Books on Greece
Area (sq km)
% of GDP
Update No: 100 - (25/08/05)
OECD report positive
The OECD has just issued its annual report on Greece. It takes a long view and
is generally positive.
The Greek economy grew rapidly in the last four years, in the 3-4.5% range per
annum, well above the EU average. But inflation and unemployment remain
stubbornly high, while income per head lags behind the EU average. The current
account is deeply in deficit.
Living standards would rise more quickly, the OECD asseverates, if the
government reformed product markets, to promote competition, and labour markets,
to make wages more flexible. The immediate objective, however, should be the
reduction of budget deficit, which at 6% of GDP in 2004 is far too high, double
the amount permitted in Euroland. This is important, not only to comply with
fiscal rules of the euro zone, but to meet the growing demands for pensions of
an ageing population.
The OECD predicts that GDP growth will be 2.8% this year and rise to 3.2% in
Greece joins the flat-tax brigade
Greece is set to become the next European nation to introduce a flat rate of
income tax, according to speculation in Athens triggered by the finance
minister, Giorgios Alogoskoufis.
The prime minister, Costas Karamanlis could announce the proposal at September's
Thessaloniki International Fair. A flat rate of income tax, which abolishes all
bands and exemptions and replaces them with a single rate and a high personal
allowance, is all the rage among free-market thinkers and the idea is sweeping
across eastern Europe.
The Greek government's precarious finances were thrown into a massive deficit of
nearly 7% of GDP last year by the Olympics, and Finance Minister Alogoskoufis
has promised to bring the deficit down to 3% of GDP. The fiscal crisis helped
propel the New Democracy government into power.
Mr Alogoskoufis believes a flat tax rate, by discouraging evasion and corruption
and also boosting incentives for high earners, would help narrow the deficit.
Currently, the first 11,000 Euro of income is tax exempt in Greece and there are
then three bands: 15%, 30% and 40%.
The finance minister has said that, from 2007, he would like to replace this
system with a single 13,000 Euro personal allowance and a single 25% band for
both corporate and personal income. He has already started to cut corporation
tax from 35%.
The flat tax idea was first proposed in America, notably by former presidential
candidate Steve Forbes. But it was Russia which first introduced one at 13%,
resulting in higher tax revenues as evasion was cut and economic growth
improved. So far, it has been introduced successfully in Poland, Slovakia,
Latvia, Lithuania and Estonia.
Greece's harsh post-party reality
A year after Greece staged its lavish Olympiad, memories are still fresh,
reported the International Herald Tribune on August 10th.
The din of applause has shifted to sound of the wind at many of the more than 30
Olympics sites where 16 days of Games were staged last August. In the meantime,
yearly maintenance costs have soared to almost US$100 million, along with a
total Olympics bill estimated at 9 billion to 13 billion, a staggering price
that has resulted in new political clashes.
One of the smallest countries to host the global event, Greece spent on the
Games with the abandon of Hermes, the Greek god of commerce and speed, in order
to overcome construction delays and finish more than 30 Olympics sites on time.
Now the country is facing the post-party reality: a tally of economic benefits
and costs that pressed public borrowing to 43 billion last year and prompted a
warning from European Union finance ministers to reduce a 6.1% deficit.
"We had a vision," Tourism Minister Dimitrius Avrampoulos, the former
Athens mayor who pressed the winning game bid, said in an interview. "We
believed that the Olympics would be a vehicle for transformation and change.
"The fact that we organized a safe Olympics game is practical proof of what
the Greeks represent today." Athens was indeed transformed, with a new
airport, state-of-the-art suburban trains, trams and a ring of urban highways
that carry commuters into a city determined to press on with improvements. The
clouds of pollution that used to hover over Athens have vanished. New paint,
subsidized by the city in a façade program that has become a Harvard case
study, brought colour to barren grey concrete high-rise apartments.
Tourism, a critical element of the Greek economy, also showed a sharp increase,
with air passenger traffic rising more than 7 per cent in the first half of the
year to 6.6 million, according to Athens International Airport. International
tourism grew even more, but that trend has not filled all the rooms in city
hotels, which spent heavily to remodel in advance of the Olympics. More tourists
are apparently doubling up and bunking together. "It's not really the boom
or boost that we were hoping for," said Aris Ikkos, director of JBR Hellas,
an Athens business consulting firm that tracks hotel occupancy for the Athens
Hotel Association. From January to June, the overall rate remained virtually the
same as last year: 60%.
"The truth of the matter is that we still don't really now the full cost of
the Games," Ikkos said. "The Olympics definitely created the
foundations to make Athens a very good destination, but without knowing details
of how much was spent it's very difficult to say it was worth it or not."
Most of the cost of the Olympics was absorbed by Greek taxpayers, who paid for
sparkling new sports venues that in many cases now stand virtually deserted
except for lonely security guards. The diving pool is dry, and the velodrome
empty of bicycles. The northern town of Volos, population 85,000, has been
unable to fill its 22,000-seat stadium when the local soccer team plays.
In contrast to past Olympics, all of the structures built this time were
permanent - even the baseball stadium, which was supposed to be temporary
because of tepid Greek interest in the game. Some stadiums have been rented out
on short-term leases for pop concerts, a "Holiday on Ice" show and a
travelling performance of "Cats." But such events have generated less
than about 5 million, not enough to pay for hefty maintenance costs.
