport, permitting more flights.
Accommodating Tourists
''The change in infrastructure has been very important,'' says Christos
Avramides, an economist at and general manager of Athens-based Proton Asset
Management SA, with more than 180 million euros under management. ''The issue
now is to capitalize on this experience.''
Considering tourism's importance to the economy, Greece isn't the most
accommodating of destinations. The government determines when shops can open;
department stores have to close by 3 p.m. on Saturdays and all day on Sundays.
Museums don't have evening hours.
The new Eleftherios Venizelos International Airport in Athens charged the
third-highest fees and taxes among international airports, after Newark, New
Jersey, and Osaka, Japan, according to U.K.-based Transport Research Laboratory,
a transportation research organization.
The decline in tourism after the Games is a blow to a nation that relies on
spending by tourists for about 6 per cent of its gross domestic product. Tourism
is one of Greece's three biggest industries, along with construction and
shipping; the latter accounted for about 8 per cent of GDP last year. About 6.4
per cent of Greece's workforce of 4.3 million, or about 275,000 people, is
employed in the tourism trade.
''The advantage of the Olympics is over and finished,'' says Bart Daenekindt,
who manages about 30 million euros in Greek stocks at KBC Asset Management in
Brussels.
Not Enough
That gives the government until next year to tame the deficit and reduce
debt, both of which are about double EU guidelines. Karamanlis has responded
with a plan to cut spending, boost certain taxes and sell state-owned assets.
The European Commission said in a statement in April that those efforts may not
go far enough.
Even so, investors have bid up Greek shares and bonds, lured by the country's
growth and the prospect of sales of state-owned companies.
The ASE General Index gained 23 per cent in 2004, led by Athens-based Opap SA,
Europe's third-biggest publicly traded gambling company. Opap, 51 per cent owned
by the government, is among the enterprises that may be sold. The company's
shares rose 79 per cent last year and have gained 4.8 per cent this year to
21.34 euros yesterday. The ASE increased 4 per cent this year to 2896.40.
''There was some relief that the Olympic games were a success, nothing bad
happened, there were no bombs,'' says Panagiotis Antonopoulos, who helps oversee
the equivalent of $6.5 billion at Athens-based Alpha Asset Management SA.
EU Laggard
Though the economy has been expanding, Greece's 11 million people are still
the second-poorest among the 12 EU nations that have adopted the euro. Last
year, GDP was 15,000 euros a person, higher only than Portugal's 12,850, euros
according to EU figures.
Of the 15 nations in the EU at the start of last year, Greece ranked 14th in
competitiveness, according to the Geneva- based World Economic Forum, which
surveyed 8,700 business leaders in 104 countries.
Budgetary problems
Karamanlis's plan to cut the budget deficit by more than half next year to
less than 3 per cent of GDP may prove hard to fulfil.
Karamanlis said the government will raise 1.6 billion euros from selling state
assets, including a stake in the Athens airport, which is 40 per cent owned by
Hochtief AG, Germany's largest builder. He has imposed higher alcohol, cigarette
and value-added taxes and is pushing for curbs on wage increases for government
workers.
The EU told Greece on April 6 that those efforts may not go far enough. ``Greece
appears to be at serious risk with regard to the long-term sustainability of
public finances,'' the European Commission said in a statement from Brussels.
Karamanlis, whose New Democracy party ousted the Socialists, blames the deficit
on his predecessors and said his proposals will sustain expansion. ''We are
aiming for high growth,'' he said at a news conference in Athens on March 8.
''It can't be based only, as in the past, on Olympic projects or European funds.
Greece needs dynamic, self-created growth. Greece can't stay in last position.''
Ratings Cut
Failure to meet the 3 per cent deficit ceiling by 2006 may put the country's
credit rating at risk.
In December, Fitch Ratings cut Greece's rating, joining Standard & Poor's,
after the country revised budget figures to show that deficits since 1997 were
higher than initially reported. Fitch reduced its grade to A from A+. Moody's
Investors Service rates Greece's debt A1, the fifth-highest investment grade,
while S&P rates it a step lower, at A.
