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Targets set in new agenda
Citation preview
07GreekEconomy&Markets
Targets set in new agenda
Foreign investors take positions
Ship owners upgrade fleets
PPPãs move ahead
5th issue - October 2007
(-1.7*)
4
Themes
Venturing in Greece, TANEO’s strong comebackTANEO expands scope and aims at helping revitalize market.
(page 10)
Shipowners sail into changing global conditionsGreek shipowners invest in upgrading fleets (pages 11 – 13)
Public-Private Partnerships (PPP)Ministerial committee gives green light to 24 projects worth 31billion euros. PPPs in waste management projects grow.
(pages 39 – 46)
Greek Economy & Markets 07A publication of the “Agora Ideon” forum.
Project manager: BusinessOnMedia118 Kremou str, Kallithea, 17675
Athens, Greece
tel: +30-210.953.3095
fax: +30-210.953.3096
Greek Economy & Markets 07 is also distrib-
uted along with the International Herald Tribune
(IHT) and Kathimerini English Edition newspa-
pers in Greece, Cyprus and Albania. The content
of the magazine does not involve the reporting or
the editorial departments of the IHT.
Cover Story
The 2008 draft budget estimates another year of strong economicgrowth as the Finance Ministry takes steps to reduce the budget deficit.After the re-election of the conservative government in September, theeconomic policy being formed includes steps on energy, telecommunica-tions and structural reforms. (pages 20 – 29)
Contents
5th issue - October 2007
Markets
Investors waiting for privatizations after the elections(page 18)
Foreign funds eye Greek companies(page 30)
Leading European players take positions in Greece (page 34 – 36)
Perennial underperformer shows growth in foreigninvestments (page 37 - 38)
5
Facts & figures
In September, the Consumer Price Index increased by 2.9 percent incomparison to September 2006. The unemployment rate decreased
from 9.1 percent in the first quarter of 2007 to 8.1 percent in the secondquarter. Furthermore, in the first quarter of 2007 the gross domesticproduct expanded by 4.6 percent whereas in the second quarter the
growth rate decreased to 4.1 percent. Also, the total value of exports inthe first half of 2006 was 8.1 billion euros and in the first half of 2007increased to 8.5 billion euros. This is in line with the improvement of
external competitiveness of the Greek economy, which has been underobservation during recent years and improved its standing by eight
positions within the ranking of Institute for Management Developmentin 2005.
Period Value
Consumer Price Index (CPI)1 September 07/September 06 2.9
Harmonized Index of Consumer Prices (HICP)1 September 07/September 06 2.9
Producer Price Index in Industry1 August 07/August 06 1.2
Industrial Production Index (excluding construction)3 August 07/August 06 -0.4
Turnover Index in Retail Trade1 July 07/July 06 5.5
Gross Domestic Product (provisional data)1 Q2 2007 4.1
Unemployment Rate2 Q2 2007 8.1
Population (2001 Census)4 2001 10,964,020
Building Activity)3 July 07/July 06 -9.6
1Annual rate of Change, 2Rate, 3Periodical rate of change, 4Value
Latest Statistical Data
The profile of the Greek economy
6
Your strategic partner in Southeast EuropeYour strategic partner in Southeast Europe
GREECE:
¸ Gateway to the fast-growing market ofSoutheast Europe with 140 million con-sumers.
¸ Access to a broad business network of morethan 3,000 Greek firms operating in theregion.
¸ Banking hub with 2,300 branches of Greekbanks operating in Southeast Europe.
¸ One of the most highly skilled labor forcesand some of the most renowned universitiesand research centers in the region.
¸ Energy hub in the East-West energy corridorwith a new transbalkan pipeline connectingGreece with the Black Sea.
¸ Maritime and shipping hub as Greece hasthe largest fleet in Europe and the thirdlargest in the world. Major transhipmentcenter for the East Mediterranean andSoutheast Europe with the upgrading andprivatization of the Greek ports underway.
Key geopolitical position
7
¸ Stable macroeconomic and favorable busi-ness environment as a member of the euro-zone. Public finances are back on track (thedeficit fell from 8% of GDP in 2004 to 2.7%in 2006).Inflation rates are decelerating(3.5% in 2005, 3.2% in 2006, 2.9% in Sept2007). Labor productivity is continuouslyincreasing (72% of the EU-15 average in2000, 79% in 2004). In addition to the highquality of the greek workforce, labor costs areamong the lowest within the EU-15.
¸ Strong economic growth — among the high-est in the eurozone. Over the last three yearsthe Greek economy has grown at an averagerate of 4%.
¸ International orientation of the economy.Exports rose twice as fast as nominal GDPpresenting a 34.4% increase in the lastthree years, while outward FDI increasedby 40.9% in 2004/5 and 184% in 2005/6.
¸ Job creation and falling unemployment.Unemployment is decreasing steadily.From 11.3% in March 2004, it fell to7.8% in July 2007. More than 200,000new jobs have been created over the lastthree years.
¸ Increasing investment. Total investment inGreece went up by 12.7% in 2006 incomparison with 2005. In 2006, foreigndirect investment net value reached 4.3billion euros (2% of GDP), nine timeshigher than 2005.
¸ Structural reforms paving the way for greatbusiness opportunities:
ñ Competitive tax regime with corporate taxrates reduced from 35% to 25%.
ñ The Investment Incentives Law led to 8.8billion euros of new investment in the lasttwo years.
ñ The new framework for Public-PrivatePartnerships facilitates the construction ofpublic infrastructure. Twenty-four PPPprojects of 3.1 billion euros have alreadybeen approved and will start in 2008.
ñ An extensive privatizations agendaaccounting for 6.2 billion euros hasalready stimulated competition in thebanking sector and continues to presentsignificant investment opportunities invarious sectors.
ñ The flourishing tourism, energy and servic-es sectors present significant investmentopportunities.
PUBLIB
usinessOnM
edia
Dynamic economy
8
Facts & figures
Deficit seen sliding to 1.7 pct
2005 2006 2007 2008
Finance Ministry -5.6 -2.7 -2.5
draft budget
European Commission -5.5 -2.6 -2.4 -2.7
(Public Finance
in EMU 2007)
OECD -4.5 -2.3 -1.9 -2.2
(Economic Outlook 2007)
General government financial balance (deficit/GDP ratio)
(-1.7*)
According to the recent speech of Economy and Finance Minister Giorgos Alogoskoufis to the WorldBank and International Monetary Fund, the public deficit to GDP ratio is forecast at 2.5 percent in 2007and 1.7 percent in 2008. Also, the fiscal consolidation is not at odds with the development of the Greekeconomy because the government has undertaken supply side reforms which have improved thereallocation of recourses and enhanced private investments. According to the European Commission(Public Finance in EMU 2007) the Greek deficit to GDP ratio is forecast at 2.4 percent and 2.7 percentin 2007 and 2008 respectively. Additionally, according to the OECD (Economic Outlook 2007) thedeficit of the general government is seen at 1.9 percent of GDP in 2007 and 2.2 percent in 2008.
Authorized and regulated by the Hellenic Capital Market Committee (HCMC No 3/88/1991)
Registered in Greece (No. 24829/06/B/91/50), Ministry of Development.
Registered office as above.
MEMBER OF THE ATHENS EXCHANGE
SECURITIES MARKET / DERIVATIVES MARKET15 Valaoritou St, 106 71 Athens, Greece
Tel. +30-210.367.8600, Fax +30-210.364.1002
KAPPA Securities SA is a member of the Athens Stock Exchange and the
Athens Derivatives Exchange. Founded in 1991, it constitutes the con-
tinuation of the brokerage house of the Komninos family, whose long-
standing presence in the market goes back to 1921. At the beginning of 1996
the company was reorganized under a new management team, headed by chair-
man and major shareholder Spiros Bellos. The new management's main objec-
tives were, apart from the upgrading the company's EDP systems, to incorporate
capable and experienced executives from the stock and banking markets, in order
to offer a complete range of brokerage services of high quality to foreign and
domestic institutional and private investors. Under the new management the
company has achieved an impressive increase of its market share in the past
three years, thus joining the top ranks of Greek brokerage firms. The leading posi-
tion and the recognition it has received are a result of excellent brokerage and
corporate services and successful investment proposals. In November 1997, the
company's status was upgraded by the Capital Markets Committee to an Invest-
ment Services Company (EPEY), which enables KAPPA Securities SA to provide
a broader range of investment services, such as underwriting and asset manage-
ment. In mid-1999 KAPPA Securities SA became a member of the Athens Deriv-
atives Exchange (ADEX) as a market maker and it was one of the first companies
to become active in derivative products.
Products and servicesñ A complete range of brokerage servic-
es, research and investment consul-
tancy on stocks listed on the Athens
Stock Exchange.
ñ Underwriting and financial Advisory
Services - Mergers & Acquisitions,
IPOs, rights issues, private place-
ments.
ñ Custodian services.
ñ Investment advisory services on stock
and derivative products to institutional
and private investors.
ñ Equity and market research. Funda-
mental and technical analysis of listed
equities.
ñ Brokerage services and proprietary
trading on derivative products of the
Athens Derivatives Exchange
9
PUBLIB
usinessOnM
edia
10
Themes
Tthings are finally looking up for the New
Economy Development Fund (TANEO).
After three years of idle performance, its opera-
tions are beginning to take off.
A year ago the management of the company
claimed that during 2007 the fund should be com-
pletely restructured with the approval of the European
Union to extend its investment period and then use its
uncommitted resources. Another main goal was to get
approval from the Greek authorities and the EU in
order to expand TANEO’s scope and transform it from
a vehicle for innovative investments to the first ven-
ture capital fund for SME funds. Finally, it was envi-
sioned that by accomplishing all the aforementioned
initiatives, it could be possible for the management to
commit all the unused resources to funding equity
participations. After all the previous lack of interest in
collaboration in previous years, reality has certainly
and pleasingly surpassed expectations.
In an interview for a survey on the Greek venture
capital market at the beginning of this year, we
expressed the opinion that we felt quite confident.
Now we may claim with certainty that our confidence
is valid.
November 5 is D-Day for the relaunching of
TANEO in the venture capital market. However, this is
no longer our sole objective.
TANEO is designed to invest jointly with private
investors in order to form new venture capital schemes
that will finance Greek SMEs. For this purpose and
with the financial support of the Greek government, a
total 150 million euros was raised. However, after all
these years, out of 150 million euros, more than 100
million (approximately 70 percent) is still uncommit-
ted. Originally it was said that this was inevitable due
to the structural characteristics of the Greek venture
capital market. It was thought that it would be almost
impossible to attract matching funds from the private
sector and accomplish TANEO’s original task. Current-
ly, though, 160 million euros solely from the private
sector are queuing for TANEO’s co-funding.
Furthermore, some among the most involved pres-
tigious professionals from the venture capital sector
used to claim that there are not enough experienced
and dedicated fund managers adequately competent
to lead new venture capital funds to success. TANEO’s
management, to a certain extent, almost believed
them, but fortunately reality disproved us all.
Today, more than 25 dedicated practitioners with
valid track records have formed six promising man-
agement teams. These people marketed their experi-
ence to TANEO and to other private investors (institu-
tions, wealthy people, etc) and signed on for our
uncommitted resources. Among these private investors
are large international and domestic banks that eager-
ly accepted investing in collaboration with TANEO for
those talented and young managers.
By the end of the current year, those management
teams are expected to feed private equity funding with
an additional 200 millon euros, doubling the number
of venture capital firms currently in operation. Taking
the above into consideration, it is obvious that the
capital structure and therefore the landscape for
Greek small and medium-sized enterprises will not be
the same. The fact that almost 60 million euros come
from foreign investors is indeed challenging. Howev-
er, for us, more important is the aggressiveness and
the spirit that the new management teams will bring
to the market.
Inevitably, TANEO will expand, mature and gain
the trust of industry. Today, market practitioners are
exposed to a better environment compared to previous
years and we may say with confidence that we are
ready to support initiatives in a greek market full of
opportunities.
Our goal for 2007 was mainly to revitalize the
existing market. That is why we are using our strength
to design market-driven, differentiated and mostly
effective financial vehicles such as real estate develop-
ment funds, health and industrial funds, green econo-
my funds etc. Attracting and allocating financial
resources is only a tiny part of our mission.
It is not by coincidence that the current develop-
ments in the Athens Stock Exchange related to the
launch of the ‘Alternative Market’ support our initiative
with good and valuable foundations. The fact that
speaks for itself is that three out five companies wait-
ing to be the first listed in the Alternative Market
belong to TANEO’s portfolio.
What will TANEO do next? Monitor, publicize,
expand. Those are the key terms for next year’s
objectives.
By ‘monitor,’ we mean an environment closely
facilitated by our experience and scope. Step by step,
TANEO’s role is becoming more and more organic in
the development of the venture capital market in
Greece.
Finally, in regards to expansion, the market is
without doubt still lacking in terms of financial avail-
ability of resources. Nevertheless, and as we see it,
restructuring an underdeveloped market is an ongoing
process.
The first major steps, however, have already been
taken...
Venturing in Greece, TANEO’s strong comeback
TANEO is designed to invest jointly with private investors in order to form new venturecapital schemes that will finance Greek SMEs. For this purpose and with the financial supportof the Greek government, 150 million euros in total has been raised.
Nikolas HaritakisVice President & CEO
The New Economy Develoment
Fund SA (TANEO)www.taneo.gr
11
Greek shipowners are preparing for changing
global conditions in international trade by
upgrading their vessels and improving the
capacity of their fleet in a sector that is
playing an increasingly important role in
the domestic economy.
Bank of Greece, the country’s central bank,
pointed out in its 2007 monetary report that
receipts from shipping transport revenues have
managed to continue increasing despite a drop in
international freight rates.
‘It is important that in 2007 the increase in rev-
enues from sea transport is expected to continue,
even if at a slower rate, mainly due to the increase
in the transport capacity of Greek-owned ships,’
the report highlighted.
‘This development is attributed to the 19.6 per-
cent increase in the deadweight capacity of Greek-
owned ships and the quality upgrade of vessels due
to a reduction in the average age.’
Until recently, a large problem of the Greek
fleet was its increasing age, mainly due to the
business strategy of Greek shipowners, who pre-
ferred highly leveraged inexpensive old ships that
could be operated at low cost. However, this situ-
ation has reversed in recent years mainly as a
result of new environmental legislation, especially
concerning oil transportation, and heightened
Shipowners sail into changingglobal market conditions
Greek shipowners are taking steps toward the improvement of their fleet quality andcapacity. The sector is playing an increasing role in the domestic economy,contributing more than 13 billion euros in sea transport receipts.
By Stelios Bouras
12
Themes
world competition in this segment. In addition,
strong competition between Chinese, South Korean
and Japanese shipyards has led to a significant
decrease in shipbuilding costs.
Greek shipowners have been especially active
in shipbuilding operations recently.
Earlier this year, official data showed that
orders for new vessels of Greek interests stood at
612 ships of total capacity 47.9 million dead-
weight tons (dwt), up an incredible 86 percent on
2006 figures. Most of the 612 vessels are expect-
ed to sail under the Greek flag, 340 of them
tankers, representing 19.8 percent of total global
newbuilt vessel capacity.
Data show that the average age of ships is con-
stantly improving — i.e. dropping — with the age of
foreign-flagged Greek-owned vessels in 2006 falling
to 14.3 years from 15.3 years in 2005. With regard
to Greek-flagged ships, the average age dropped to
11.1 years from 11.7 years in 2005.
The Greek commercial fleet’s capacity expanded
by 4,014,042 register tons during the first five
months of this year compared to December 2006,
according to data put together by the National Statis-
tics Service (NSS).
In May, the Greek fleet numbered 2,025 vessels,
with a total capacity of 35,609,983 register tons
against 31,595,941 in December 2006. NSS data
also show that of the 2,025 ships, 630 are dry-bulk
carriers and 911 are passenger carriers and other
vessels. This growth is attributed to the measures the
Merchant Marine Ministry recently took to boost the
competitiveness of the Greek register.
On a global scale, the Greek-owned fleet remains
the largest in the world, and this year witnessed a
reversal in the trend of the last few years, of the slow
decrease of its percentage in the world fleet.
Robust growthShipping is one of the most vibrant sectors of the
Greek economy, contributing substantially to the
economy’s growth.
It is Greece’s only sector which has a leading
position in the international market in what is con-
sidered to be a highly competitive business.
Greece’s improved ties with countries such as
China and Russia have helped contribute to growth
in the sector as they are also nations that require
the sea transport services of Greek shipowners.
Union of Greek Shipowners (UGS) President
Nikos Efthymiou recently described the industry’s
current trading environment as enjoying ‘an
unprecedented climate of euphoria’ and called for
further investments in staff training to help main-
tain the ‘positive momentum in the future.
In this competitive market, Greek shipowners
control 16 percent of the world’s seagoing fleet and
21.5 percent of the world’s tanker and dry-cargo
fleet.
As a result of its large market share, the sector
generates more than 4.5 percent of the country’s
GDP and employs more than 160,000 individuals.
The sector also generates significant foreign
exchange, sufficient to cover 30.2 percent of the
country’s trade deficit in 2005, compared with net
tourism receipts and EU net transfers that reached
26.7 percent and 11.6 percent respectively of the
trade deficit.
Bank of Greece data show that revenues from
ship transport services in 2006 reached 13.2 bil-
lion euros, up 2.53 percent from the previous year,
when the figure stood at 12.9 billion euros.
