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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: 104 - (01/01/06)
EU report positive for Greece
The conservative government of Prime minister, Costas Karamanlis, has received
an unexpected endorsement from the European Union (EU). The European
Commission's annual report (covering up to 2007), which was released in Brussels
recently pointed out the uphill task of fiscal deficit reduction, but predicted
a strong rate of development of the Greek economy. Moreover, the unemployment
and inflation rates are also set to come down, according to the report.
The report said it expected GDP growth of 3.5 per cent in 2005, with average
inflation at 3.5 per cent and a budget deficit of 3.7 per cent of GDP, when the
proceeds from securitisation of public debt are included in budget revenues. On
the other hand, the report refused to include proceeds from securitisation in
2006 calculations and projected the deficit at 3.7 per cent of GDP. For the same
period inflation was expected to be 3.1 per cent and GDP growth set to touch 3.4
per cent.
This is the best growth prospect for any Euroland member apart from Ireland, on
present form.
The report was naturally welcomed in Athens, where government sources
immediately started harping on the improvement in the country's fiscal situation
in 2005 and said they anticipated further progress in 2006. But there is a flip
side to it, as the Finance Minister, Giorgos Alogoskoufis, recently had said
Greece would not include securitisation of debt in its official 2005 and 2006
budgets and thus the deficit could skyrocket to 4.4 per cent this year, while
the target for 2006 would remain at 2.6 per cent of GDP.
According to fiscal pundits there is something to rejoice, as the 2005
prediction became the lowest deficit in recent decades. According to figures
released by Eurostat, the Greek fiscal deficit for the period 1991-1995 stood at
11.5 per cent of GDP, while it fell to 5.2 per cent in 1996-2000, and fluctuated
around 6.1 per cent in 2001, 4.9 per cent in 2002, 5.7 per cent in 2003 and 6.6
per cent in 2004.
Another factor with a silver lining from Eurostat data was a decline in public
sector debt, which was expected to close at 107.9 per cent of GDP in 2005, at
106.8 per cent in 2006, and at 106.0 per cent in 2007.
With respect to unemployment, Eurostat predicted it would close at 10.4 per cent
in 2005, declining to 10 per cent in 2006 and to 9.7 per cent in 2007.
On inflation, Eurostat predicted it would close at 3.5 per cent in 2005, and
decline to 3.1 per cent in 2006 and three per cent in 2007.
Commenting on the report, European Commissioner for Economic and Monetary
Affairs, Joaquin Almunia, said that the forecast for the Greek public deficit
figure is based on the working assumption that the Greek government's debt
securitisation plan will be approved by Eurostat. The Commissioner did agree
that Greek authorities, being in a tight corner all this while, had based their
official forecast on a "worst-case scenario" in which Eurostat
completely rejected Greek debt securitisation plans. Almunia, however, hoped
that the situation would clarify in the coming weeks since Eurostat was due to
complete its analysis of the Greek proposals before the year-end. Moreover, the
Commissioner did elaborate that securitisation schemes and other temporary
measures had not been taken into account by either the Greek government or the
European Commission in the forecasts for 2006 and 2007, but concluded that these
factors would be presented once Eurostat's decision was known.
****
Nevertheless, there is another aspect of Greece's relationship with the EU that
needs addressing, as the following editorial syndicated by in a daily.com, from
International News Alliance, to leading newspapers, including The International
Herald Tribune and El Pais. Its views have a wide resonance. A viewpoint can be
as interesting for who espouses it as for what they say:-
Making use of EU money
Greece's foot-dragging in absorbing funds from the European Union's Third
Community Support Framework (CSFIII), a performance that puts the country at the
bottom of the EU's related table, is a cause for serious concern. Greece cannot
afford to squander a cent of these much-precious funds. At present, the best the
conservative government can do is to mobilize the responsible institutions and
find ways to keep the losses at a minimum.
It is worth noting that just one year before the expiration of the EU deadline
(in fact, countries are granted an extra two-year period to complete the
process), Greece's absorption rate is stuck at a paltry 36 per cent. The truth
is that the absorption rate tends to climb in the final years as bureaucracy
occupies the early years of the process. Nevertheless, both the overall
absorption rate as well as the rates for each individual program ought to stand
at far higher levels.