''The reduction of the deficit to below 3 per cent of GDP is achievable by 2006
but would require the government to exercise significant control over public
expenditures,'' says Trevor Cullinan, a ratings analyst at S&P in London.
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BANKING
Alpha Bank maintains high 2004 profits
At the ordinary general meeting of the shareholders of Alpha Bank, which took
place on April 19th, board of directors Chairman Yannis S Costopoulos stated
that 2004 was an especially significant and productive year during which the
country was at the centre of world attention because of the hosting of the
Olympic Games, New Europe reported recently.
The bank, as grand national sponsor and official bank of the Games had the
privilege to participate in the preparation and the holding of the games and to
associate itself, from the beginning, with their course and image. The
sponsorship was a highly successful initiative which reinforced the bank's image
in Greece and abroad.
"Because of the Olympic Games, we naturally did not celebrate, last year,
the 125th anniversary of the beginning of commercial activities by John F
Costopoulos which later gave birth to the Credit Bank and the 165th anniversary
since the establishment in Corfu of the Ionion Bank. For this reason, we have
postponed to this year the promotion of the double anniversary," the
chairman said.
In 2004, operating profits of the Alpha Bank Group were maintained at a high
level, based on the increase of purely banking revenues. Basic indicators show
the upward course, activities of all Group companies posted good growth,
Costopoulos said.
Growth and profitability were maintained taking advantage of all competitive
possibilities for the realisation of high recurring income and simultaneously
restricting operating costs. At the same time results were further enhanced
through reengineering while Group activities dynamically expanded within Greece
and abroad.
In 2004 the group's capital adequacy remained at a high level: 8.9% for the
Upper Tier I capital ratio, 10.1% for the Tier I capital ratio and 14% for the
overall capital ratio. The profitability posted during the year led to return on
equity rising to 18.3% despite the significant reinforcement of the capital
base.
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ENERGY
Greek-Italian natural gas pipeline to begin soon
Construction of a Greek-Italian natural gas pipeline is due to begin in the near
future, Greek Development Minister, Dimitris Sioufas, said recently, after a
meeting of the International Energy Agency (IEA) ministers in Paris.
In talks with his Italian counterpart, Claudio Scajola, it was agreed that
Greece and Italy should sign a bilateral protocol for speeding up implementation
of a Greek-Italian natural gas pipeline, whose operation will make Greece and
Italy a major energy conduit for natural gas from the Caspian Sea to the larger
European markets. Sioufas and Scajola agreed to create a Greek-Italian committee
charged with drafting the protocol. This decision comes on the heels of a
memorandum of intention signed by Greece's Public Gas Corporation (DEPA) and
Italy's Edison on April 27th for the construction of the pipeline.
"This is a very significant development," Sioufas said in reference to
the agreement between the two companies. "This pipeline in combination with
the Greek-Turkish natural gas pipeline, on which work will soon commence,
creates an energy ring linking Turkey, Greece and Italy and consequently all of
Europe for the transfer of natural gas from the countries of the Caspian
Sea," ANA quoted Sioufas as telling reporters.
Regarding the Turkish-Greek natural gas pipeline, Sioufas met with his Turkish
counterpart, Mehmet Hilmu Guler, with whom he discussed the details of beginning
construction on the project as well as expanding the two countries' cooperation
on other energy-related issues.
Meanwhile, Greek prime Minister, Costas Karamanlis, had a meeting with Sioufas
to discuss energy policy and related issues. After the meeting, Sioufas stressed
that Greece was being converted into a major energy junction for Europe and was
acquiring geostrategic importance in the energy sector.
The minister noted that all this, in combination with the planned
Bourga-Alexandroupolis oil pipeline linking the north-western Greek region of
Epirus with Croatia and Austria, as well as the development of the electricity
grid, will make Greece geostrategically important in terms of energy.