Revenue growth rates have been deteriorating,
as shipping transport revenues grew by annual
amounts of 38.4 percent and 4.42 percent in
2004 and 2005 respectively.
‘Given that the largest part of revenues come
from the provision of sea transport to meet the needs
of global transport, net earnings from Greek trans-
port services, which are almost exclusively in ship-
ping, represent three-quarters of net revenues from
transport services in the EU,’ the central bank said.
The number of shipping companies based and
active in Greece has grown by 4.7 percent in 2007
compared with last year, reaching 725 from 693 in
2006, according to recent research, putting an end
to the decline that started in 1998.
Back then there were 926 companies in
Greece, but they declined to just 690 in 2005 due
to the lack of competitiveness at small shipping
firms who usually manage older vessels.
‘The Merchant Marine Ministry measures in
2006 aimed at increasing the competitiveness of
the national register had a positive impact, stop-
ping the flight of ships from the Greek flag, while
their mass repatriation has also begun,’ according
to UGS sources.
‘This is why most of the 612 vessels ordered
will raise the Greek flag.’
Small shipping companies — those owning up
to eight vessels –– are proving to be the backbone
of the industry in Greece as they account for 82.3
percent of all Greek shipping companies based in
this country.
One of the qualitative factors reflecting change
in the shipping industry is the changing age of
Greek ships.
The average age of ships was reduced from
15.3 years in 2005 to 14.3 years in 2006, accord-
ing to data included in the 2006-2007 annual
report compiled by the Greek Shipowners’ Associa-
tion (EEE).
The report is aimed at providing information on
the fundamentals and prospects of shipping.
In the period from January 2001 to May 2007,
there was a 2.9 percent rise in ship numbers and
an increase of 30.3 percent in total capacity. Dry-
bulkers have increased in number by 0.8 percent
and in capacity by 19.8 percent. Tanker numbers
have increased by 5.9 percent, with their capacity
growing by 40 percent. Passenger carriers and
other ships increased in number by 2.9 percent
and their capacity rose by 21.9 percent.
‘Investment activity in the shipping sector is
expected to slow considerably in the following
years, on the back of accelerating shipbuilding
prices, as most shipyards are already operating at
maximum capacity and the modernization in world
economic growth rate coupled with large accumu-
lations of new tonnage in the same period,’ said an
Athens economist.
Greek flagThe fleet flying the Greek flag grew by 8 percent in
the first few months of the year as the 46 vessels
added to the register raised the total capacity to
33,980,782 registered tons, from 31,595,941
tons on December 31, 2006.
The increase in the number of ships bearing the
Greek flag is the result of positive moves by the
shipping community in response to the Merchant
Marine Ministry’s measures to strengthen the com-
petitiveness of the country’s register.
Since the beginning of 2007, 46 ships with a total capac-
ity of 2,581,088 register tons and an average age of 6.6
years have joined the Greek register.
Of these ships, 21 are new constructions with an average
age of 0.3 years and a capacity of 1,576,734 tons. The new
entries on the register consist of 23 dry-cargo ships, 21 tankers
13
and two chemical product and liquid natural gas (LNG) carriers.
‘We believe that with the measures taken we
will attract more ships to the Greek flag, rendering
it even stronger,’ ministry sources say.
The ministry recently took a significant leap for-
ward by overcoming certain impediments of the past.
The two measures it introduced have clearly begun
bearing fruit to the benefit of the Greek register.
First, it decided to proceed with a more flexible
approach to the composition of crews for oceango-
ing vessels. It ruled that the restriction on the num-
ber of Greeks should be six, including all officers
and crew. Second, the social insurance contribu-
tions of Greek seamen serving as low-level crew
are to be subsidized. However, if a shipping com-
pany decides to have more than six Greek seamen
and they are low-level crew, then the state, as an
incentive, will subsidize the contributions, not only
of seamen but also of shipowners.
Cypriot-based Ocean Tankers Holdings is an
example of a fast-growing company that has multi-
plied its fleet by five times since December last year.
It said recently it has completed the acquisition
of a fleet of eight tankers for $231.5 million as part
of its broader expansion plans.
The delivery of eight double-hull and ice-class A
tankers is expected to be completed by April next
year and will be financed through a loan with ABN
Amro Bank, an upcoming rights issue and a $12
million (8.38-million-euro) loan from major share-
holder Michalis Ioannides.
The acquisition will mean the company has
multiplied its fleet size fivefold since December
2006, raising the total number of its tankers to 16
from three and upping the total capacity to
200,000 tons from 20,000 tons.
‘It is worth noting that the acquisition of the
fleet includes a long-term time charter with oil
company Lucoil for seven years plus three years
with a daily net revenue per ship of $15,300
(10,696 euros),’ the company said.
‘The company’s revenues are expected to reach
$60 million (41.9 million euros) on an annual basis.’
The Cypriot-based shipper is one of the largest companies
in the world that provide double-hull tankers.
The right infrastructureWhether the Greek economy can take full advan-
tage of Greek shipping’s premier position in the
industry depends largely on its taking advantage of
synergies from the development of Southeastern
Europe, including efficient links with rail and road
transport. Currently, the Greek share of freight han-
dled in European ports is 4.6 percent, with 40 per-
cent attributed to trans-shipment, which suggests
a relatively small share of total outward goods.
To achieve economies of scale, the ports of
Piraeus and Thessaloniki must improve their links
with rail and air transportation, with the former
highly underutilized in Greece.
In fact, the freight volume per kilometer of rail
networks is 0.2 million tons in Greece versus an
EU average of 1.8 million tons. The current
restructuring plans for both Greek ports, involving
improved capacity and links to rail and road trans-
port are supported by the European Union’s Third
Community Support Framework. The EU projects
provide an opportunity to improve scale by attract-
ing trade destined for SE Europe, which in suffi-
cient size could make Greece a regional trade hub
for the region.
In particular, the five-year investment plan for
the port of Piraeus (2006-2010) amounts to 215
million euros, of which more than half concerns the
improvement of the production capacity of the con-
tainer terminal by 60 percent.
Economies of scope will follow economies of
scale, attracting business such as shipbroking,
legal services and marine insurance, thus creating
a maritime cluster.
Along with the subsequent higher employment in
shipping-related business, the decline in Greek sea-
men, and officers in particular, could also be
reversed. More specifically, since Greece has long
lost its competitive advantage in low-cost crew, it is
essential to focus on the high-level training of Greek
officers. In fact, over the past couple of decades,
there has been a sharp decline in well-trained sea-
men, particularly officers. As the worldwide shortage
of officers has reached 16,000 and is projected to
reach 46,000 officers by 2010, the potential bene-
fits from investment in seamen’s training are clear.
‘Greek shipping needs suitably trained seamen.
Apart from offering their services at sea, they can
continue to work in the business by working from the
land,’ said Efthymiou.
‘Despite recent attempts to upgrade training in
Greece, more needs to be done in order to secure the
right number of competent staff members being cre-
ated with the right level of education that can meet
the needs and opportunities of modern fleets.’
Data show that shipping is by far the largest
employer from the traditional maritime sectors, mak-
ing up about 16 percent of the total cluster of
employment with nearly 42,000 jobs on the sea and
shore.
Meanwhile, coastal tourism generates more
employment than all the other parts of the maritime
sector put together.
The European Commission is also taking initia-
tives in a bid to increase the transportation of goods
by sea rather than by road. Last week it announced
sweeping changes in sea cargo transport in an
attempt to introduce the free movement of goods to
the sector that already exists in land transport.
In the European Union’s large domestic market,
people and goods can move (more or less) freely;
however, there still remains one area of trade in
Europe that has still to open up — ports.
Cargoes transported by sea between European
ports are still subject to all the customs, police,
health and veterinary checks that apply to goods
transported to non-EU states.
The European Commission presented a plan for
the cessation of these controls as Transport Commis-
sioner Jacques Barrot pointed out that progress in
technology allows for closer monitoring of ships and
their journeys.
The Commission will submit related proposals for
approval next year.
There are hopes that a quick approval by govern-
ments will pave the way for the maximization of sea
transport within the EU to the benefit of the econo-
my and the environment, which will be less burdened
by the trucks that currently cross Europe daily.
The role the Greek shipping sector plays in the
economy is large and appears to be continuously grow-
ing. It is the only market in which Greece can make a
decisive impact on the industry on a global scale.
Signs, however, that Greek ship companies are rein-
vesting their funds in acquiring new vessels is a posi-
tive development as the economic gains from these
operations are being spread into other industries.
14
An effective partner in project financeAn effective partner in project finance
NBG GROUP
National Bank of Greece heads the strongest
financial group in the country and boasts a
dynamic profile internationally, particularly in
Southeastern Europe and the Eastern Mediterranean.
Today, after recent acquisitions, the Group is present
in 12 countries and owns eight banks and 65 companies
in the financial services sector.
The retail network comprises 561
branches in Greece and 939 over-
seas, and constitutes the largest
Greek network for the distribution
of financial products international-
ly. NBG was the only Greek firm
included in the FT Global 500 (list
of the 500 largest firms in the
world), recently published in the
Financial Times.
NBG Group provides a full
range of financial products and
services to corporate clients, including corporate lending,
investment banking services, insurance, asset manage-
ment, brokerage, leasing and factoring. In addition, the
Group has been mandated as arranger and underwriter
for some high-profile infrastructure projects in Greece
and abroad.
The Group currently maintains a leading position in
project finance and Public-Private Partnerships among
Greek financial institutions. NBG is in 25th position in
the ‘Global Advisory Mandates won in 2006’ League
Table and in 23rd position in the
‘Europe, Middle East & Africa
(EMEA) Advisory Mandates won in
2005’ League Table according to
the Project Finance International
Magazine.
The Bank’s services in this
field are provided by a team of
experienced and highly qualified
professionals who have actively
participated in the evolution of
Public-Private Partnership / Pri-
vate Finance Initiative (PPP/PFI)
practice in Greece. The involvement of NBG Group in
project finance dates back to 1994, when NBG was
assigned to advise the Ministry of National Economy on
the evaluation of the offers that had been submitted for
The Group currentlymaintains a leadingposition in projectfinance and public-
private partnershipsamong Greek financial
institutions.
15
Contact: C. Stavridis ñ tel + 30-210.8897.060 ñ e-mail: [email protected] ñ fax + 30-210.8897.100 ñ www.nbg.gr
the design, financing, construction and operation of
the new International Airport in Spata.
The NBG team continued successfully advising
the ministry during the negotiations, the signing of
the concession agreement, the financial close and
finally until the commencement of the airport’s oper-
ation in March 2001.
To date, three more large infrastructure projects
have already been completed on a BOT basis in
Greece, namely the Rio-Antirrio Bridge, the Elefsina-
Stavros-Spata Airport Highway & Western
Hymettus Peripheral Highways (ESSI Highway
or Athens Ring Road) and the Thessaloniki
Submerged Tunnel. In all these projects, the
NBG team has provided its advisory expertise
to the Ministry of Environment, Physical Plan-
ning and Public Works throughout the whole
process, from the invitation for tenders and the
signing of the concession agreements, to their
implementation and the operation of the proj-
ects. Currently, the NBG team is advising the
Greek state on the Greek Highways concession
Project (six Concession schemes), which is one
of the largest highway projects in Europe, to be
implemented on a concession basis, with a
total cost exceeding 8 billion euros. Namely
these schemes are:
ñ Northwestern Axis (Ionia Odos) & PATHE: Athens
- Maliakos / Schimatari - Halkis
ñ PATHE: Maliakos - Kleidi
ñ PATHE: Athens - Corinth - Patras & Southwestern
Axis: Patras - Pyrgos - Tsakona
ñ Corinth - Tripolis - Kalamata
ñ Central Greece Highway
ñ Urban Projects in Attica Region
Moreover, NBG has contributed via its experience
and know-how to the evolution of the new legal
framework for Public-Private Partnerships in Greece
(Act 3389/2005). The new law is expected to facili-
tate significantly the process for the implementation
of projects on a PPP basis and maximize efficiency,
thus strengthening the incentives of all parties
involved. NBG has been appointed jointly with Grant
Thornton as Financial Adviser, along with its legal
and technical partners, to the first two projects that
are putting the law into practice after its enactment
last year and involve the design, construction, finance
and operation of 27 schools in the Attica district and
six buildings of the University of the Peloponnese.
The integrated services offered by the Project
Finance team include:
ñ Formulation of preliminary studies and economic
models;
ñ Review and assessment of the bankability of the
project;
ñ Preparation of tender documents and planning of
project implementation;
ñ Assistance in the preparation of offers for submis-
sion in tenders;
ñ Arrangement of financing;
ñ Negotiation of the economic terms included in
concession agreements and other legal docu-
ments;
ñ Supervision and coordination of the financial clos-
ing;
ñ Support of the contracting authority during the
implementation of the project.
NBG takes a complete view in project finance,
providing clients with well-integrated services both
in project advice and financing. Along with our
advisory services, we provide specialized financing
solutions for PPP/PFI projects at the stage of
structuring a financial deal as well as at the
stage of arranging, participating or manag-
ing medium- to long-term syndicated loans.
This specialized package of products is sup-
plemented by the full spectrum of an inter-
national bank, offering our corporate clients
not only standard products, but also capital
and international banking services. NBG’s
key focus areas regarding involvement in
Project Financing are Infrastructure Pro-
jects, as well as Energy Projects and pri-
mary market of industry projects. The Bank
has participated in the financing of all the
projects that have been implemented in
Greece on a PPP basis, as well as many
other important projects in Greece and abroad
(Romania, Turkey, Kuwait, Germany, the USA and
the United Kingdom). Internationally, the financing
services are facilitated by NBG’s dense network of
units and branches in foreign countries, mainly in
Southeastern Europe.
NBG Group, capitalizing on its unique know-
how, efficiency and financial strength, will seek to
maintain its position as a partner of choice for PPP
and PFI projects, and will further assist in creating
a context for steady growth in this field in Greece
and abroad, especially in the Southeastern Europe
region.
NBG Group, capitalizing on its uniqueknow-how, expertise and efficiency, willseek to maintain its position as a partner
of choice for PPP and PFI projects, andwill further assist in creating a context forsteady growth in this field in Greece and
abroad, especially in the SoutheasternEurope region.
PUBLIB
usinessOnM
edia
16
Themes
GDP revision: Eurostat, the European Union’s
statistical body, recently approved the revi-
sion of Greece’s GDP, up by 9.6 percent
using 2000 as the base year. This means
that 2007 nominal GDP will now reach 230
billion euros from the initial 209.3 billion, confirming
Greece’s dynamic 4.1 percent 11-year growth trend.
It should be noted that improved, more accurate
economic surveys were behind the GDP revision and
not the inclusion of Greece’s rather substantial shad-
ow economy. Previous data, covering business activ-
ity, employment, the number of economic units, prof-
it margins as well as numerous other variables, were
based on older, outdated 1988 economic surveys
and methodologies which were incapable of accu-
rately measuring current economic activity. Recorded
GDP could be even higher with the inclusion of the
unofficial or shadow economy which arises from the
efforts of various economic entities and individuals in
Greece to a) avoid taxes and social insurance contri-
butions, b) sidestep strict (on paper) laws on housing
planning, development and land use and c) take
advantage of profitable shadow market opportunities
provided by the state monopolies which remain in
the Greek education, health and social security sec-
tors. The OECD has estimated the size of the shadow
economy at 28 percent of GDP between 2002-03 —
the highest among all the OECD countries. Moreover,
there are strong indications (e.g. a rate of growth of
net current budget revenues during the 2002-07
period, which is 2.7 percentage points lower than the
rate of growth of nominal GDP) that in the last five
years the shadow economy has grown at a rate in
excess of the official GDP growth rate.
Current developments: The Greek economy con-
tinues to maintain its growth momentum, with GDP
rising 4.4 percent year-on-year in H107, compared
with the 4.2 percent y-o-y growth recorded in H106
and 4.3 percent full-year growth in 2006. The main
growth drivers remain total investment and exports of
goods and services, with the former growing by 10.4
percent y-o-y (13.3 percent H106) and the latter by
The Greek economy at the end of2007: Developments and prospects
Private consumption and investments are seen keeping the GDP expansion rate in 2007above the 4 percent mark, but international competitiveness is eroding as wage growthbeats inflation rates and productivity increases.
Demetrios MaroulisManager, Economic Research
Division, Alpha Bankwww.alpha.gr
17
9.2 percent (2.6 percent H106). Consumption
growth remains healthy at 2.9 percent y-o-y (3.6
percent H106) and is expected to remain above this
rate in the coming quarters. In fact, government con-
sumption is expected to accelerate in H207 due to
the additional expenditure which arose following this
past summer’s devastating forest fires. On the other
hand, the growth of imports remains high at 9.8 per-
cent y-o-y in H107, all the more concerning given the
already substantial increase of 9.3 percent y-o-y in
H106, negating all positive benefits conferred by the
robust growth in exports and ultimately subtracting
1.2pps from Greece’s headline GDP growth in first
half of 2007 (-1.98 pps in 2006).