Depressingly, rates are the lowest in business programs that are vital for the
country's modernization and economic competitiveness. The absorption rate for
the Information Society project now stands at 22 per cent. Business programs for
the environment, education, railways and many regional projects also score
poorly.
In an attempt to avert any further losses, the Economy Ministry had to transfer
500 million euros from sluggish programs to more receptive projects. However,
even that trick has its limits. After all, the point is not just to absorb EU
funds but to invest money in such a manner as to spur growth and boost
employment.
The truth is that much of the blame for the current situation lies with the
previous administration. But the current administration is not without blame.
For that reason, Costas Karamanlis and his ministers must step in to break the
inertia and cut through red tape. Furthermore, the administration must shake up
the responsible institutions so as to enable the preparation of more credible
programs and their swift implementation.
The government cannot do miracles - especially under the pressure of time. This
means that the government will have to ask for help from experts in the private
sector. Proper collaboration would not just accelerate the absorption rate, but
also inject the state apparatus with the much needed know-how.
****
On what might appear a more frivolous note we append the following. But it
should be remembered that businessmen, and even businesswomen, take golf very
seriously, whether European, North American or Japanese:-
Teeing off for golf tourism
By Nikos Michaelian, Athens
In line with the Greek government's efforts to promote high-quality, year-round
tourism, the development of golf resorts with state-of-the-art leisure
facilities is being given top priority. This long-neglected sector is now
beginning to attract major attention from Greek and foreign investors,
encouraged by recently passed legislation providing such incentives as subsidies
and tax breaks. Despite the country's mild weather and stunning scenery, there
are only six courses for golf enthusiasts to choose from: one in Athens, another
on Corfu, one on Rhodes, another on the Chalcidice peninsula in northern Greece
and two on Crete. This is all about to change within three years. As many as 11
resort complexes, to include one or more 18-hole golf courses costing from 100
million to 1.2 billion (US$117 million to US$1.4 billion), are now under
development.
According to Minister of Tourism, Dimitris Avramopoulos, the staging of the
successful 2004 Olympic Games pushed Greece more into the tourist destination
spotlight, but the country cannot envisage high-quality tourism without huge
investments in golf courses, surrounded by sprawling luxury hotel and villa
complexes. The minister, senior officials and industry leaders agree that a
largely untapped potential for development exists in integrated resorts,
combining health tourism (spas and thalassotherapy), conference centres,
marinas, residential tourism (real estate sales or leases) and casinos and
sports, including golf.
In his role as president of the Hellenic Golf Federation, Petros Doukas, deputy
minister of economy and finance, has long championed golf as an investment
opportunity. Enthusiastic about the potential of golf, he says, "Greece is
going to expand its golf industry to help promote tourism and sports in an
eco-friendly manner. Just lying on the beach is not enough anymore. We have to
diversify our tourism product." Recent legislation is meant to remove
bureaucracy roadblocks, which have, until now, discouraged investors, he says.
Several new projects that will take advantage of Greece's generous investment
incentives will be built in spectacular locations steeped in history and
culture. These projects are being built by companies from Britain, the United
States, Belgium, Switzerland, Cyprus, Australia and Greece.
Navarino Resorts, which is being developed by Tourism Enterprises of Messinia,
an Athens-based company controlled by the Constantakopoulos shipping family,
consists of two luxury golf resorts near the historic bay of Navarino on the
southwest Peloponnese. Troon Golf, a high-end golf development, marketing and
management company based in the United States, will manage the initial two
championship courses. These will be designed by the California-based golf course
architect Robert Trent Jones II Inc. and the renowned German golf player
Bernhard Langer, together with European Golf Design (EGD). When completed in
2015, the 1 billion project will include a large conference centre, 12 luxury
hotels and 320 villas, making it Greece's premier golf destination, with seven
courses within close proximity. The first two hotels will be managed by the
Swiss-based Kempinski Hotels and the Singapore-based Banyan Tree luxury hotel
chain. Achilleas Constantakopoulos says that residential homes attract returning
tourists and contribute to year-round tourism.