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FOREIGN RELATIONS
Greek, Bulgarian presidents reaffirm good relations
Greek President Karolos Papoulias and his Bulgarian counterpart Georgi Parvanov
recently reaffirmed the good bilateral relations between Greece and Bulgaria
during a meeting in the northern Greek city of Thessalonica, ANA reported.
Noting the desire of the Greek and Bulgarian leadership to continually develop
bilateral relations for the benefit of both countries, they also hailed the
signature of an agreement for the Bourgas-Alexandroupolis oil pipeline that took
place in Sofia recently. Apart from bilateral relations, the two men also
discussed the situation in the surrounding regions, with Papoulias stressing the
importance friendship, as a basis for growth, cooperation and peaceful
coexistence, for all nations in the Balkans. Parvanov thanked Papoulias for the
assistance Greece had offered Bulgaria in its bid to join NATO and the EU,
describing Greece as a key economic partner and investor in his country. He
expressed hope that bilateral efforts to open two new border crossings on the
Greek-Bulgarian border will soon yield results. Parvanov also extended an
invitation to the Greek president to attend a Balkan cultural forum that will
take place in the Bulgarian city of Varna in May, which Papoulias accepted.
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RETAIL
Greece's largest department store opens
Attica, the largest department store in Greece and one of the biggest in the
Balkans, opened on April 9th in downtown Athens at the ambitious "CityLink"
retail and entertainment centre, a 250m Euro project developed by Piraeus Bank
Real Estate that is expected to become fully operational by autumn, ANA
reported.
Athens has been continually changing in recent years, becoming friendlier and
more attractive to its residents and visitors.
In this modern Athens, the historic building of the Army Pension Fund was
transformed by Piraeus Bank Real Estate Group, without alteration of its
traditional architecture, into a multi-purpose building complex that
aesthetically as well as functionally enriches the Greek capital's centre.
The CityLink complex, encompassing an entire city block covering 65,000 square
metres, is conveniently situated between two Metro stations - those of Syntagma
and Panepistimou - and strategically placed amid 3 major hotels (the Grande
Brettagne, and the Grecotel Group's King George II and Athens Plaza), within
walking distance of the Greek parliament and the National Gardens, as well as
some of Athens' most well-known archaeological gems such as the Catholic Church
and Athens University.
The 250m Euro investment is due to be fully operational by autumn; the complex
will encompass, in addition to the department store, a health and fitness club,
restaurants, and the fully renovated theatres Pallas and Aliki.
"Attica, the department store," covering 25,000 square metres on eight
levels, employs more than 700 people, comprises more than 300 shops-in-a-shop
offering 500 brand-name goods meeting all consumer needs in women's, men's and
children's fashion, home and sport goods, accessories and cosmetics, a VIP
service area, and lock-up facilities for personal objects. The department store
further boasts an inhouse restaurant and a cafeteria, and offers free home
delivery of purchases.
Attica Department Stores SA was set up by founding members Elmec Sport (25%
holding), Epirotiki (owner of the historic Minion department store building,
with a 25% holding), businessman Constantine Lambropoulos (former main
shareholder and managing director of another historic Greek department store,
with a 10% holding), businessman Alexis Sgoumbopoulos (exclusive importer of
Benetton and Sisley, with a 10% holding), businessman Ritchie Francis (main
shareholder and managing director of Ridenco, with a 10% holding), businessman
Constantine Tsouvelekakis (exclusive importer of Replay, with a 10% holding),
businesswoman Vassiliki Foka (main shareholder and managing director of the O
Fokas SA, with a 5% holding), and businessman Asterios Economidis (main
shareholder and managing director of Arcon construction, with a 5% holding).
According to management, the Attica department store's visitorship is estimated
at 8,000-10,000 shoppers daily, while sales are anticipated to exceed 100m Euro
in two years' time. The ultra department store's opening was attended prominent
members of the Athenian business and entertainment communities, and throngs of
shoppers.
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