Growth prospects: On the basis of the above
developments and economic indicators published
before the end of October 2007, we expect GDP
growth to once again exceed 4.0 percent in 2007
and 3.8 percent in 2008, following a 4.3 percent
growth rate in 2006. Private consumption is expect-
ed to maintain the 3.0 percent growth rate, support-
ed by the sustained high growth of both consumer
lending (+24.1 percent at end-July 2007) and dis-
posable incomes (expected to grow at 7.4 percent
and 7.3 percent in nominal terms in 2007 and
2008). On the investment front, the following devel-
opments point to a high growth rate in the current
and the following years: a) public investment which
is set to remain one of the main drivers of growth in
2007-08 as the government accelerates absorption
of EU funds in the final two years of the Community
Support Framework III implementation period; b)
numerous key infrastructure projects (budgeted at
3.6 billion euros) which have already been awarded
to consortia of construction companies via public-pri-
vate partnership arrangements (PPPs); c) the posi-
tive business investment outlook which remains sup-
ported by the healthy increase in profits of both list-
ed and non-listed firms, as well as by the good per-
formance of the Greek stock exchange enabling list-
ed firms to improve their capital base. Business
investment also remains supported by grants
received under the investment incentives law. Fur-
thermore, in the housing sector d) is the negative
growth in the volume of building permits issued in
January-July 2007 which is expected to bring about
the deceleration of residential investment growth to
around 2.0 percent in 2007 and 0.0 percent in
2008, following the 32 percent surge in 2006. In
fact, residential investment remains supported,
notwithstanding some important setbacks in some
short time periods affected by government policies,
by the ever-present high demand for housing due to
the continued high growth of mortgage lending (at
relatively low interest rates) and the high number of
building permits issued in both 2005 and 2006.
Finally, robust export growth is set to continue in
2007 and the following years based primarily on the
continued internationalization of Greek firms, which
have increased their size and domestic production
capacity in tandem with expansion into neighboring
Southeastern Europe. Moreover, the rapid develop-
ment of public infrastructure in Greece and South-
eastern Europe in combination with favorable
demand conditions for tourism and other products
prevailing in Greece’s main exporting markets will
provide a boost for Greek exports.
Impediments to growth: The high rate of GDP
growth in Greece is based solely on the high growth
of domestic demand, due itself to rapid wage growth
(far in excess of both inflation and productivity
growth) resulting in the continued erosion of Greece’s
international competitiveness. This is most clearly
evident in the growth rate of domestic unit labor
costs (ULC) which remain substantially above the
rate recorded by Greece’s main competitors. Crucial-
ly, an opportunity has been missed which could have
seen the high rate of GDP growth facilitating the nec-
essary fiscal adjustment via sizable reductions in the
country’s general government debt/GDP ratio, which
even after the GDP revision, remains high at 96 per-
cent of GDP. Finally, growth in domestic demand has
also been based on the continuous deterioration of
the financial position of the main social security
funds in Greece, with incentives for increased pen-
sion savings almost non-existent, leading to the
explosive increase of the Greek state’s future implic-
it pension liabilities.
These developments underlie Greece’s relatively
low credit rating and remain the single largest com-
bined threat to the country’s continued economic
expansion in the coming years. Currently, they have
the combined effect of driving the growth of imports
of goods and services even higher, while acting as a
constraint on further growth of exports, which
accounts for the rising Greek current account deficit,
set to reach 11.5 percent of the revised GDP in
2007. In all, this implies a rapid increase in Greece’s
international indebtedness which will in turn lead to
the rapid increase of payments for interest, dividends
and profits to foreigners, contributing further to the
worsening of the current account deficit.
Therefore, while prospects for Greece’s future eco-
nomic growth and prosperity remain bright, they are
fraught with obstacles which require timely action and
focused policy aimed at further fiscal adjustment,
reform of the social security system and improvement
of the country’s international indebtedness.
Themes
Δhe governing conservative party, New
Democracy (ND), won Greece’s general
elections on September 16 with 41.83 per-
cent of the vote (152 seats vs 165 previ-
ously), followed by the socialist PASOK
party with 38.1 percent (102 vs 117), communist
party KKE, 8.15 percent (22 vs 12), left-wing
SYRIZA, 5.04 percent (14 vs 6), and right-wing
LAOS, 3.80 percent (10 seats vs no representation
previously).
Based on pre-election references made primari-
ly by the minister of finance, Giorgos Alogoskoufis,
ND’s re-election will likely signal further privatiza-
tions in certain companies majority-controlled by
the state. Moreover, restructuring potential has
been cited explicitly for companies like the Public
Power Corporation (PPC).
Below we identify likely sector-specific reper-
cussions:
Financials (Postal Savings Bank, ATEbank) Two
key developments had been put on the back burn-
er, to be looked into after the elections. Namely the
cases of Postal Savings Bank and Agricultural Bank
and the further divestment of state holdings. The
plan calls for further divestment up to the point
where the state will own 51 percent of ATEbank;
however, we do not think that will bring any sig-
nificant changes. As for PSB, prior to the elections,
it was the government's intent not to sell its stake
to another Greek banking institution and that it
would rather sell it to a foreign strategic investor.
Telecoms (OTE, Cosmote) The state will proceed
with reducing its current 28 percent stake in the
medium rather than short term, as market condi-
tions have not been materially altered (i.e. a pre-
ferred mainstream operator has yet to appear as a
strategic investor). In our opinion there will be no
impact on the current management team in the
short term.
The new structure in the top management of
Cosmote may denote a transitory period for Cos-
mote’s top post given the diverging views on strate-
gic issues for the OTE Group. The move may bring
closer a potential Cosmote minority buyout for OTE.
Electricity (PPC) The CEO remains in place, while
changes will be expedited and an aggressive busi-
ness plan is likely to be implemented. During the
past four months, the government has firmly stated,
through both the minister of national economy and
the minister of development, that substantial issues
of critical importance to PPC will be firmly
addressed. Such critical issues include the defini-
tion and the manner in which the PSO reimburse-
ment will be dispersed (to PPC), the commence-
ment of the increased (3,200 MW) replacement
plant, a future placement and the restructuring that
PPC is in need of, although no further comments
have been made on this particular issue. We con-
tinue to look forward to the upcoming October busi-
ness plan but following the elections outcome, in
our view, uncertainty has paved the way for more
visibility and could turn into an opportunity. A fur-
ther reduction in the state’s stake is very likely.
Gaming (OPAP) OPAP’s management and the new
government’s gaming policy may change. In our
opinion, OPAP’s operating performance during the
next one or two years will be decoupled from a
hypothetical top management change. A change in
gaming policies reflected in the forthcoming busi-
ness plan of OPAP may trigger risks and opportuni-
ties for the medium term.
Industrials (Metka, Endesa Hellas) A rather posi-
tive development for Metka, like PPC, is expected
to accelerate the implementation of the 3,200 MW
replacement program of a big part of its obsolete
lignite plants with new combined cycle gas turbine
(CCGT) ones. In this case, Metka can take advan-
tage of its long-term relationship with PPC through
the assignment of large-scale energy projects in the
next two to three years. Positive catalysts can be
viewed for Endesa Hellas too, as the new govern-
ment can proceed faster with the full liberalization
of the domestic energy market.
Water utilities (EYDAP/EYATH) Unlikely manage-
ment changes and strong potential stemming from a
further state stake reduction, though there is slim
likelihood that such a development could occur any-
time soon. There is substantial room for operational
improvements through the continuation of headcount
reduction by attrition rate and no hiring and expedit-
ing the collection of owed receivables. In EYATH's
case, in particular, a closer integration with French
Suez and the secured annual tariff increases above
inflation would definitely benefit the company.
Ports (OLP/OLTH) The reshuffling of the board of direc-
tors with three new non-executive members, likely to be
appointed in the upcoming EGM early November, will
most likely accelerate an ambitious 40-million-euro
investment program for a 30 percent increase in con-
tainer capacity, yet we do not expect any change in the
existing CEO position. State stake reduction is rather
unlikely in the next 12-18 months before operational
efficiencies and new terminal capacity are materialized.
Investors waiting for steps in privatizations after the elections
The economic impact of the recent national elections is likely to have repercussions on state-controlled companies such as Postal Savings Bank, OTE telecom, the Public PowerCorporation and state lottery and gaming firm OPAP, among others.
Research
18
19
In comparison with other eurozone countries,
Greece presents a peculiarity: Its public sector
is broader and is involved in a wider range of
activities. This continues to be the case
despite the efforts during the past three years
to curtail the public sector. The large participation
of the state in the production process is related to
low productivity in Greece, now standing at about
70 percent of the eurozone average. This is due not
only to the low productivity of public enterprises
but also to the distortions and constraints imposed
on private entrepreneurial activities. These distor-
tions raise the cost of doing business in Greece
either directly — through financing and taxation —
or indirectly — through the administrative burden
that is created, red tape and corruption.
On the other hand, it is important to consider
whether the state is successful in its social role; a
role which cannot be substituted by the private
sector. In other words, is the welfare state effi-
cient? Does it redistribute income and does it
reduce poverty? Unfortunately the answer is that
the state has not accomplished its welfare-related
goals. Specifically, apart from social expenditures
(which account for almost one-third of GDP), it has
not been successful in reducing income inequality,
nor has it combated poverty effectively. Greece still
has the second-highest inequality index among EU-
15 countries (after Portugal), while one-fifth of its
population lives below the poverty line.
What is even more interesting, though, is the
fact that despite quite high social contributions,
the reduction of the rate of poverty as a result of
social transfers amounts only to three percentage
points (from 23 percent of the population to 20
percent). This equals to lowering the poverty rate
by 13 percent, while in other countries, such as
Denmark, for example, the poverty rate has been
lowered by 61 percent. But even ignoring the case
of Denmark — think of it as an outlier — the aver-
age drop of the poverty rate in EU-25 is 38 per-
cent. This fact alone highlights the inefficiency of
our mechanism for social transfers.
The problem is that until now emphasis was put
on general benefits which did not produce results in
combating poverty or in lowering inequalities. If, for
example, benefits are given without discrimination
to wide categories of the population, the line of
poverty is simply raised, leaving the same people
below it. To tackle this, we must have better-tar-
geted measures to those who are really in need.
Taxation is a way to strengthen the social role
of the state, especially policies aimed at combating
tax evasion. In a country like Greece, where there
is extensive tax evasion, the structure of direct tax-
ation can have the opposite results to the redistri-
bution of income between law-abiding and non-
complying taxpayers. Nonetheless, if someone had
to choose between taxation and social transfers to
achieve income redistribution, the most effective
choice seems obvious: The policy mix should put
emphasis on transfers. According to a recent study
on a group of developed countries, transfers are
more effective than taxes as they have multiple
results on reducing income inequality (in some
cases 11 times larger effect, as was the case in
France).
The government’s policy aims at social justice in
tandem with economic efficiency. The fruits of
growth should be broadly distributed and, at the
same time, the taxpayer’s every cent should be
spent wisely. The support offered to low-income
pensioners through raises to the pension fund for
retired farmers (OGA) and to the allowance to low
pension receivers (EKAS) eases somehow the eco-
nomic burden of those who are most in need. The
same can be said for the establishment of the Social
Cohesion Fund, which aims to reduce poverty levels
with better-targeted measures and more effective
social transfers. Finally, the ongoing fight against
tax evasion is creating more revenues that are pro-
viding funding for even more social expenditures.
The state’s social role in Greece
Government policy aims at social justice in tandem with economic efficiency. Supportoffered to low-income pensioners through the pension fund for retired farmers (OGA) and tothe allowance to low pension receivers (EKAS) eases economic burdens while the same canbe said for the establishment of the Social Cohesion Fund.
Plutarchos SakellarisChairman of the Council of
Economic Advisers
Professor at Athens University
of Economics and Business
20
Greece’s fast-growing economy has seen rapid changesin recent years, with structural reforms helping to spurgrowth and close economic gaps with our EuropeanUnion peers. Cutbacks in public spending and moves tostamp out tax evasion have helped tighten fiscal policywhile moves such as cutting corporate tax rates and thereduction in red tape have helped make the businessenvironment more friendly.
Results have started to materialize, with Greece’sbudget deficit expected to be cut down to 2.5 percentin 2007, below the 3 percent limit imposed by the Euro-pean Union, and the stubbornly high unemploymentrate is starting to retreat.
Prime Minister Costas Karamanlis is focusing onchanges in the fields of economy and development,energy policy, tourism, the environment, public worksand economic diplomacy — developments that willhelp the country make its mark in a fast-growing andhighly competitive part of Europe.
New programs regarding public-private partnershipsare expected to bolster investment activity by boostingconstruction projects such as new schools and prisons.
Economic priorities take shape
21
The global economy continues to grow
strongly, although downside risks have
clearly increased. The recent financial mar-
ket turbulence that originated in the US
credit market potentially could slow the
pace of the global expansion. Financial market
conditions have improved since mid-August but a
full recovery will require time. The widening of
credit spreads has a positive aspect, insofar as it
better reflects underlying risks. However, it creates
downside risks to near-term growth. Rising oil
prices, inflation concerns and trade protectionism
also constitute key risks to the global outlook. Cli-
mate change and clean energy needs should also
be taken into consideration.
The speed at which the recent credit crunch
spread from the US to Europe and other parts of
the world provides a powerful illustration of the
systemic risks associated with financial globaliza-
tion. Enhancing transparency in financial markets
is key to avoiding unexpected events that create
uncertainty and impair market liquidity. The recent
turbulence calls for improvements in the practices
of market participants regarding the disclosure of
information on exposure to risks. There is also a
need to strengthen cross-border regulation and
supervision. Given its global membership and
financial stability mandate, the Fund has a key role
to play in identifying spillover risks and working
with national regulators and other relevant bodies
to help avoid or contain them.
Quota & voice reformReform of the Bretton Woods institutions is pro-
gressing. The ad hoc quota increases agreed last
year are only a first step toward achieving a redistri-
bution of quotas in favor of the most dynamic
economies and the low-income countries. It is
imperative that we reach agreement and complete
the quota and voice reform by the fall 2008 dead-
line. The new formula must be simple and transpar-
ent, and give a primary role to GDP at market rates.
A compression factor would clearly help toward a
more equitable redistribution of voting power. We
look forward to further progress in enhancing the
credibility and effectiveness of the Fund.
World BankThese annual meetings take place at a time of
increased financial flows to developing countries.
The World Bank Group has retained a key role in
financing the least developed countries, where pri-
vate capital inflows have remained limited. ODA
(Official Development Assistance) and IDA (Inter-
national Development Association) in particular
have a prominent role to play in sub-Saharan
Africa. In this connection, we support the pledge of
the World Bank Group to allocate an amount of 3.5
billion dollars from its earnings to IDA15. We sup-
port the IFC (International Finance Corporation)’s
commitment to increase its engagement in IDA
countries.
Greece is actively participating in the IDA 15th
replenishment round with a view to increasing its
IDA share.
Greece’s economic performanceGreece plays a key role in the development of
Southeast Europe through trade and direct invest-
ment. Southeast Europe is becoming one of the
fastest-growing regions in Europe and Greece is
committed to facilitate the integration of these
countries in the global economy and the European
Union.
Greece’s growth performance has been quite
strong over the past three years, exceeding the
Euro-area’s average by a significant margin.
Growth has been underpinned by private invest-
ment and exports, while tourism and shipping serv-
ices also are a contributing factor. GDP growth
reached 4.3 percent in 2006 and is expected to be
sustained around 4 percent in 2007-08. The Greek
economy can do even better in the medium term,
as structural reforms are being pursued to make
the economy more competitive and to tackle the
perennial weaknesses of the public sector.
Fiscal consolidation has advanced significantly
in the past three years, as the general government
deficit was slashed below the 3 percent EMU
threshold from 8 percent in 2004. The general
government deficit is estimated to reach a 10-year
low of 2.5 percent of GDP in 2007. Greece’s
adjustment record demonstrates that fiscal consol-
idation is compatible with sustained growth if
accompanied by supply-side reforms that help redi-
rect resources toward private investment. Looking
forward, the Greek government remains committed
to continuing structural reforms, including the pen-
sion reform, while pursuing fiscal consolidation
efforts to achieve balanced budgets by 2010.
Greece maintains strong growth;downside risks abroad grow
In his speech at the 2007 International Monetary Fund annual meeting in Washington DC,Economy and Finance Minister Giorgos Alogoskoufis spoke about the Greek economy’s stronggrowth prospects, on the back of rising private investments and exports, and the country’s rolein the fast-growing region of Southeastern Europe. He also highlighted the government’scommitment to structural reforms aimed at helping boost the economy’s competitiveness.
Giorgos Alogoskoufis
Minister of Economy and Finance
Speech at the 2007 World Bank - IMF AnnualMeetings in Washington DC
22
The 2008 draft budget at a glanceThe 2008 draft budget at a glance
HIGHLIGHTS OF THE 2008 BUDGET
ñ Greece’s first budget drafted since exiting from the excessive deficit pro-
cedure.
ñ Launche of the second phase of fiscal consolidation and economic
reforms for sustainable growth.
ñ Continuation of the implemention of the new economic model for
growth, employment and social cohesion, initiated in March 2004.
MAIN ELEMENTS OF FISCAL CONSOLIDATION
ñ Downsizing the public sector.
ñ Containing public expenditure.
ñ Tackling tax evasion.
ñ Reducing public debt.
PRIMARY OBJECTIVES
ñ Further deficit reduction aiming at a balanced budget by 2010.
ñ Further reduction of unemployment.
ñ Enhancement of social cohesion.
ñ High economic growth.
Cover
OBJECTIVES OF THE 2ND PHASE
OF FISCAL CONSOLIDATION & REFORMS PROGRAM
1. Achieve a balanced budget by 2010
ñ By tackling tax evasion and illegal activity related to fuel distribution.
ñ By broadening the tax base.