Meanwhile, in Thesprotia in northwestern Greece, the Belltower Golf and
Residential Development, an integrated tourism and real estate resort, is being
developed by the Sydney-based Glen Alpine International. The golf course
architect Antony Cashmore & Associates and the resort architect Malcolm
Davidson from Australia are involved in the project, which will include an
18-hole golf course. The resort will be managed by the Greek-Australian company
Albatross Investments and Developments. Napoleon Tsanis, president and CEO of
Albatross, says the resort will tap into the region's unspoiled beauty,
encompassing sandy beaches and ecotourism. Meanwhile, the British developer
Minoan Group PLC is building one of the largest resort complexes in Greece. Cavo
Sidero, a 1.2 billion luxury complex in northeastern Crete, will have two
18-hole golf courses central to other sport and leisure activities. Minoan has
signed a management deal with PGA Golf Management for the courses to be designed
by European Golf Design Ltd.
In central Greece, the Greek-Cypriot Paraskevaides Group (which owns the luxury
Ledra Marriott hotel in Athens) is developing the 250 million, multicomponent
Apollo Golf and Spa Resort. The project includes a conference centre and an
18-hole golf course. In southern Crete, Greenwell of Belgium is financing a 270
million resort in Matala, including two golf courses, five-star hotels and a
residential complex.
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AVIATION
Greece to create new airline, "Olympic Air"
Greece said it will create a new private national airline which will take over
its cash-strapped predecessor, state owned Olympic Airlines, by spring 2006, the
transport ministry said recently, New Europe reported.
Greek Transport Minister, Michalis Liapis, said the government decided to create
a new smaller airline, with the name "Olympic Air," after an
international competition to privatise the airline fell through. He said Olympic
Airlines will continue flying until the new airline is off the ground, probably
by the spring of 2006. The government said privatisation talks with a consortium
made up of Greek investment company Olympic Investors and its US partner York
Capital Corp broke down after the consortium refused to take on the airline's
debt, including fines of more than 500 million Euro issued by the European
Union.
The European Union in September ruled that Olympic Airlines and its predecessor
Olympic Airways unfairly received benefits amounting to 540 million Euro in
illegal state subsidies. The Commission has yet to decide how much of that money
should be repaid to the Greek government. The government said it will hold
cabinet talks on how to cover Olympic Airlines' debt over the next weeks. Liapis
said the new company will be made up largely of private investors with a
government share of 34 per cent. "The new airline will only have 30
aircraft and will offer limited destinations within Greece, Europe and the
Middle East," he said.
He said only 3,500 of the current 7,000 employees will be hired by the new
company, with the remaining receiving early retirement.
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BANKING
NBG's 87% increase in 9-mo net earnings
The National Bank of Greece reported an 87 per cent surge in net earnings to
531.9 million Euro, with NII growing 16.5 per cent to 1233.4 million Euro,
commissions increasing seven per cent to 314.1 million Euro and total operating
expenses decreased by 3.9 per cent year-on-year. NBG's bottom line came in six
per cent above Marfin's forecasts of 500.5 million and consensus estimates
(Bloomberg poll) of 502.1 million Euro. The results were boosted by high income
from financial transactions, which soared 72.6 per cent to 142.4 million Euro.
Core EBT (ie EBT excluding income from financial transactions) jumped 62.7 per
cent year-on-year to 592.2 million Euro, slightly exceeding estimates by 1.1 per
cent. Net interest income slightly exceeded Marfin's initial estimates by 0.9
per cent, while fee & commission income came in slightly lower than their
estimates (1.4 per cent), New Europe reported.
Lending growth continued strongly with total loans 17.5 per cent year-on-year,
retail loans up 25.3 per cent year-on-year, while the loan book in SE Europe
expanded 75 per cent approaching almost two billion Euro. Cost reduction was a
very important driver of results according to the bank statement. The cost to
income ratio was reduced to 53.6 per cent from 64.9 per cent in 9M:04. ROE
improved to 29.5 per cent, but is affected by the level of financial gains. The
NIM continued to expand driven by the lending mix effect reaching 3.41 per cent
in Q3 from 3.1 per cent in Q2. Management reiterated NBG's interest for the
broader SE European region saying that they are exploring and stepping up
investments in the region.
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CREDIT RATINGS
Fage Dairy Industry cut to B
Standard & Poor's Ratings Services said recently that it has lowered its
long-term corporate credit rating on Greece-based dairy company Fage Dairy
Industry S.A. to 'B' from 'B+'. The outlook is negative. "The downgrade
reflects the company's continued operating pressures and the upward revision of
planned capital expenditures," said Standard & Poor's credit analyst,
Benedetta Rospigliosi, New Europe reported.