There are about two dozen Olympics sites that the government is advertising in
hopes that international investors will sign long-term leases, enhancing
Greece's critical tourist economy, which accounts for more than 18 percent of
the country's gross national product. On the first day of a recent slalom race,
Olympic Properties, which was set up to manage the sites, started accepting bids
for the kayak course, a badminton arena and a building that housed an
international broadcasting centre. Beginning in late August, government
officials plan to seek bids for a beach volleyball centre and tae kwon do and
But the more difficult buildings are still to come. "The toughest sites are
the peripheral stadiums in the small cities," said Christos Hadjiemmanuil,
president of Olympic Properties, who suspects there is also little hope of
finding a use for the existing baseball stadium. "The Greek government is
not going to start on some quixote campaign to create demand for a new
sport." Palli-Petralia, who has taken charge of the sites, said in an
interview that there has been considerable interest in the kayak site from theme
park developers and investors.
The strategy is to maintain ownership of the Olympics structures, with an eye on
the bottom line. "It's very costly to maintain," she said. "What
we want is to reduce the costs and to develop all these complexes to improve the
quality of life."
In some ways, the Olympic legacy of concrete has become a political burden that
has sharpened differences between the New Democracy party, which swept to power
in elections in March last year, five months before the Games, and the previous
governing party, the Socialists. The two sides have been trading charges about
who squandered opportunities. "We didn't find a plan for the post-Olympics
development of the venues," said Palli-Petralia, who is part of the New
Democracy administration. "What we found was a rough draft from one of the
Greek universities. It was really not a master plan. "When a city gets the
Games it should make a business plan for big changes and then decide what the
country needs for the day after the Olympics. This did not happen."
Greece to purchase F-16 planes, Leopard tanks
The Greek Government Foreign Affairs and Defence Council (KYSEA) decided to
purchase 30 F-16 Block-52 warplanes with the option of purchasing an additional
10 of this type to meet the air force's immediate operational needs, during its
meeting chaired by Prime Minister Costas Karamanlis. It also approved the
procurement of 333 Leopard tanks. The agreement for the purchase of the aircraft
will be signed by the governments of Greece and the United States, while that
for the tanks between the governments of Greece and Germany, as the defence
minister clarified, New Europe reported.
The cost of the warplanes, in current prices according to the minister, amounts
to 1.1 billion Euro but the final amount will depend on negotiations with the
American side and offset benefits will concern infrastructures and support for
the rest of the F-16s belonging to the Greek air force. As regards the new
fighter aircraft, whose procurement lies in the year 2009, the minister said the
proposal by the defence ministry is for the purchase of 30 new aircraft with an
option for the purchase of another 10. The minister clarified that the type of
aircraft has not been decided.
KYSEA also okayed the new structure of forces and the new structure for the
armed forces' administration to enable them to become more flexible and
effective and to have a greater rapid reaction ability, as the minister said,
while he also appointed the new leadership of military justice.
Karamanlis, Sioufas and DEH chief discuss firm's growth
Greek Prime Minister, Costas Karamanlis, focused on the course and development
of the Public Power Corporation (DEH) during his meeting with Development
Minister, Dimitris Sioufas, and DEH President, Ioannis Paleokrassas, at Maximos
Mansion recently, New Europe reported.
Sioufas underscored the fact that DEH has played and continues to play a
significant role in the country's growth. He ruled out the possibility of DEH's
privatisation, noting that the government has pledged that the state will
maintain a 51 per cent share in the company. Sioufas and Paleokrassas also
stressed that PPC's back-up system worked effectively during the heatwaves, thus
preventing power outages, and thanked citizens for complying with requests to
limit use of electricity as well as employees and associated authorities for
their work and commitment.
Athens, Tripoli sign cooperation memorandum
Greece and Libya recently signed a cooperation memorandum for regular
consultations on matters of mutual interest between the Greek and Libyan foreign
ministries, during a visit to the country by Greek Deputy Foreign Minister
Yiannis Valynakis, ANA reported.
Valynakis expressed his satisfaction with the traditionally good ties between
Greece and Libya, noting that his was the second visit by a Greek minister to
Libya within the space of two months, and stressed that the Greek government was
ready to further develop these ties on all levels. The Greek minister
particularly praised Libya's decision to abandon programmes for the production
of weapons of mass destruction, saying that this decision had set in motion a
chain of events that had brought Libya into the forefront of international news
and had earned it high respect in the international community.
Valynakis and his Libyan counterpart Said Hefyana also referred to policy for
the Mediterranean Sea, noting that this should be an area of "peace and
cooperation" and a "means of communication between neighbouring
Voulgarakis announces agreement with China
Greek Public Order Minister, George Voulgarakis, on August 7 announced the
signing of a cooperation agreement with China, which will host the 2008 Olympic
Games, "in an international environment, particularly fluid," with the
purpose of exchanging experiences on security issues, in the course of his
second visit to Beijing in September. Referring to the new anti-terrorist law
which will be tabled in parliament, Voulgarakis called on the main opposition
Panhellenic Socialist Movement (PASOK) to be "responsible, above
partisanship and to maintain a consistent stance, as did the New Democracy as
opposition three years ago." At the same time, Vima newspaper quoted
Voulgarakis in an interview as saying that the new measures will maintain the
balance between security policies and the protection of individual rights.
Furthermore, referring to the Security Studies Centre, he observed: "Its
operation does not only concern economic sizes and benefits. It is also
connected with our country's image abroad and the role it can play as a nucleus
of security and development in the broader region." Finally, commenting on
the election of a candidate mayor who garners 42 per cent from the first Sunday,
Voulgarakis said its safeguards the credibility of the system and rids the
citizens of the hassle of them going successively to the ballot box.