ñ By improving the accounts of state-owned enterprises, social security
and the National Health System.
2. Reform budget procedures
ñ By integrating all extra-budgetary accounts to the budget.
ñ By intensifying fiscal audits.
ñ By completing and broadening the implementation of the legal frame-
work for the operation of state-owned enterprises.
4. Reinforce the social welfare system
ñ By establishing a minimum national pension by 2009.
ñ By setting up the National Fund for Social Cohesion to support poor
households.
ñ By supporting low-income pensioners.
5. Boost regional development
ñ By successfully completing the absorption of the 3rd Community Sup-
port Framework and the optimal use of funds from the National Strate-
gic Reference Framework 2007-2013.
ñ Through the Investment Incentives Law and public-private partnerships.
6. Reform the pension system
ñ Through broad social and political dialogue.
3. Complete the final phase of the tax reform
ñ By reducing the tax rates for individuals with mid-level incomes to 25%
by 2009 from 30% and 40% in 2006.
ñ By further tackling tax evasion.
ñ By abolishing or simplifying certain property taxes such as those for the
first residence and inheritance. The aim is for citizens to pay a small
duty for their real estate holdings (excluding the first residence), similar
to the regime in most other developed countries around the world.
7. Further implementation of the new growth model
ñ By promoting the outward orientation of the economy.
ñ Through privatizations, the investment incentives law, the digital strate-
gy and public-private partnerships.
23
PRIORITIES OF THE REFORMS PROGRAM
ñ Tax cuts for enterprises and households.
ñ Investment incentives.
ñ Community Support Frameworks (EU funds).
ñ Outward orientation of the economy.
ñ Public-private partnerships for infrastructure projects.
ñ New privatizations agenda.
ñ Strategy for Digital Greece.
ECONOMIC POLICY RESULTS
ñ Achieved fiscal consolidation:
— The deficit of the general government was rapidly reduced from 8%
of GDP in 2004 to less than 3% in 2006.
— The debt of the general government was reduced by 6.6 percentage
points of GDP in the period 2004-2007.
ñ Maintained a rate of growth above that of other eurozone member
states, reaching 3.7% in 2005, 4.3% in 2006 and 4.4% during the first
half of 2007. Growth is based on higher private investment and exports.
ñ Reduced the unemployment rate from 11.3% in the first quarter of
2004 to 8.1% in the second quarter of 2007.
ñ Improved Greece’s competitiveness.
ECONOMIC POLICY & FORECASTS FOR 2008
Further deficit reduction
ñ The deficit is expected to be reduced further from 2.5% of GDP in 2007
to 1.7% in 2008.
Total expenditure restriction
ñ State budget expenditure is expected to be restricted to 30.1% of GDP
in 2008 from 30.4% in 2007 while, at the same time, public invest-
ment will increase.
Debt reduction
ñ Public debt is expected to be reduced by 3 percentage points of GDP
and fall below 100% of GDP for the first time since 1992.
High growth rate
ñ As also specified by the Stability and Growth Program, the growth rate
for 2008 is expected to be 4%.
ñ Private investment and exports will continue to be the locomotives of
economic growth, accounting for more than 60% of GDP growth.
Higher employment, lower unemployment
ñ Employment is expected to increase by 1.9%, leading to further reduc-
tion in unemployment of 7.4% (down from 8.3% in 2007).
More privatizations
ñ Revenues from privatizations are estimated to reach 1.6 billion euros.
Private consumption increase
ñ Private consumption is expected to increase at a rate of 3.5%.
Inflation reduction
ñ Inflation is projected to slightly fall to 2.6% (down from 2.7% in 2007).
Social spending increase
ñ The restriction of primary expenditure is expected to allow the increase
of social spending by 850 million euros, i.e. by 0.4% of GDP, which will
be allocated to:
— an increase of pensions of retired farmers by 19%,
— an increase of the allowance to low pension receivers by 18%,
— an increase of the unemployment benefit by 10%.
ñ The Social Cohesion Fund has been established in an effort to reduce
poverty levels with better targeted measures.
Tax revenues increase
ñ Tax revenues are expected to increase at a rate of 12.3%, reaching
24.4% of GDP (from 23.2% of GDP in 2007) while corporate and per-
sonal income tax rates will be reduced.
ñ The increase of tax revenues is attributed to:
— Maintaining high growth rates.
— Tackling tax evasion by:
intensifying tax audits, cross-checking and customs control,
restructuring taxation of heating oil to avoid illegal activity,
providing taxpayers with incentives to ask for receipts and fulfill
their tax obligations.
— Broadening the tax base by:
tackling property tax evasion through the introduction of a single
real estate tax.
24
Cover
Change and speed are character-
istics of our era. Our world is
developing technologically, pro-
ducing innovations, developing
at an extraordinary pace, chal-
lenging the status quo. We have to sieze
the moment since missed opportunities
cannot be brought back.
For us today, our major challenge is
to take advantage of the opportunities
available globally by creating incentives
capable of maximising the creative
forces of this country and exploiting our
geo political position.
In this direction, the energy sector
remains a key priority. The boosting of
this sector in the recent years reflects
our stead fast commitment to become
the energy hub of S.E.Europe.
In this context our objectives are:
- Securing energy supply,
- Investing in infrastructure and pro-
duction capability and
- Increased concern for the environ-
ment.
Our energy policy is built around three
axes:
The first axis has to do with the Ener-
gy Interconnections to the international
networks of transport of electricity, oil
and natural gas, so that the country is
rendered an international transit energy
centre and its geostrategic role is rein-
forced. We are now making significant
advances regarding the various agree-
ments signed in the last two years for the
construction of major international ener-
gy projects such as the Burgas-Alexan-
droupolis pipeline, the ITGI natural gas
pipeline of which, the Greek-Turkish
pipeline will be inaugurated shortly, the
Greek-Italian natural gas pipeline cur-
rently at the phase of technical study.
Furthermore, on June 27 2007 the
Prime-Minister Mr Kostas Karamanlis,
announced the participation of Greece in
the construction of the projected South
Stream natural gas pipeline that will
connect Russia with Europe via Greece
and which will involve it is foreseen,
Russia, Bulgaria and Italy . Moreover,
we are promoting the interconnection of
electricity networks between Greece and
Turkey that will be completed shortly as
well as the upgrading of the electricity
interconnections with other Balkan
countries. The energy interconnections
in question enhance the safety of energy
supply in Greece, rendering it an energy
hub in Southeast Europe.
It is a given that the modernisation of
the national system of interconnections
and transportation of electricity, (which
also includes the interconnection of
islands with the continental system),
contributes to the safety of energy sup-
ply. At the same time, we aim to satisfy
the energy needs even further by
increasing the contribution of Renew-
able Energy Sources (RES) in our nation-
al energy balance. Simultaneously, we
are intensifying the efforts so as to
ensure the domestic safety of supply
through new investments in electricity
production from the Public Power Cor-
poration (PPC), which will be replacing
old units with new ones of equivalent
total power but of higher output, as well
as from other investors.
The second axis is saving energy and
promoting environment-friendly energy
sources (RES), the so-called green ener-
gy. The public consultation for the RES
Special Land-planning has already been
completed and will be finalised shortly.
We expect their rapid development due
to the financial incentives that have
been provided with laws and develop-
ment programs, as well as with the con-
struction of essential electricity networks
of transportation.
The third axis is the liberalization of
the energy market. In this context, the
national regulatory bodies for the elec-
tricity and natural gas systems are being
updated according to the EU norms
which will contribute to the creation of
an environment attractive for private
investments. Above all our objective is to
create the necessary conditions in order
for our consumers to benefit from an
improved quality of service. Our primary
objective is for consumers to benefit
from the liberalization of the electricity
and natural gas markets.
Whereas the consumption of energy
used to be an important indicator of
prosperity today the need to protect our
environment has led to the revision of
this of this factor. In accordance with the
objectives of the EU Energy Policy, we
are implementing energy saving meas-
ures. We want buildings that conserve
energy and methods that produce envi-
ronment-friendly energy. The energy
resources do not belong to us. They
belong to the future generations.
In the sector of Trade, we are adopt-
ing new regulations which simplify the
incorporation and operation procedures
for Societes Anonymes as well as all
types of commercial companies. We are
in the process of completing the nation-
al Companies Registry so that we can
facilitate the procedures further while
reducing red tape. We are unifying and
encoding the ratifications, which are
incorporated in the Market Code, revis-
ing the method by which fines and
penalties are imposed by different state
institutions, while we are intensifying the
efforts for tackling illegal trade.
At the same time, in the sector of
Industry, we are adopting new regula-
tions which simplify the incorporation
and operation procedures for industrial
enterprises in combination with the new
Land-planning. This will resolve long-
lasting problems such as environmental
and urban planning issues with regard to
the manufacturing sector. We are pro-
moting programmes that will support
enterprises mainly by capitalizing on our
national human capital and creating
new infrastructure. We are taking spe-
cial care to ensure that new tax meas-
ures and additional incentives will
encourage and support entrepreneurship
in Greece.
Innovation, research and new tech-
nologies are of strategic importance. The
transition to the knowledge society aims
at infusing research, technology and
innovation into the production process,
thus boosting growth and competitive-
ness in the Greek economy and society.
Our goal is to link the research system
with industry increasing competitive-
ness.
Our policies reflect our commitment
to transform Greece into a leading EU
and regional player. We are determined
to maximize our national potential and
to exploit our geo-strategic position,
located as we are at the crossroads
between Europe, Africa and Asia, laying
the foundations for our future genera-
tions.
Energy stays high on priority list asGreece takes position on power map
Policies focus on better connecting Greece with international energy networks, saving energyand promoting environmentally friendly power along with improving the regulatoryframework regarding investments in the sector.
Christos FoliasMinister of Development www.ypan.gr
25
∞fter spending 13 years in the
European Parliament, where I
had the opportunity to see how
problems similar to the ones
we face in Greece were
addressed in different and innovative
ways, I am now part of the Greek gov-
ernment. For me this is both a great
honor and a significant yet rewarding
challenge. Simply pointing out the
problems faced by Greek citizens is not
enough anymore; I now have to con-
tribute to a better Greece with targeted
solutions to specific problems. And that
is what I aim to do.
The Ministry of Transport and Com-
munications is one of the most vital min-
istries to the livelihood of the Greek pop-
ulation. It is directly related to the quali-
ty of our everyday lives, to the environ-
ment, to the use of new technologies for
the benefit of the people and the welfare
of the country as a whole. Taking all this
into consideration, I have set six priori-
ties for my tenure as minister. All of
these goals are centered on the well-
being of each citizen. The first one is to
turn Greece into a transport hub for the
whole region of Southeastern Europe.
The European Union will assist Greece
in achieving this goal by supporting the
upgrade and expansion of the Greek rail-
way network.
The second and third goals are relat-
ed, on the one hand, to urban transport
and, on the other, to the need to support
rail transport for people and goods. As
for urban transport, the aim is to have
fewer cars in the cities by convincing
people to use buses and the rail net-
works. In order to achieve this, we need
to provide better services, that is to say,
quicker and more comfortable means of
public transport. I have worked abroad
for a long time and every day I used pub-
lic transport to go to work, just as the
majority of Europeans do. I believe that
Greeks can do so as well and can leave
their cars behind, provided that they
have a better alternative. This is an easy
way to improve the quality of our every-
day lives. At the same time, it is of vital
importance to support and upgrade the
railway system all over Greece. Rail
transport is one of the most comfortable
and environmentally friendly ways to
travel. We need to follow the example of
the majority of European Union member
states and place the railways at the cen-
ter of our attention. That way people will
be able to travel more safely and quick-
ly and, most importantly, by environ-
mentally friendly means. Here again the
economic contribution of the EU will be
of vital importance.
My fourth and fifth goals are linked
to the civil service sector and to those
organizations that suffer from severe
public debts. On the one hand, we need
to focus on ways to increase the effi-
ciency and improve the finances of all
the organizations supervised by the Min-
istry of Transport and Communications.
On the other, we need to find a viable
solution specifically for the problems fac-
ing Olympic Airlines. Without ignoring
the fact that all the organizations super-
vised by the ministry have an important
social role to play in providing affordable
services to the people, we need to focus
on making them more economically
viable. There is already a law in place,
introduced in the first years of the New
Democracy government, concerning the
operation of all public organizations. We
need to ensure this law is enforced with-
out further delay. According to this law,
every public organization will have to set
a specific business plan and guiding
rules by which it will operate. If we do
not enforce these rules now, public
money will continue being spent at the
expense of efficiency and effectiveness.
This is something the New Democracy
government and I personally will not tol-
erate any longer.
As for Olympic Airlines, we need to
be realistic. This organization, which is
the only public civil aviation organization
in Europe, has severe debt problems.
Our goal is to save Olympic Airlines. But
in order to save the company we need to
privatize it. All our efforts are focused in
that direction. Currently a final round of
negotiations is being carried out with the
European Commission regarding the
money the company owes to the Greek
civil sector and vice versa. These negoti-
ations have been tough, but we are
doing the best we can to come to an
equitable solution for everyone. Above
all, the rights and well-being of the peo-
ple working for Olympic Airlines will be
safeguarded whatever the outcome of
the negotiations.
The final goal I have set is related to
the field of telecommunications.
Telecommunications and more general-
ly new technologies have gained
momentum across the EU and else-
where. Although it has made significant
progress in recent years, Greece is still
far behind its European counterparts in
the field of new technologies. I strongly
believe that this field, together with
shipping and quality tourism, can be the
three pillars that will support a ‘smart’
development for our country. Telecom-
munications is a significant sector in the
global economy, which, if we as a
nation can create our own niche, has
the potential to create many quality jobs
for the people of Greece. Therefore, it is
to our own benefit to make full use of
the opportunities lying ahead. More
specifically, we have set the following
targets: All citizens, the state and busi-
nesses should have quick and reliable
internet services in the near future. All
customer services have to be improved.
Remote areas need to have full access
to new technologies. This last point is of
particular importance, since with new
technologies everyone, regardless of
where he or she lives, can partake in a
number of activities ranging from
telecommerce to telemedicine and tele-
education. At the same time, new tech-
nologies can significantly enhance tradi-
tional occupations and can contribute to
a better quality of life for all.
These goals are not simply words
and empty promises; it is my commit-
ment to the Greek people. I know very
well that at the end of my time in office
I will not be judged by what I said or
who I was seen with, but by my
actions. And at the end of my tenure I
would like to be able to look every sin-
gle Greek in the eye and say to them
that everything I promised four years
before has become a reality.
Toward a better future in transport and communications
The Transport Ministry aims to turn Greece into a transport center for Southeastern Europe,to reduce the number of cars on the roads and to boost efficiency. New technologies willgive the telecommunications sector a new boost.
Kostas HatzidakisMinister of Transport
and Communicationswww.yme.gr
26
Cover
During its first term in power, the govern-
ment of Prime Minister Costas Karamanlis
adopted a forward-looking strategy in
order for the Greek economy to grow
beyond its borders, above everyone’s
expectations, and for the good of the society as a
whole: extroverted growth and domestic reforms.
The impressive recent economic figures as well as
the positive outcome of the latest national election
have empowered the New Democracy party to put
fresh emphasis on social policies for those in
greater need and to take bold reformative initia-
tives. With all these promising developments tak-
ing place on the domestic front and the country
assuming an increasingly important role in the
region of the Eastern Mediterranean, there is no
way for Greece but forward.
A brief look at the figures makes it clear that
the government’s economic policies have borne
much fruit: a brisk GDP growth rate of 4.3 percent
in 2006 and 4.4 percent in the first half of 2007,
a budget deficit down to 2.5 percent of GDP from
7.8 percent in early 2004, and an unemployment
rate reduced from 11.3 percent in early 2004 to
8.9 percent in 2006 and 7.8 percent in July 2007,
creating 250,000 new jobs, 80 percent of which
are in the private sector.
Given these remarkable developments, the
newly re-elected government prioritizes helping
those in greater need, both in everyday as well as
in extreme circumstances. Specifically, the govern-
ment recently presented the Draft Law for the
National Fund meant to advance social cohesion
by helping those living below the poverty line. In
addition, taxes for low-income citizens have
already been reduced while a minimum national
pension and a fund for unemployed middle-aged
employees in problematic areas are being estab-
lished.
In terms of extreme circumstances, the best
example can be drawn from the immediate meas-
ures that the state took for the compensation of the
people and the reconstruction of the areas affected
by the recent forest fires (Peloponnese, August
2007). In addition to the funds coming from the
European Union for that specific cause, the Greek
economy will also finance the rebuilding work. Fur-
thermore, the government oversaw a great effort to
collect funds from Greeks both at home and from
around the world. In an outpouring of fellowship
and unity, we came together with a stronger sense
of patriotism, gathering more than $200 millon.
Starting in the next few weeks, the greatest part of
this amount will go toward the reconstruction of
homes.
Empowered by the vote of confidence of the
Greek people, the newly formed cabinet has
already taken important steps to correct, for exam-
ple, long-term and deep-rooted wrongs in bureau-
cratic policies. In fact, the pilot program was
implemented during the recent forest fires. Specif-
ically, with a fast and efficient process put in
Reforms in Greece: Full speed ahead
The government intends to push ahead with economic reforms and changes to its socialpolicy after positive results emerged during its first term in office. Prime Minister CostasKaramanlis is adopting a forward-looking strategy in order for the Greek economy to growbeyond the country’s borders.