"The negative outlook reflects the further deterioration of Fage's
financial profile and our expectation that the recently announced 50 per cent
increase in planned capital expenditures will challenge the company's ability to
internally fund its development and shareholder remuneration," said
Rospigliosi.
"Importantly," added Rospigliosi, "we also assume that the
Filippou family's other business interests will not result in a cash drain on
Fage's liquidity position, apart from the above-mentioned shareholder payments.
Any evidence to the contrary would have a negative credit impact on the
company."
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FOREIGN INVESTMENT
Chinese firms eager to see Crete cargo centre
Chinese companies, including shippers, have shown strong interest in
construction of a cargo transit centre in the island of Crete, Merchant
Minister, Manolis Kefaloyiannis, said at a news conference recently, New Europe
reported.
"There is intense interest from China and from Chinese companies for the
development of a joint investment with Greece and the creation of a new port
station in Crete, which would be the size of Piraeus," Kefaloyiannis said.
"About one million containers will arrive at the port annually."
Recently, the chairman of the China Shipping Group, Li Ke Lin, wrote to the
government after a tour of the southern Aegean island and other Mediterranean
and European countries, saying that Crete would make an excellent location for a
centre to cover the eastern Mediterranean, the Black Sea and the Adriatic, due
to its location.
"The investment will proceed immediately, and we are studying the
possibility of making it through a cross-state agreement between Greece and
China...The port will be in Tymbaki, on the southern coast of Crete," the
minister said.
Ke Lin, who headed the nine-member delegation to sound out Crete for a port, is
also deputy president of China Shipping Container Line Co Ltd. "Due to a
dizzy rise in the volume of China Shipping's containers, and in the company's
services based in the Far East and the Mediterranean, creation of a transit
centre in the Mediterranean is an item on our agenda," Ke Lin said in his
recent letter to Kefaloyiannis and released by the ministry. Also taking part in
the trip were the chairman of China Shipping Europe (Holding) Co Ltd, Yu
Zenggang; the head of the China Shipping Group's Mediterranean office, Zhu Jinze;
and executives of the Hongkong International Terminal.
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TOURISM
Tour operators were also pleased with the Greek tourism industry
Minister of Tourism Development, Dimitris Avramopoulos, concluded his series of
meetings in London recently, deeply satisfied with the performance of the Greek
tourism sector, New Europe has reported.
Tour operators were also pleased with the Greek tourism industry, as a result of
the ministry's efforts, Avramopoulos told Greek correspondents. He also
announced that the wax figures of former Greek politicians - Eleftherios
Venizelos, Constantine Karamanlis and Andreas Papandreou - will soon grace
London's Madame Tussaud museum. Avramopoulos noted that this event, the result
of his ministry's efforts, is particularly important given that there was no
Greek presence in the museum prior to this.
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TRANSPORT
New tunnel on border
Greek president, Karolos Papoulias, and his Bulgarian counterpart, Georgi
Purvanov, will inaugurate a tunnel constructed to facilitate the opening of the
new border crossing between the two countries at Exochi, in Drama, in the near
future, New Europe reported.
The two Presidents will meet in the middle of the road tunnel, which has been
named the Greek-Bulgarian Friendship Tunnel, for the inauguration ceremony.
Earlier in the day, deputy foreign minister, Evrypides Stylianidis, and his
Bulgarian counterpart will sign the relevant inter-state agreement. The new
Ilinden-Exochi border crossing will link Drama with the neighbouring Bulgarian
city of Goce Delcev. The construction of the tunnel was necessary in order to
protect a rare species of bears, the brown bear or ursus arctos that lives and
reproduces in the area, specifically Rodopi.
Environmental organisations had taken recourse against the initial plans for the
construction of a road link, without a tunnel, warning it would have negative
repercussions to reproduction in the bear population. The tunnel was added in
the revised plan for the link, thus solving the problem. The tunnel was
constructed with 10 million Euro financing from the European Union.
The initial agreement for the opening of the new border crossing was signed in
1995. It is the first of three new border checkpoints between Greece and
Bulgaria provided for in the bilateral agreement, aimed at alleviating
congestion at the other busy border posts between the two countries. The other
two future border crossings will connect Komotini with Kurdzhali, and Xanthi
with Rudozem.
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