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GREECE


 

 

In-depth Business Intelligence

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 173,000 132,834 117,200 27
         
GNI per capita
 US $ 13,720 11,660 11,430 45
Ranking is given out of 208 nations - (data from the World Bank)

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%



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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