Panos LeivadasGeneral Secretary of Information
27
place, all affected citizens were able to get com-
pensation in the days following the devastating
fires.
The government now aspires to implement such
a policy of minimum bureaucracy on all levels of
the state’s transactions with citizens. It is a new
philosophy of not seeing every citizen as a poten-
tial law-breaker but trusting them unless otherwise
proven and giving them the opportunity to maxi-
mize their potential as they see most fit. By the
same token, of course, it is the philosophy of a
state that closely and strictly inspects and super-
vises all processes, implementing its laws in an
uncompromising and non-negotiable way.
At the same time, the government puts the
same emphasis as before on the Greek economy’s
extroverted growth. After all, there is no doubt that
in today’s competitive international environment, a
market of just 10 million people cannot fulfill its
potential in isolation; it thus needs to open up and
engage others in its own path of growth. Greece
continues to do exactly that by capitalizing on the
fortunate coincidence that our neighbors, who
were once a cleavage between us and Europe, have
now become close partners who want to follow in
our path of democracy, economic development and
active participation in the Euro-Atlantic organiza-
tions.
In the last couple of years especially, Greece
has been looking outward to maximize on its com-
parative advantages. Our role in the global energy
market has been redefined, thanks to important
agreements on the Burgas-Alexandroupolis oil
pipeline, the natural gas pipeline from Turkey and
all the way to Italy, or the new South Stream gas
pipeline. Equally impressive are the developments
in the shipping industry. With the Greek-owned
fleet being the largest in the world and approxi-
mately 300 new ships currently under construc-
tion, Greece is transferring increasing quantities of
commercial goods and oil globally. At the same
time, the country is becoming an important distri-
bution hub; the 3-billion-euro Protocol with the
European Investment Bank to upgrade our ports as
well as projects to implement security systems in
12 ports through public-private partnerships are
but a few of the promising developments that are
transforming our ports.
Last, Greece is a credible financial and busi-
ness center in its neighborhood, holding the posi-
tion of the leading foreign investor in Albania and
the Former Yugoslav Republic of Macedonia
(FYROM) and ranking among the first three in Bul-
garia, Romania and Serbia. With more than 3,600
Greek companies in the region and Greek invest-
ments exceeding 12 billion euros so far, we are the
base for reaching out to a market of 160 million
consumers across Southeastern Europe.
In addition, our banking sector, with more than
1,000 branches now operating in the region, holds
16 percent of the region’s banking market share
and has invested millions of euros to acquire and
build networks in a number of countries. At the
same time, Greek banks are progressively pene-
trating promising markets such as those of Turkey
and Egypt.
In conclusion, the government of Costas Kara-
manlis is moving ahead with reforms and initiatives
at a faster pace and with greater determination.
Our international partners have once again taken
notice, counting on Greece not only to be a para-
digm of strong economic growth but also to assume
a shaping role in the Eastern Mediterranean by pro-
moting peace and stability as well as actively shap-
ing EU foreign policy in an increasingly important
region.
28
Cover
The formation of a new government following
elections on September 16 provides the oppor-
tunity for the adoption of an economic policy
that takes into consideration the medium-term
needs of the Greek economy, that foresees and
plans, reducing to an absolute minimum those inter-
ventions which are strongly influenced by combinations
of economic and political circumstances. The fresh
popular mandate creates the conditions for the exercise
of a policy with greater freedom of movement without
undue political cost, not only for the government but
also the opposition. This will facilitate efforts to achieve
the social and political consensus that is absolutely
necessary for advancing key reforms, particularly those
relating to the social security system, the state and edu-
cation.
At present, there are two very important factors
which facilitate the advancement of significant reforms
in these key sectors. The first is a new collective per-
ception, according to which the time is now ripe for
resolving the major problems facing Greek society.
Society is ready to accept the changes. The second fac-
tor is the convergence of the positions of the govern-
ment and the main opposition, not only regarding their
estimation of the urgent nature of the changes, but also
the main directions which they propose. Despite this,
experience from recent years shows a clear timidity on
the part of governments to undertake initiatives since
the possible political cost entailed is usually overesti-
mated, i.e. the will of society for the advancement of
overdue changes is underestimated. The election of a
new government provides an opportunity for a new eco-
nomic policy that distances itself from the stereotypes
of the past and responds to society’s desire for reforms.
The new economic policy must set medium-term
goals and develop separate interventions with appropri-
ate planning and the assigning of priorities. The primary
goal, on which almost the entire political world agrees,
is of course faster economic growth that will bring
about a reduction of unemployment and a more effi-
cient state, not only in the various fields of administra-
tion but also in social policy. In order to achieve this
goal, as already noted above, what is needed is a shift
in emphasis to supply, i.e. a strengthening of the Greek
economy’s capacity to produce competitive goods. This
in turn means the bolstering of competitiveness and
entrepreneurship, with a drastic reduction of structural
weaknesses which to date have had a negative impact.
PrioritiesFiscal adjustment: On the issue of fiscal adjustment, it
should be noted that despite the important progress
made in recent years, the challenges continue to be for-
midable, as the situation regarding the country’s public
finances remains fragile. The major economic problems
created by the aging population and a possible future
slowdown in economic activity will increase the pres-
sures even further. For this reason, the country must
A new economic policy takes shape
The election of a new government provides an opportunity for a new economic policy thatdistances itself from the stereotypes of the past and responds to society’s desire for reforms.
Extract of quarterly bulletin preparedby the Foundation for Economic andIndustrial Research (IOBE) releasedin September 2007.www.iobe.gr
29
press ahead in a timely fashion with those structural
changes which will ensure the fiscal rehabilitation of
the economy so that it will be able to undertake with-
out particular problems the funding of its greater needs
in the future.
Given that the ratio of public debt to GDP is very
worrying and the estimated future pressures on spend-
ing for pensions and health are among the highest in
the OECD region, it is absolutely imperative for fiscal
rehabilitation measures to be taken in good time. And
the undertaking of such measures in the immediate
future is facilitated by the fact that the Greek economy
is registering high rates of economic growth, which
makes adjustment easier. For this reason, too, it would
be expedient to draw up a long-term program on fiscal
developments, which analyzes how — and on the basis
of which priorities —fiscal policy will deal with the
anticipated major imbalances.
Fiscal adjustment must be based on efforts on both
the revenue and expenditure fronts.
1st. The increase of revenues should not be pursued by
increasing tax rates and the tax burden, which is
already high. It will therefore be necessary to broaden
the tax base, by combating tax evasion and incorporat-
ing underground economic activities. Essential prereq-
uisites for achieving this are:
ñ The reform, simplification and codification of tax
legislation, in order to eliminate the existing uncer-
tainties and ambiguities which currently serve to
further stimulate the underground economy and tax
evasion.
ñ The reform of tax administration, with moderniza-
tion of tax collection mechanisms and reduction of
their cost.
ñ The consolidation of a climate of trust and consis-
tency vis-a-vis the tax system with the abolition of
tax amnesties.
2nd. The room for maneuver on the expenditure side is
far greater, particularly regarding the efficiency of pub-
lic spending. The possibilities here are considerable
and, as is clear from international experience, placing
emphasis on efficiency will enable significant improve-
ments to be made in areas such as health, education
and combating poverty. In this respect it is worth not-
ing that expenditures for public administration in
Greece absorb a much higher percentage of general
government spending than in the majority of OECD
countries; yet despite this, the quality of Greek public
administration continues to be unsatisfactory.
The long-term rehabilitation of public finances can-
not be achieved without comprehensive fiscal reform,
which will include:
ñ The preparation of budgets having a timeframe of
more than one year, and which are in line with the
three-year fiscal program that is submitted in the
framework of the Stability and Growth Pact.
ñ Assessment on a long-term basis not only of the
legality but also the expediency and effectiveness of
expenditures.
ñ Complete transparency of all general government
accounts, including the so-called Special Accounts.
The publication of such accounts in the case of the
broader public sector should be on an annual basis.
Publication also of all guarantees provided by the
government.
ñ Instituting of procedures to enable a substantial
comparison each year of the fiscal outcome with the
corresponding budget. Any overruns which have not
been approved by Parliament should automatically
be charged to the following year’s budget of the
respective ministry or organization.
ñ Establishment of procedures for checking local gov-
ernment finances.
Efficient state: The second, related and equally impor-
tant issue concerns the operation of the state and pub-
lic administration. The question of whether we need a
smaller or larger state has become obsolete. What we
do need in present conditions is a more efficient state,
i.e. a state that maximizes the performance of the enor-
mous resources which it manages for the benefit of
society as a whole, a state which will be judged on the
basis of its administrative efficiency and effectiveness.
With this in mind, IOBE in 2006 put forward a
series of specific proposals which are aimed at creating
a more efficient state. These proposals, presented in
detail in the publication ‘IOBE’s Positions on an Effi-
cient State,’ relate to the following:
ñ The streamlining and simplification of existing legis-
lation and the improvement of the quality of laws.
ñ A more effective regulatory/supervisory role on the
part of the state.
ñ The creation of a public administration which is
more efficient in its operation, simpler with regard
to procedures, adopts meritocracy in its manning
and is more effective in implementing policies.
ñ The improvement of the operation of public enter-
prises and utilities (DEKO) as well as of the social
services provided by the state.
Social security system: The need for the reform of the
social security system is now accepted by all. In addi-
tion, the analysis has been completed of the causes
responsible for the crisis in the system and proposals
have been put forward for changes to its parameters.
Moreover, for fiscal reasons alone, it is clear that the
growing burden placed on the state budgets by social
security expenditures cannot be allowed to continue.
Lastly, proposals have been put forward by both the
European Union and the OECD. The time is now ripe
for the reform of the social security system and a solu-
tion is possible.
As has been underlined by all sides, the reform of
the social security system will come about through
social dialogue. This dialogue must be comprehensive,
effective and rapid. However, the dialogue should not
rule out immediate measures which are based on leg-
islation in force and do not require any changes to those
parameters of the system that will be decided through
social dialogue. Such measures which can be imple-
mented include the curbing of contribution evasion, the
integration of migrants into the system and the reduc-
tion of early retirements.
Remedying the fire damage: The economic policy pri-
orities must also include the effort for the reconstruction
and development of those areas stricken by fires in
August. Immediate measures have already been taken,
while reconstruction programs have been announced
for the areas in question. Essential preconditions for the
success of this program are the following:
ñ The detailed recording of the damage caused and
its impact on economic activity and demographic
trends.
ñ Clarity with respect to the goals of the program. The
main objective should not be reversion to the situa-
tion prevailing before the devastation, but the chart-
ing of a new path for more rapid economic, social
and environmental development.
ñ The securing of the resources necessary for achiev-
ing the targets that have been set.
ñ The effectiveness of expenditures made, so as to
ensure the maximum possible benefit for the strick-
en areas and for the Greek economy as a whole.
Under the conditions currently prevailing in Greece, the
choices and priorities of economic policy as described
above are — to a large extent — acknowledged by the
majority of the country’s political forces. The problem is
the effectiveness of economic policy in advancing the
specific means for achieving the various targets.
In order to be more effective, economic policy must
acquire determination, continuity, consistency and
administrative efficiency in order to push forward those
reforms that have been delayed.
By convincingly illustrating the benefits that will
result from these reforms for society as a whole, it may
be possible to overcome possible opposition and secure
the consent of society that will be necessary for the suc-
cess of the reform drive.
30
Markets
For the second consecutive year, the Athens
Exchange (ATHEX), with Bloomberg’s sup-
port, organized the Annual Hellenic Road-
show in London for Greek listed companies,
which again met with great success. The
roadshow is a unique opportunity to promote the
Greek market to the international investment commu-
nity. The reason behind this initiative is the certainty
of the ATHEX management that international expo-
sure will add to the value of Greek listed companies
and Greek entrepreneurship as a whole.
The success of this event was underlined by all
the participants and especially the president of the
Athens Exchange, Spyros Kapralos. But, apart from
his comments about the event, Kapralos also
announced that the Greek stock market could proceed
with a partnership only if it was to the benefit of
shareholders and the Greek capital market in general.
Robert Buckland, managing director of Global
Equity Strategy of Citi Investment Research, who was
the keynote speaker on the first day of the roadshow,
pointed out that markets are currently in a phase of
rising maturation. He stressed that he does not fear
the possibility of recession in the markets, adding that
for the next two years stocks will probably show a
controlled profit.
He underlined that the above objectives will be
achieved sooner or later, and in the case of Greece
possibly to a greater degree. According to Buckland,
the only danger that can stop the bull run in the next
two years is not the credit crisis but inflation. He
stressed that this time inflation is controlled.
The Second Annual Hellenic Roadshow was one
of the rare occasions that many of the participating
companies — especially the smaller ones — get to
interact with international funds and to liaise with
them in one-to-one meetings, during which they
demonstrated their long-term growth strategy. Around
60 percent of the ATHEX’s daily transactions are
made by international funds, so it is important for
Greek stock market officials to introduce the fund
managers to the management of the companies in
which they invest.
Funds that participated at this year’s roadshow
represent more than 3 trillion euros and the number
participating were double that of 2006. Among those
funds were: Fidelity, Capital, Wellington, Fortis, Axa,
HSBC, Morgan Stanley, Citigroup, BNP-Paribas,
Robeco, Goldman Sachs and Centaurus.
Furthermore, it was a unique opportunity for many
of the Greek companies to operate in an international
environment and to mingle with experts of the invest-
ment community.
It is very important for the ATHEX to support list-
ed companies and to assist them in their efforts
toward growth and expansion. It is worth noting that
many of the companies that participated in the first
roadshow have seen their business grow considerably
within the last 12 months. A number of them even
outperformed the ATHEX general index during the
year, thus proving the positive effect of such events on
their development.
Indeed, the number of participating companies
rose to 38 out of 30 last year and the number of
investment funds rose from 92 in 2006 to 138 this
year. Throughout the duration of the roadshow
approximately 650 meetings took place, rising from
500 last year.
Foreign funds eye Greek companies
The Hellenic Roadshow brings Greek companies into contact with foreign fund managersthat conduct around 60 percent of the daily transactions on the Athens bourse. The fundsthat participated at this year’s roadshow represent more than 3 trillion euros.
By Dimitris Pappas
Participating companies
ALPHA BANK
ASPIS BANK SA
ATHENS MEDICAL
ATTICA HOLDINGS SA
BAN∫ OF CYPRUS PUBLIC COMPANY LTD
EFG EUROBANK SA
ELVAL SA - HALKOR SA
FOURLIS HOLDINGS SA
FRIGOGLASS SA
GEK-TERNA SA
POSTAL SAVINGS BANK SA
HELLENIC PETROLEUM SA
HELLENIC TECHNODOMIKI SA
HYGEIA MEDICAL SA
IASO SA
ILEKTRONIKI ATHINON SA
INTRALOT SA
J&P-AVAX SA
LAMDA DEVELOPMENT
LV LAVRENTIADIS GROUP
METKA
MICHANIKI SA
MOTOR OIL SA
NEL LINES SA
NIREUS SA
OPAP SA
PIRAEUS BANK SA
PROTON BANK SA
SARANTIS SA
S&B INDUSTRIAL MINERALS SA
SIDENOR SA - CORINTH PIPEWORKS SA
SPRIDER STORES SA
TITAN CEMENT COMPANY SA
VIOHALCO SA
31
Δhe Athens Stock Exchange (ATHEX) will
shortly launch a new product and service as
part of plans to broaden operations offered to
investors. The Exchange Traded Funds
(ETFs) is a new product which will be issued
by the end of 2007. ETFs are open-ended mutual
funds which are issued by Mutual Fund Management
Companies (AEDAK) and are accepted for trading on
the stock exchange. Just like shares, ETFs can be
traded at any time, during trading hours, by members
and brokerage firms.
An ETF offers investors the benefits of a diversi-
fied portfolio, i.e. the risks involved are reduced by
spreading them across a wide portfolio, while its
main investment objective is to reproduce the per-
formance of a specific index. Seven international
and local issuers have expressed their interest in the
creation of an ETF and in a few days the successful
one will be selected. The issuers are: 1) Alpha Bank
- Alpha Mutual Funds, 2) BNP Paribas - BNP
Paribas Asset Management for its EasyETF platform,
3) EFG Eurobank - Eurobank Mutual Funds, 4) JP
Morgan - JP Morgan Securities, 5) Marfin Egnatia
Bank - Marfin Mutual Funds, 6) National Bank of
Greece - Diethniki Mutual Funds, 7) Societe Gen-
erale Group - Lyxor.
The new service that the ATHEX plans to incor-
porate in its activities is the Alternative Market of the
ATHEX (ENA), a Multilateral Trading Facility (MTF).
Since it is not a regulated market it does not fall
under the obligatory provisions that apply in regulat-
ed markets or impose strict admission and ongoing
requirements. It will operate in accordance with the
ATHEX operating rules.
The Alternative Market is addressed to companies
seeking funding and easier access to the Secondary
Market and investors looking for alternative forms of
investment and who are willing to accept higher risk.
The benefits for the market participants arising
from admission to the ENA are mainly the following:
an alternative method of fund-raising at a competi-
tive cost, quick and easy access to the Secondary
Capital Market, an increase of visibility and enhance-
ment of reputation, an expansion of business in new
products, market valuation of investments.
The benefits for the ATHEX are, firstly, the further
enhancement of its business and an increase in com-
petitiveness for the benefit of all market participants
and, secondly, the decrease of operating costs for the
ATHEX with a corresponding reduction of the said
cost for all capital market participants.
Of course the ATHEX has imposed some prereq-
uisites for admission to trading.
At the time of approval of the shares’ trading, the
shareholders' equity in the company must be at least
1 million euros on a consolidated basis. Also the
company must have published or drawn up annual
financial statements for at least two fiscal years. In
the event of loss-making fiscal years, accumulated
losses must not exceed 50 percent of own equity.
A company must appoint a nominated adviser
both before and after admission, at the time of trad-
ing approval and for two years following such
approval. Nominated advisers are either credit insti-
tutions and investment services firms/brokerage firms
which are authorized to provide underwriting invest-
ment services or financial services/companies/con-
sulting firms with adequate experience and opera-
tional organization.
Finally it should be noted that the ATHEX is
solely responsible for setting out the prerequisites
for admission to trading, the obligations of compa-
nies and advisers as well as for imposing sanctions
for any violation of the operating rules. ENA is
supervised by the Hellenic Capital Market Commis-
sion on issues concerning market abuse, public
offers and the issue of a prospectus, in cases its
issuance is mandatory.
New prospects for ATHEX
The Athens Stock Exchange is about to expand its range of products and services with theintroduction of Exchange Traded Funds, which are open-ended mutual funds helpinginvestors diversify their portfolio.
32
Greek banks have been enjoying a growing
market for credit products; however compe-
tition in the sector has been intensifying,
with the appearance of new players and
some existing banks becoming more com-
petitive. This is reflected in net interest margins com-
pression and in the efforts of the bigger banks to
maintain rather than increase their market shares.
On the other hand, the degree of concentration is still
high with the five largest banks controlling about 70
percent of total loans and more than 60 percent of
deposits. Furthermore, Greek banks are continuing to
expand their operations in the promising markets of
Southeastern Europe.
In recent years outstanding loans in Greece have
been growing at a significantly higher rate than GDP.
As a result, the loans/GDP ratio has been moving
higher and has reached a level estimated to be slight-
ly over 90 percent. The EU average stands at over
120 percent.
The latest data released by the Bank of Greece
regarding loans and deposits in the private sector
include the month of July. Overall, credit exhibited
healthy growth rates both in the retail segment and
in the corporate segment. Overall credit to the private
sector rose by 19.7 percent in July, reaching a total
of 199.8 billion euros.
Greek households are raising their debt levels at
a rate of 23.1 percent year-on-year. Unsecured lend-
ing is the strongest growth area, exhibiting growth
rates of 28.9 percent, while the lowest growth seg-
ment are the outstanding credit card balances that
are growing at rate close to GDP, i.e. 4.4 percent.
Outstanding balances in mortgages (including securi-
tizations) grew by 23.8 percent y-o-y, reaching 64.4
billion euros.
Corporate loans exhibited a 16.7 percent y-o-y
increase to 103.3 billion euros (including securitiza-
tions of 2.7 billion and bond loans of 16.4 billion).
We should however mention that there was a slight
acceleration of the growth rate in the months of May
and June. Despite the declining trend of overall cred-
it growth rates, after the hyper-growth experienced at
the beginning of this decade, Greek households and
corporations’ demand has kept the rates at relatively
high levels.
Deposits growth rates had been declining leading
up to the end of 2006. So far this year we have seen
the growth rates in the balance of deposits acceler-
ating and reaching 14.4 percent with the balance
standing at a total of 188.1 billion euros.
In order to get a better feel of the domestic bank-
ing sector, we compare loans and deposits growth in
H1 2007 extracted from the Greek banks’ stand-
alone balance sheets as an indication of their activi-
ty in the domestic market and compare it to the
growth market growth rates extracted from ECB data.
Looking at total loans figures we see that the mar-
ket growing at a 13 percent year-to-date, with most
of the big traditional banks growing at a slower pace.
Banks Piraeus, Marfin Popular and Postal Savings
had the highest growth rates during the first half of
2007, with 19, 32 and 15 percent respectively.
In terms of market share, the three largest banks —
National Bank of Greece (NBG), Alpha Bank and EFG
Eurobank — have lost a few basis points from their
market share figures, as is the case for Emporiki Bank
and ATEbank. On the other hand, the largest benefici-
ary is Piraeus Bank, which has gained almost 100 bps
during this period on the back of a very strong presence
in the corporate segment and mostly to SMEs.
Deposits have, according to the European Central
Bank, grown at 9 percent in H1 2007. Once more,
most of the larger banks grew at a slower pace.
Piraeus, EFG Eurobank and Marfin Popular grew
more than the market as a result of aggressive/differ-
entiating product offering.
In the domestic deposit market share EFG
Eurobank and Piraeus have gained approximately
100 bps each at the expense of NBG and Alpha
Bank. Of the smaller banks, Marfin Popular is the
only one gaining market share.
Greek banks have been exploring opportunities in
neighboring countries since the early 1990s. Before
that any foreign operations were limited to countries
and cities with a significant diaspora presence.
Ever since Alpha Bank launched its first opera-
tions in Romania in 1994, many have followed and
the new millennia has found Greek banks — espe-
cially the four largest — with operations in more than
one country in Southeastern Europe as well as in
Turkey and Egypt. The banks are a part of these fast-
growing economies and are contributors to the
growth of these countries.
In some cases these are markets with large pop-
ulations and they are all under-banked and under-
leveraged when compared to their Western counter-
parts, meaning they represent attractive growth
opportunities. Such is the environment where Greek
banks have either already established or are on their
way to establishing critical mass.
Most banks have provided business plans stretch-
ing up to 2009 or 2010. Many have revised them
upward and others are in the process of revising
them a second time.
The growth that Greek banks are experiencing
has obviously been reflected in their market prices as
well. The ATHEX banks index has outperformed the
General Index year-to-date by over 100 bps.
We remain positive on the sector, as any decline
in the domestic growth in demand for credit could be
offset by their established presence in the fast-grow-
ing economies of Southeastern Europe and the
Eastern Mediterranean.
Markets
Research
Securities
BANKING SECTOR
33
Piraeus Bank was founded in 1916 and became a private bank in
December 1991 after a long period of state ownership and manage-
ment (1975-1991). Today the bank is ranked fourth in terms of market
capitalization having demonstrated a period of very rapid growth
through M&As and organic growth. The most significant acquisitions
were those of Macedonia Thrace Bank, Xiosbank and ETBA Bank.
Moreover, the bank acquired a number of foreign branches in Greece,
such as Chase Manhattan, Credit Lyonnais and National Westminster.
Currently, Piraeus operates as a universal bank with a clear focus on
high margin segments such as SMEs and retail banking. At the same
time, especially after 2000, strategic efforts toward international expan-
sion have been ongoing, which has resulted in a significant presence of
the bank in eight countries outside Greece with 356 branches and 6.2
billion euros in assets. President and CEO Michalis Sallas has been in
charge of the bank since 1991 being very successful up to date and
respected even by his competitors. There is also a team of longstanding
senior managers with a very active role in the bank’s operations as well
as in transferring its corporate culture. The way the management react-
ed during the recent takeover attempt by the Marfin Group was evidence
of its effectiveness and high quality. At the end of June 2007, the
Piraeus Bank Group had a network of 574 branches (304 in Greece and
270 abroad — excluding an acquisition in Ukraine which was com-
pleted in September), 10,227 employees and its equity capital stood at
1.9 billion euros. Clients' deposits, repos and retail bonds issued came
to 20.7 billion euros, gross loans reached 25.5 billion and total assets
were 37.3 billion. The company reported 372 million euros’ net profit
for H107 including 150 million euros in one-off gains from the sale of
its stake in Bank of Cyprus.
Greek market
Domestically, Piraeus Bank has been one of the biggest success stories
in the sector. Still, having a young branch network (one out of three
branches have been in operation for less than five years) the bank pres-
ents one of the highest growth rates in terms of business growth and
profitability. In terms of market share, Piraeus has a 13.1 percent in
loans and 12.2 percent deposits and repos, and ranks fourth in both
categories behind NBG, EFG and Alpha. Fast procedures and flexible
product offering, expertise in SMEs, investing in new technologies and
young and friendly IT personnel are among the factors that make
Piraeus a distinct case in the banking sector and resulting also in mar-
ket share gains in a very competitive environment. In line with its strat-
egy, the creation of the successful Winbank — an e-banking platform
which has won several awards — has been contributing to the bank’s
image as a modern and sophisticated organization as well to its busi-
ness growth. An effort to expand to other sectors beyond traditional
banking, such as bancassurance products and wealth management, is
also under way. In June the bank acquired a 30 percent stake in
Europaiki Pisti, a medium-sized Greek insurance company, and few
days ago it signed an exclusive agreement with the ING Group, follow-
ing a five-year strategic alliance. The latter agreement calls for the dis-
tribution of ING’s bancassurance products domestically by the bank and
the sale of Piraeus retail products through the insurer’s network, where-
as the partnership with Europaiki Pisti works is complementary as the
bank can sell its insurance products through its international network.
International market
Piraeus Bank is also very active in the broader region outside
Greece, with a presence currently in eight countries after the com-
pletion of the acquisition of the Ukrainian International Commerce
Bank, while Cyprus operations are also expected to start in January
2008. Excluding Ukraine, total assets abroad stand at 6.2 billion
euros, total loans at 4.3 billion, or 17 percent of group loans, and
total deposits at 2.9 billion, or 14 percent of group deposits. Inter-
national operations contribute about 12 percent of the group’s net
profit, which is expected to increase in the coming years as busi-
ness activity expands and matures. Indicative of how fast business
is growing abroad for the bank is the impressive growth rates
reported in H107 for loans and deposits, which grew by 93 percent
and 44 percent respectively. Piraeus’s first move toward interna-
tional expansion was made quite early in 1996, opening its first
subsidiary in Albania, with the next step in 1999 when the bank
established its presence in London and New York. In 2000 Pater
Bank (renamed Piraeus Bank) in Romania was acquired, while
2005 was one of the most active years since the bank took control
of subsidiaries in Bulgaria, Serbia and Egypt. Currently Bulgaria
and Romania are the countries where the bank has its largest pres-
ence, while Ukraine and Egypt are two of the largest and most
underbanked economies of the region which are expected to grow
very fast, generating significant benefits in the future.
Recent developments
An indication of the bank’s quality comes from the recent successful
completion of a 1.35-billion-euro capital increase, equal to its exist-
ing capital at the time and without having a single major shareholder
to contribute. In July Piraeus announced its intention to proceed with
a capital increase by issuing a total of 67,548,758 new common reg-
istered shares (a ratio of one new to four old shares) at a subscription
price of 20 euros each. Despite the crisis that weighed on global mar-
kets in the last two months, the bank managed to attract 2.4 billion
euros, oversubscribed 1.8 times, which represents a significant suc-
cess. According to the management, approximately 900 million euros
of the incremental capital will be required to support the accelerated
business growth through 2008 while at the same time preserving cap-
ital adequacy levels above 11 percent and Core Tier I ratio above 7.5
percent.
Risks
Growth does not come without risks. Nevertheless it does not seem
that Piraeus has taken excessive risks in its growth effort. Operational
and execution risks are there but given the bank’s recent history they
should not create abnormal concerns. Systematic risks are more
important in this case.
The future
Piraeus’s vision is to be distinguished as a significant regional
player in SE Europe and the Eastern Mediterranean by becoming
the main bank of service for SMEs, being strong in providing solu-
tions to individuals’ banking needs and remaining a preferred
employer and top financial services provider. More specifically, in
Greece the bank is aiming at having a network of 360 branches
by 2010 in an effort to increase market share in all segments of
activity through attracting new relationships and intensifying
cross-selling. Expertise in SMEs and retail banking will aid in this
direction. In its international operations, Piraeus’s primary goal is
to expand business organically or through small acquisitions in
countries where the bank is already present, whereas expansion to
new countries cannot be excluded, especially after the successful
completion of the capital increase. Domestic experience in sever-
al segments is quite valuable in forming an entry strategy in most
of the foreign operation attempts.
Piraeus Bank
w w w . p ko n l i n e . g r
34
Markets
Leading European players take position in Greece
Foreign investment in Greece is on the rise. Last year inflows of foreign direct investment reached 5.4 billion dollars, according to the World Investment
Report, published in the middle of October by UNCTAD, the UN’s division on trade. This development shows that the country is increasingly attracting the
interest of international business. Here are seven examples of foreign investors who are leading players in the European economy and that have invested in
Greek companies with activities in various sectors, ranging from banking to energy and retail.
By Maria Vasileiou
Credit Agricole — Emporiki BankIn December 2000 French bank Credit Agricole announced the acquisition of 6.7 per-
cent of Emporiki Bank. It was a strategic acquisition that led Credit Agricole to fur-
ther increase its stake in the Greek bank to 9 percent in May 2002 by acquiring 2.35
percent owned at the time by the Loans and Consignment Fund (LCF). The terms of
the transaction were those set when Credit Agricole SA purchased its initial holding
in Emporiki in December 2000. At the time, it was agreed that Credit Agricole SA
would have the right of first refusal on the LCF's holding in Emporiki. Six years after
Credit Agricole began cooperating with Emporiki, on July 4, 2006, the French bank
made a cash offer of approximately 2 billion euros for Greece’s fourth-largest banking
institution. A month and a half later Credit Agricole SA’s bid for Emporiki was
declared successful and it secured a 72 percent stake.
Today Emporiki collaborates with Credit Agricole SA in four areas: life insurance,
with the formation of Emporiki Life, a 50-50 joint venture between Emporiki and
French insurer Predica; consumer credit via Credicom, a 50-50 joint venture between
Emporiki and banking institution Sofinco; asset management with a 20 percent hold-
ing by Credit Agricole Asset Management (CAAM) in Hermes, Emporiki’s fund man-
agement arm, and the formation of Emporiki Asset Management, an institutional
investment manager 20 percent-owned by CAAM; and wholesale banking with coop-
erative activities between Credit Agricole Indosuez and Investment Bank (of which CAI
owns 2 percent) in project financing and fixed-income business. Emporiki Bank has
1.5 million customers, 425 branches and a 10 percent market share.
Credit Agricole is the largest banking organization in France, with a presence across
the entire spectrum of banking and finance activities. It is a leader in Europe in terms
of current accounts and retail banking revenues, while it holds the second position in
Europe and the sixth worldwide in terms of shareholders' equity. Credit Agricole SA pur-
sues a strategy of sustainable, profitable growth through a unified approach between the
regional banks and the group's specialist business line subsidiaries.
Credit Agricole SA’s activities are centered on six business lines: French retail
banking, with a 25 percent stake in the Regional Banks and the LCL (Le Credit Lyon-
nais) network, international retail banking, specialized financial services, asset man-
agement, insurance and private banking, and corporate and investment banking.
Credit Agricole is France’s leading retail bank and has a unique competitive advan-
tage: two highly complementary networks (the Regional Banks and LCL). The group
significantly increased its international retail banking presence in 2006. After acqui-
sitions in Egypt, Portugal and Ukraine, it seized opportunities to build on its presence
in Greece and Italy. Credit Agricole SA generated net income of 3.947 billion euros
for the first half of 2007, an increase of 48.7 percent compared with the same peri-
od in 2006. Net income expanded by 17.9 percent, to 1.292 billion euros, despite a
conservative approach to the impacts of the US subprime loan turmoil, thereby con-
firming the great strength of the group's profitable growth model.
Emporiki’s restructuring plan is moving forward as anticipated. Its five-year busi-
ness plan was announced on April 27, 2007, with the aim of transforming the bank
into a modern banking institution and recapturing its natural market share (10.5-11
percent, on average). This process is based on three sources of growth: i) the sus-
tained growth of the Greek economy, ii) the transformation potential of the bank, and
iii) further important developments in SE Europe, where Emporiki will serve as a hub
for Credit Agricole.
Societe Generale — Geniki BankOn March 5, 2004, French bank Societe Generale (SoGen)
became the majority shareholder of Greece’s Geniki Bank, hold-
ing 50.01 percent of Geniki following the acquisition of a block
of shares held by the Army Pension Fund and the completion of
a reserved capital increase on the basis of 6 euros per share.
Societe Generale is one of the largest financial services
groups in the eurozone. The group employs 88,000 people serv-
ing more than 16 million clients worldwide. Its interests revolve
around three key businesses: Retail Banking and Financial Ser-
vices, where SoGen serves more than 15 million retail cus-
tomers worldwide; Asset Management, Private Banking and
Securities Services, where Societe Generale is one of the largest
banks in the eurozone in terms of assets under custody ($1.165
trillion) and under management (284 billion euros, December
2003); and Corporate and Investment Banking, in which it
ranks among the leading banks worldwide in euro capital mar-
kets, derivatives and structured finance. SoGen is included in
the four major socially responsible investment indices. Societe
Generale was established on May 4, 1864, when the authoriza-
tion decree was signed by Napoleon III. The bank's ambitions
were reflected in its original articles of association, when it took
the form — still very unusual at the time — of a limited com-
pany. In 2006 the bank reported 22.4 billion euros net banking
income.
Geniki Bank, a member of the Societe Generale Group,
stands today at a very important juncture. The bank is entering
a new era. Many positive initiatives have been taken and
improvements have been achieved at all levels. The existing
branches are undergoing renovation and by the end of the year
a significant number of new branches will have opened. New
products are being prepared and will soon be launched on the
market.
Geniki’s total assets are estimated at 3.8 billion euros (end
of 2006). It has more than 305,000 customers, 2,303 employ-
ees, 139 branches and 67 off-site ATMs (at end-2006). Total
operating income over the first six months of 2007 came to
84.7 million euros, slightly over (+0.4 pct) the first half of
2006. Costs in the first half of 2007 showed a limited increase
(+4 pct) against the same period last year, at 84.7 million
euros. Operating results before provisions stood at nil in com-
parison with 3 million euros in the first half of 2006. On June
30, 2007 total loans and advances, net of provisions, amount-
ed to 3.1 billion euros and showed an increase of 12.8 percent.
Total customer deposits and repos, amounting to 2.8 billion
euros, showed an increase of 8 percent. As planned, a share
capital increase of 210 million euros was voted upon in June
2007 in order to meet all regulatory and statutory requirements.
35
Iberdrola — C. Rokas SAC. Rokas SA was founded in 1958 by Christos Rokas, its main scope of
business being the construction and installation of lifting and handling
equipment, as well as heavy machinery and steel structures. In 1977, fol-
lowing its conversion into a societe anonyme (SA), or public limited com-
pany, the company built its new modern production unit in the industrial
area of Tripolis and started specializing in more complex steel structures,
supplying equipment to major commercial ports, shipyards and heavy
industries in Greece and abroad. In 1990, the company was listed on the
Athens Stock Exchange (ATHEX). During the period 1991-1992, the com-
pany constructed the first wind farms in Greece for the Public Power Cor-
poration (PPC) and in 1998 it constructed the country’s first private wind
farm. In 2004 Rokas became a member of the Iberdrola Group, which dates
back to the beginning of last century when Hidroelectrica Espanola was set
up to supply the markets of Madrid and Valencia, exploiting the Tajo, Jucar
and Mijares rivers. Today Iberdrola is a world leader in renewable energy
sources, with a considerable international presence in over 30 countries. In
2005 Iberdrola completed the agreement signed with the Rokas Group, the
largest wind energy producer in Greece, acquiring a 49.9 percent stake in
its capital. The company presently holds a leading position in both sectors
of its activity — renewable energy sources and electromechanical equip-
ment. In wind energy especially Rokas has a considerable market share,
with a total installed capacity of 193.3 megawatts. In 2006 the company
reported turnover of 50.188 million euros and gross profit of 22.133 mil-
lion euros.
Last year Iberdrola’s board of directors unanimously approved the 2007-
2009 strategic plan — with projections to 2011 — which continues the
course decided upon and successfully fulfilled in the previous five years and
contemplates the beginning of a new investment cycle, within the frame-
work of which 9 billion euros (+20 percent compared to the previous three-
year period) will go toward the continuation of the company’s commitment
to the basic energy business, both in Spain and overseas. The new strate-
gic plan, the aim of which is to increase profitability through growth, effi-
ciency and internationalization, ratifies the company’s commitment to the
environment and sustainable development. Not in vain does Iberdrola envis-
age extending its world leadership in the sector of renewable energy — it
will reach a power of 10,000 MW in 2011 — and investing in clean elec-
tricity generation technologies. Supply quality is likewise one of its basic
pillars. As a consequence of both its investments and growth of efficiency,
Iberdrola will obtain a net profit at the end of the period of 2.350 billion
euros, a figure that posits an increase of 70 percent (almost 1 billion euros)
with respect to that achieved in the 2005 financial year (1.380 billion
euros). Similarly, 3 billion euros will be paid as dividends. Iberdrola’s
strategic focus again saw positive results in first-half accounts. Despite an
environment of low pool prices (-36 pct) and modest demand for electrici-
ty in Spain (+2.6 pct), performance improved across the board: Sales rose
22.2 percent to 6.718 billion euros), EBITDA was up 25.4 percent to
2.403 billion euros, net operating profit rose 22.3 percent to 1.697 billion
euros and net profit was 34.7 percent higher at 1.101 billion euros. The
figures are testimony to the birth of a world energy leader, with a strategic
focus on an Atlantic platform (Europe - North America - Latin America), and
a cash flow (generated from operations) that surged 45 percent in the first
half to 1.712 billion euros, laying the foundations for future growth at Iber-
drola.
Lafarge — AGET Heracles GroupThe AGET Heracles Group of Companies was established in 1911. But it was-
n’t until 1992 that the company started attracting foreign investment. During
that year 50.5 percent of the company's shares were transferred to CAL-NAT,
a joint venture of Calcestruzzi SpA and National Bank of Greece. Four years
later, in 1996, the clearance procedure for CAL-NAT took place as well as the
distribution of the AGET shares it possessed (50.5 percent of the total) to Con-
cretum (38.5 percent) and National Bank of Greece (12 percent). In 2000
54.48 percent of the company's shares were transferred to the Blue Circle
Industries Group of the UK, which was acquired in 2001 by Lafarge, today
AGET Heracles’ major shareholder.
The Heracles Group is now Greece’s largest cement producer, with a pro-
duction capacity of 9.6 million tons per year. It is also the largest cement exporter
in Europe. Focused on sustainable development, it creates value for all its stake-
holders, contributing to the economy and to the local communities where it oper-
ates. With three cement plants — in Volos (the largest in Europe), Halkis and
Milaki — seven cement terminals, as well as facilities for production and trading
of aggregates and concrete, the group has production activities in 29 prefectures
around Greece and trades all over the Greek mainland and islands.
Lafarge is the world leader in building materials, with top-ranking positions
in all of its businesses: cement, aggregates and concrete and gypsum. With
71,000 employees in over 70 countries, Lafarge posted sales of 17 billion
euros in 2006. Lafarge is committed to pursuing a strategy that puts the cus-
tomer at the top of its priorities list. Lafarge is the only company in the con-
struction materials sector to be listed in 2007’s ‘Global 100: Most Sustainable
Corporations in the World.’ Its growth is based on its sustainable development
policy. Group know-how encompasses industrial efficiency, value creation, pro-
tection of the environment, respect for people and cultures, and preservation
of natural resources and energy. Lafarge offers all construction industry sectors
— from architect to tradesman and from distributor to end-user — a compre-
hensive range of products and solutions for each stage of the building process.
During the period 1990-2001 Lafarge became the world leader in building
materials. In 2001, following the acquisition of Blue Circle, Lafarge became
the world's leading cement producer. Numerous acquisitions and joint ventures
in all four divisions and on every continent, particularly Asia, have continued
to consolidate its world leadership position. In July 2001, Lafarge was intro-
duced onto the New York Stock Exchange (NYSE).
The Heracles Group of Companies announced sales amounting to 331 mil-
lion euros in the first half of 2007, marking a marginal increase of 0.5 percent
year-on-year. Respectively, the company’s sales for the first half of 2007
amounted to 297 million euros — an increase of 1 percent on the correspon-
ding period of 2006. The group’s net profits after taxes for the first half
amounted to 28.2 million euros, compared to 26.8 million euros in the same
period of 2006 — an increase of 5 percent.
In 2006 the group’s sales reached 693.7 million euros, increasing by 13.9
percent in relation to the corresponding period of 2005. Respectively, compa-
ny sales for 2006 amounted to 615.7 million euros, increased by 13.1 per-
cent compared to the same period of 2005. The rise in turnover mainly derived
from the increase in the volume of cement and concrete sales in the domestic
market, as well as in the achievement of higher prices in cement exports. Profit
after taxes for the company showed a decrease by 63.9 percent, at 54.3 mil-
lion euros compared to 150.5 million euros in 2005. Respectively for the
group, profit after taxes decreased by 63.4 percent at 58 million euros in
2006, compared to 158.7 million euros in 2005.
36
Weather Investments — Wind HellasWind is today one of Greece’s largest telecommunications operators, with an
annual turnover of 1.1 billion euros and more than 4 million customers. It was
founded in 1992 as a subsidiary of Telecom Italia and became the technology
leader of the Greek mobile telephony market thanks to its innovative products and
services. In 2005 the company was acquired by APAX Partners and Texas Pacif-
ic Group, two of the biggest international investment funds. In 2006, TIM Hellas
acquired Q-Telecom, the fourth-largest mobile operator in Greece. This acquisition
allowed TIM to further strengthen its market position. the year 2007 is another
milestone in the company’s history. On February 7, Weather Investments SpA,
which controls the international group Orascom Telecom, acquired TIM Hellas.
The sale price included 500 million euros in equity plus 2.9 billion euros in net
debt at the end of 2006. APAX and TPG initially acquired TIM Hellas from Tele-
com Italia in June 2005 for 1.6 billion euros. In January 2006 the consortium
completed the follow-on acquisition of Q-Telecom from Info-Quest SA for 360 mil-
lion euros. During APAX and TPG’s period of ownership, the company was suc-
cessfully turned around and set on a growth trajectory leading to a significant
improvement in all financial and operating key metrics. As part of Weather Invest-
ments Group’s international footprint, TIM continued its successful course in the
Greek market and changed its brand name to Wind.
Weather Investments is a global telecommunication group controlled by
Naguib Sawiris, who ranked 278th among the world's richest people in 2006.
Sawiris made his first foray into the European telecom sector with his group's 12-
billion-euro purchase last year of a controlling stake in Italian mobile and fixed-line
phone operator Wind Telecomunicazioni. He has also bought a stake in Hutchison
Whampoa for 1.3 billion dollars. Today Weather owns Wind Telecomunicazioni
SpA, the third-largest mobile operator and second-largest fixed-line operator in
Italy as well as 50 percent plus one share of Orascom Telecom Holding SAE. Oras-
com Telecom is a leading international telecommunications company operating
GSM networks in seven high-growth markets in the Middle East, Africa and South
Asia. In Greece, through Wind Hellas as well as through the second-largest Greek
fixed-line operator Tellas, the Weather Investments group has a significant pres-
ence in the local market and develops synergies to offer even more competitive
products and services. Weather Investments gained absolute control of Tellas in
the middle of October. Sawiris’s holding company bought the remaining 50 per-
cent minus one share of Tellas by offering 175 million euros to the Greek Public
Power Corporation.
Today Weather owns 100 percent of Wind Telecomunicazioni SpA, with over
15.2 million mobile subscribers and more than 1.14 million direct fixed-line sub-
scribers as of May 2007. Weather also controls and owns 50 percent plus one
share of Orascom Telecom Holding, having a total population under license of
approximately 460 million with an average mobile telephony penetration of
approximately 29 percent as of March 31, 2007. OTH operates GSM networks in
Algeria, Bangladesh, Egypt, Iraq, Pakistan, Tunisia and Zimbabwe. OTH had over
56 million subscribers as of March 2007 and owns 19.3 percent of Hutchison
Telecommunications International, a leading telecommunication services provider
operating in eight countries. OTH is traded on the Cairo and Alexandria Stock
Exchanges and has GDRs traded on the London Stock Exchange.
Delhaize Group — AB Vassilopoulos SASince its acquisition of Trofo, the sixth-largest food retailer in Greece, in Jan-
uary 2001, AB Vassilopoulos has become the second-largest food retailer in
Greece. AB focuses on customers looking for competitive pricing as well as
high-quality products and services. In 1992, the Delhaize Group acquired con-
trol of AB Vassilopoulos. It currently owns 61.3 percent of AB. The Greek oper-
ating company of the Delhaize Group had 7,200 employees as of December
31, 2006, and was operating 148 stores. AB Vassilopoulos SA was estab-
lished in December 1969 by brothers Gerasimos and Charalambos Vas-
silopoulos. In November 1990 it was listed on the main market of the Athens
Stock Exchange. AB reported revenues of 559.5 million euros and a net prof-
it of 13.5 million euros during the first half of 2007.
The Delhaize Group is a food retailer headquartered in Belgium which operates
in seven countries. The group was founded in Belgium in 1867. The principal
activity of the Delhaize Group is the operation of supermarkets in North Amer-
ica, Europe and Southeast Asia. As of December 31, 2006, the Delhaize Group
has had a sales network (which includes directly operated, franchised and affil-
iated stores) of 2,705 stores with employees numbering approximately
142,500. Store formats are primarily supermarkets, which represent 85 per-
cent of the Delhaize Group's sales network. The group's sales network also
includes other store formats, such as neighborhood stores, convenience stores
and specialty stores. In addition to food retailing, which accounts for approxi-
mately 95 percent of the Delhaize Group's sales, the group also engages in
food wholesale to stores in its sales network and in non-food retailing of goods
such as pet products and health and beauty products.
In 2006 the Delhaize Group recorded sales of 19.2 billion euros and net
income of 351.9 million euros. The Delhaize Group's operations are located
primarily in the United States, Belgium and Greece. Its other operations are
located in Romania and Indonesia. Belgium is the historical home market of
the Delhaize Group. Over the years, the group has built a strong market posi-
tion (second in terms of sales), providing its customers with quality products
and services at competitive prices. At the end of 2006, the Delhaize Group's
sales network consisted of 843 stores in Belgium, and the group employed
18,000 people in its Belgian activities.
The Delhaize Group's Belgian sales network consists of several brand names,
depending on the specialty, store size and whether the store is directly operat-
ed, franchised or affiliated (that is, stores to which the group sells wholesale
goods and generates income only from sales made to such stores). Delhaize ‘Le
Lion’ supermarket is the leading banner of the group in Belgium. The other
supermarket banner, AD Delhaize, has been the most important growth vehi-
cle for the Delhaize Group in Belgium for some years now. Proxy Delhaize is a
convenience store operating minimarkets emphasizing fresh products and Del-
haize private label products.
Dixons Group — Kotsovolos SAOn July 4, 2004 Dixons, the high-street electronics and electrical chain
owned by DSG International, took a controlling stake of Greek firm Kotsovo-
los, a leader in mixed electricals retailing in Greece, with the 35.7-million-
euro cash acquisition of a 39 percent stake in the Greek company. The stake
increased Dixons’ holding in the company to 52.3 percent from 13.6 percent
and gave it a controlling interest in Kotsovolos. It also gave Dixons the oppor-
tunity to extend its reach in Greece. Later Dixon’s increased its stake in
Kotsovolos even further, when the Fourlis Group sold a 10 percent minority
participation in the share capital of P. Kotsovolos SA. Greek furniture and
sporting goods retailer Fourlis Holdings sold a 10 percent stake in Kotsovo-
los to the Dixons Group for 22.3 million euros. Fourlis holds another 10 per-
cent stake in Kotsovolos and has the option to sell by September 2008.
The United Kingdom-based company DSG international plc, formerly Dixons
Stores Group plc, is one of the largest consumer electronics retailers in
Europe. The company operates the Dixons, Dixons Tax Free, Currys, Cur-
rys.digital and PC World stores along with many other brands across
Europe. DSGi is also a member of the FTSE 100 Index. The group's main
focus is to specialize in the sale of high-technology consumer electronics
products, audiovisual equipment, PCs, small and large domestic appli-
ances, photographic equipment, communication products and related
financial and after-sales services (e.g. extended service agreements). Other
products and services provided by the group include electrical products,
spares, accessories and repairs, mobile services, online digital photo pro-
cessing, pre-recorded media and even childcare equipment. It also under-
takes business to business (B2B) sales. Its main rival is KESA Electricals
plc, which owns Comet and Darty.
The British group reported 7.929 billion pounds sterling of turnover in
2006, while profit reached 114.1 million pounds. It operates in the UK,
Ireland, Scandinavia, Italy, France, Spain, Hungary and the Czech Repub-
lic. Apart from Greece, where the group has retail interests, it undertakes
property development in Belgium, Luxembourg, France and Germany.
37
Greece managed to ride a wave of growth in
global foreign direct investment (FDI)
flows in 2006 relatively successfully, and
saw both the inflow and outflow of FDI
soar to record highs, at least compared to
the years since 1990. Moreover, during 2006
Greece improved its relative position both as a
recipient of FDI and as an investor abroad,
although it continued to perform way beneath its
potential, especially as an FDI destination.
These are some of the conclusions in the 300-
page 2007 World Investment Report (WIR07),
which is compiled annually by the United Nations
Conference on Trade and Commerce (UNCTAD).
This year the report was presented in the library of
the American College of Greece, in Aghia Paraske-
vi, northern Athens.
Greece climbed to a respectable 42nd position
as a provider of FDI in 2006 (compared to 57th
place in 2005), with outflows of $4.167 billion
(compared to $1.451 billion in 2005). On the
other hand, it ranked 114th among 141 countries
with inflows of $5.363 billion in FDI (compared to
126th with $607 million in 2005). More telling of
the country’s performance, however, is the fact
that UNCTAD estimates Greece’s actual inflow
potential at 36th among all the countries UNCTAD
surveys.
According to economists, the difference in rank-
ing regarding outflows and inflows reflects to a cer-
tain extend the obstacles that discourage invest-
ment in the Greek economy. A country’s potential
is calculated on the basis of several indices, such
as GDP per capita, the growth rate of the economy
as a whole, exports as a percentage of GDP, the
ratios of fixed-line and wireless telephony connec-
tions as well as that of college graduates in the
population, energy use for commercial activities,
and the country’s risk investment assessment.
A significant part of the FDI inflows was due to
mergers and acquisitions (M&A) activity. The
largest such transaction in 2006 was the acquisi-
tion of Emporiki Bank by the French giant Credit
Agricole, worth $2.7 billion. According to
UNCTAD, this deal is one of the 172 so-called
mega-deals, involving more than $1 billion, that
took place worldwide in 2006.
Experts expect that Greece will not be able to
sustain this growth in FDI inflows in the immediate
future.
A large share of the FDI outflows went to coun-
tries in Southeastern Europe, where Greek compa-
nies more than doubled their sales to $821 million
in 2006 from $362 million in 2005, making Greek
multinationals in the aggregate the ninth-highest
grossing group in the area (Austria leads the pack
with $5.6 billion).
Overall FDI flows increased for the third con-
secutive year in 2006, reaching $1.3 billion, an
increase of 38 percent, said Professor Marina
Papanastasiou of the American College of Greece
Graduate School and the Copenhagen Business
School, who presented the WIR06 in Greece.
The top recipient of FDI was the United States,
with the United Kingdom and France in second
and third place respectively. China ranked first
Perennial underperformer showsgrowth in foreign investments
Foreign direct investments in Greece displayed large growth in 2006 but the countrycontinues to fall short of its potential to draw foreign players. Outflows, on the other hand,remain strong as Greek companies invest heavily in the wider region.
Harilaos H. DaskalothanassisDirector of media relations at the
American College of Greece.www.acg.edu
Markets
38
among developing countries, and Russia was the
largest recipient among the so-called transition
economies.
Among regions, Asia attracted the most invest-
ment, with West Asia (including Turkey and the Gulf
countries) performing best with a tenfold increase in
inflows since 2002, according to the summary pro-
vided by Supachai Panitchpakdi, the secretary-gener-
al of UNCTAD. Turkey in fact performed best among
West Asian countries, and attracted $20.12 billion in
FDI inflows in 2006 — twice what it did in 2005, and
more that 25 times its average during the decade
1990-2000 ($791 million annually). Turkey’s surge
reflects the approval of international investors of the
stabilization of the Turkish economy under the moder-
ate Islamist governments of Prime Minister Recep
Tayyip Erdogan.
Resource-rich Africa performed remarkably well by
historical standards, attracting $36 billion in FDI,
double its performance in 2004.
The UNCTAD study registered the broad recovery
in mergers and acquisitions activity that took place in
2006, with global M&As reaching their best level
since the banner year 2000.
UNCTAD predicts FDI activity to continue growing
in 2007, albeit at a slower pace. According to Pan-
itchpakdi, his organization’s surveys show that FDI
activity is likely to grow in the years 2008 and 2009.
This outlook is uncertain, however, due to signs of
global financial instability and the frenzied rise in the
cost of energy.
In the discussion that followed the presentation,
Dr Anna Triantafyllou, a professor at the American
College of Greece and a financial columnist, urged
countries ‘not to be passive recipients of FDI’ but to
set up the appropriate regulatory frameworks that will
prevent exploitative practices and will ensure sustain-
able development.
$100-a-barrel oil?This year’s WIR paid particular attention to the so-
called extractive industries, a broad sector that
involves raw materials and energy. Much of the FDI
that was directed to developing countries and the so-
called transition economies, like the Russian Federa-
tion, went to mining and drilling. With oil prices hav-
ing approached $90 per barrel in recent weeks, much
of the discussion at the presentation revolved around
oil.
Energy expert and former Finance Minister
Andreas Andrianopoulos remarked that unlike previ-
ous oil price surges, the current one is demand-driven
and therefore more sustainable and less damaging to
global economic growth. Andrianopoulos, who in the
past served as Eleftherios Venizelos professor at the
American College of Greece, explained that a shortage
of refining capacity conspires with rapidly growing
demand from Asia to push oil even higher, and said
that it should not surprise anyone if oil topped $100
per barrel in the near future.
Cross-border merger and acquisition overview, 1990-2006 (millions of dollars)
Sales Purchases
1990-2000 2004 2005 2006 1990-2000 2004 2005 2006
(Annual average) (Annual average)
Greece 119 1,455 1,295 6,490 37 74 408 6,590
Memorandum
Turkey 85 132 13,395 15,303 15 108 8 806 584
United Kingdom 17,980 58,107 171,689 150,527 20,447 47,307 90,535 91,717
European Union 53,668 178,772 429,146 432,144 59,437 164,677 386,757 426,656
Europe 56,362 185,809 445,126 451,288 66,085 176,095 413,405 483,637
Developed economies 105,003 317,431 604,882 727,955 108,743 341,682 627,064 752,482
World 117,889 380,598 716,302 880,457 117,889 380,598 718,302 880,457
Source: UNCTAD, World Investment Report 2007: www.unctad.org/wir or www.unctad.org/fdistatistics
For details, see ‘definitions and sources’ in annex B and annex tables B. 4 and 6 in WIR07
Country rankings by Inward FDI Performance Index,
Inward FDI Potential Index and Outward FDI Performance Index, 2004-2006a
Inward FDI Performance Index Inward FDI Potential Index Outward FDI Performance Index
Economy 2005 2006 Economy 2004 2005 Economy 2005 2006
Benin 103 109 New Zealand 30 31 Trinidad and Tobago 33 37
Algeria 113 110 Bahrain 32 32 South Africa 58 38
Malawi 116 111 Slovenia 31 33 United States 37 39
Denmark 123 112 Estonia 34 34 Lithuania 38 40
India 121 113 Malaysia 35 35 Indonesia 42 41
Greece 126 114 Greece 36 36 Greece 57 42
Australia 129 115 Kuwait 41 37 Japan 44 43
Paraguay 120 116 Czech Republic 39 38 Poland 54 44
United States 118 117 Lithuania 38 39 Venezuela 39 45
Uzbekistan 114 118 Libyan Arab Jamahir 43 40 Jamaica 36 46
Taiwan 132 119 Hungary 37 41 Latvia 46 47
Source: UNCTAD, World Investment Report 2007: www.unctad.org/wir or www.unctad.org/fdistatistics
For details, see annex table A.I.6. in WIR07.
Note: Ranking is that of the latest year available. Covering 141 economies. The potential index is based on 12 economic and policy variables.
a. Three-year moving averages, using data for the three previous years, including the year in question.
39
Since March 2006, upon the establishment
of the PPP Interministerial Committee,
under the provisions of Law 3389/2005 for
the implementation of public-private part-
nerships (PPPs) in Greece, 24 projects
have been approved with a total budget of 3.1 bil-
lion euros.
The approval of these projects has been based
on patterns set in other European countries which
have successfully implemented PPP projects for
years. The approved projects fall into different sec-
tors of the economy, and more specifically into the
sectors of education, health, port infrastructure,
waste and sewage management, accommodation
of public authorities and tourism.
It is a fact that the up-to-date progress of the
implementation of PPPs in Greece is mainly a result
of the consistency between words and actions that
has constantly been demonstrated since the ratifi-
cation of the underlying legal framework.
The main target of the PPP unit was to create
a new market of projects and services which would
significantly contribute to the development of the
Greek economy. The approval of the abovemen-
tioned projects in just one year demonstrates the
establishment of this new market. A market in
which consulting firms, consultant engineers,
banks and construction companies can all be
active, a market open and accessible to any inter-
ested private party, a market which can yield sig-
nificant benefits to all stakeholders involved.
Up to now, the procedures for the appointment
of specialized financial, technical and legal advis-
ers have been completed for half of the abovemen-
tioned projects, while it is estimated that the rest
(apart from the last five projects approved in
August 2007) will be completed in the next three
months. There has been a great interest in these
projects, since more than 100 Greek and foreign
companies have participated in the respective ten-
ders.
As for the tendering of the PPP projects them-
selves, the Hellenic Public Real Estate Corporation
(KED SA) was the contracting authority that pro-
cured the first PPP project for the construction and
maintenance of seven new fire stations of the Hel-
lenic Fire Service. The procurement of this project
is estimated to be completed by March 2008, and
the construction of the infrastructure is therefore
estimated to start in June 2008.
In July 2007, the General Secretariat for the
Olympic Utilization launched the tender for the
selection of the private partner for the transforma-
tion of the Faliron Pavilion (Tae Kwon Do stadium)
into an international conference center. According
to the planning of the PPP unit, from December
onward, on a monthly basis, a new PPP tender will
be launched, beginning with the construction and
maintenance of three new prisons, the construction
and maintenance of six new buildings for the
University of the Peloponnese and the Attica
schools project.
The progress of PPPs creates positive prospects
for their further implementation in Greece. It is
now demonstrated in practice that the Greek pub-
lic authorities have a clear picture of the benefits
and the new opportunities that the careful design
and implementation of PPP projects can yield for
the faster provision of infrastructure and better-
quality services to the citizens. It is also evident
that the private sector considers PPPs as a new
field for business activity. The approval of the
implementation of a significant number of projects
across different sectors creates substantial invest-
ment opportunities that stimulate the interest of
many firms for participating in the implementation
of these projects.
As for the participation of foreign companies in
the tenders of the first pilot projects, it clearly
demonstrates that the Greek PPP market has been
established quickly enough but with careful and
cautious steps, so as to mobilize the interest of for-
eign companies that have significant expertise and
know-how which they can efficiently disseminate
around our country.
Besides access to more projects, both foreign
and Greek companies, through their participation
in the Greek PPP market, can accumulate and add
to their existing know-how, resources and credibil-
ity that will render them more competitive in the
new PPP market throughout Europe. The 24
approved PPP projects, along with the clear legal
framework and the transparent procedures, with-
out doubt render Greece a focal point on the map
of PPPs with significant business opportunities for
foreign investors.
Ministerial committee OKs 3.1 billion euros of projects
The progress of PPPs creates positive prospects for their further implementation in Greece. Itis now demonstrated in practice that the Greek public authorities have a clear picture of thebenefits and the new opportunities that the careful design and implementation of PPPprojects can yield.
Leonidas KorresSpecial Secretary for
Public-Private Partenshipswww.sdit.mnec.gr
Themes
40
Themes
First the facts: The first application for public-
private partnership (PPP) in the field of
waste management (WM) has already been
approved by the Special Secretariat for PPPs
and the Interministerial PPP Committee.
The project of ‘Integrated Waste Management
in Western Macedonia’ includes design, construc-
tion and operation of a modern waste treatment
facility and the relevant landfill for residues, as
well as the operation of nine transfer stations that
have already been constructed, for 25 years. A
detailed profile of the project can be found at
http://www.sdit.mnec.gr/en/projects/projects/proj-
ect0020.html. The budget is around 120 million
euros and up to 50 percent of this will be covered
by the Greek government through PPP law regula-
tions, while the rest will be contributed by the local
municipalities, through their Waste Management
Authority (WMA), DIADYMA.
The project is already in the pipeline and it is
expected to start operations in early 2010. During
the preparation of the project, which has not yet
been completed, there several interesting issues
have arisen that need to be discussed in a public
dialogue. The most important are addressed below.
DriversThe Greek WM market is in transition. A lot of
landfills do exist and are in operation and still more
will be constructed during the next years, but the
challenge of waste treatment has not yet been con-
fronted. Although there is a national strategy
regarding EC Directive 99/31 that establishes strict
targets for biodegradable waste and its diversion
from landfills, the steps already implemented have
been inadequate.
Two mechanical biological treatment (MBT)
facilities have gone into operation, but their envi-
ronmental results are questionable, to say the
least. In any case, these facilities do not satisfy the
requirements initiated by Directive 99/31.
At the same time, a lot of the big landfills are
coming under increasing pressure due to lack of
space, with the case of Athens serving as a symbol
of the failure of the actual WM policy to meet EU
targets.
The Greek WM market and WMAs understand
the necessity for waste treatment, but until now
there has been no certain indication that EU or
national funds will be used to that end. So the com-
bination of treatment necessity and the lack of finan-
cial resources is a big driver for PPPs in WM.
The response of the Ministry of Finance to this
situation is a hopeful signal for the market and we
hope that this is just the first of the required steps.
Additionally, the very short time period remain-
ing to achieve the targets for biodegradable waste
provides a great advantage to PPP procedures.
Although the preparation of a PPP contract is nei-
ther an easy nor a rapid task, there is much more
flexibility and the PPP law provides certain tools
that can significantly reduce the preparation period.
One more important driver is the experience gained
from the poor operation of the existing WM facilities.
We all now understand that there is no point in spend-
ing decades and millions of euros developing waste
treatment facilities if we cannot ensure their effective
operation. And the truth is that effective operation can
be achieved if the contractor is responsible for that,
which can only be achieved through PPP contracts.
BarriersDespite the fact that real, strong drivers do exist, the
application of PPPs in WM in Greece is a difficult
issue due to the specific characteristics of the solid
waste management systems.
First, the status and the human resources for
most WMAs are not capable of preparing and imple-
menting PPP contracts. It is not by chance that the
first effort started with DIADYMA SA, a managing
authority with remarkable status in terms of human
resources and a certain record of successes in EU
funding and project implementation. But there are
very few similar cases.
Second there is the cost barrier. In most parts of
the country, Greek citizens are used to paying a negli-
gible price for waste management and even so it is not
always certain that they achieve value for money. The
Public-private partnerships in wastemanagement: The first experience
The first application for public-private partnership in the field of waste management hasalready been approved. The project, already in the pipeline and expected to start operationsin early 2010, has raised several interesting issues requiring a second look.
Antonis MavropoulosCEO EPEM SAwww.epem.com
41
country’s great dependence on landfills is also testi-
mony to that. There is a need for brave political deci-
sions to achieve a gradual but steady increase of WM
funds if we want to see the successful implementation
of recovery and recycling targets.
One of the reasons that led to the successful
preparation of DIADYMA was that the local authori-
ties were persuaded they had to increase WM
spending in order to achieve great environmental
results. And the generous contribution of the Min-
istry of Finance in its willingness to pay is a good
example that will certainly affect the political deci-
sions required.
Last but not least of the barriers are the negative
experiences of some PPP efforts that have been
made previously. Of course one must understand
that these efforts came out of the new framework. In
general terms these failures were characterized by:
ñ Poor or no preparation;
ñ Lack of performance standards;
ñ Lack of risk distribution;
ñ Lack of reliable commitment between the PPP
contractor and the municipalities.
Project preparationThe Greek WMAs, the consultants involved in WM,
as well as the government and the contractors
need to reassess project preparation.
The application of PPPs to WM projects:
— Should be combined with certain changes to proj-
ect design. The overall feasibility of the project must
be carefully documented, since PPPs are long-term
relationships which are based on the financial con-
tribution of citizens and municipalities and not just
European Union funds. Local affordability levels
must be determined and evaluated before the con-
tracts.
— Must lead to project preparation with an empha-
sis on specific, desirable and quantified results
instead of the usual more-or-less detailed design
of the facilities that dominate the Greek market.
— Needs careful and justified consideration of the
potential risks of the project. This is something
that is not yet understood by the public decision
makers, who are used to ignoring long-term risks,
but we all know that a PPP contract without effi-
cient risk allocation will be a certain disaster.
Combination of fundsOne of the most important lessons provided by the
DIADYMA experience is that the modern waste
management gate fees are too high for Greece,
even in the case of one of the most efficient and
expensive WM systems in the country, that of
Western Macedonia.
The Ministry of Finance has made a great contri-
bution of funds in order to cover the existing gap
between gate fees for modern waste management
treatment and citizens’ ability to pay. But if a large
part of the construction cost was covered by EU
funds, the gap would be much smaller and the
implementation of similar projects would be afford-
able in many more cases.
The new government should consider this as
the last opportunity for Greece to develop modern
WM infrastructure utilizing EU funds that do exist.
If these funds are once again used just for landfills
and transfer stations, this opportunity will be lost.
Then, the future of waste management in Greece
will be much more expensive and, undoubtedly,
difficult to consider.
42
Themes
Δhese last few years, the Hellenic Public Real
Estate Corporation (HPREC) has been mov-
ing toward the development of services
regarding the implementation of the Accom-
modation Program for the Greek Civil Ser-
vices, as well as the acceleration of the business
plan, aiming to develop and utilize a large number of
major public real estate properties.
Implementation of the public housing program
through building facilities suitable to support services
of high standards is an absolute priority, and therefore
an important parameter in the efforts toward modern-
ization of the Greek public administration.
To date, accommodation projects have been
implemented almost exclusively through public fund-
ing. However, the significant extent of the program
along with the need to optimize use of public funds
render necessary the use of alternative funding tools
by employing private funds. Our goal is to implement
the program with the best quality, at the best cost for
the Greek state, within acceptable budget lines and
within the set implementation time frame.
The Accommodation Program for the Greek Civil
Services currently comprises 244 projects. These
projects cater to a wide range of housing needs. The
overall budget amounts to 2.6 billion euros. The
superstructure of projects under the Accommodation
Program covers a total of approximately 1 million
square meters, while basements and auxiliary facili-
ties totsl an additional 0.5 million m2. Twelve per-
cent of the program has already been completed in
recent years, and another 5 percent is either under
auction or in progress.
Implementation of the program is essential for the
modernization of accommodation of the Greek civil
service. Based on the compiled data, a considerable
number of key public administration bodies are cur-
rently housed in inadequate buildings, while housing
and relocation needs are increasing. There is also a
lack of appropriate technical management services to
prevent devaluation of the existing buildings.
For those entities in need of accommodation, it is
important to ensure the best possible quality of hous-
ing services at the lowest cost. Quality of housing serv-
ices implies quality in both building infrastructure and
auxiliary services, which is necessary for the smooth
operation of these infrastructures in the long run.
In the conventional project implementation model,
the private sector assumes specific responsibilities
over a limited time span, primarily focusing on the
construction objective. With the new housing models,
the private sector is expected to contribute to the
implementation of the program, thus undertaking the
funding of housing projects, and most importantly
assuming an essential part of the risks associated with
the overall life cycle of such projects. The added value
of private entity involvement resides in their ability to
manage certain risks in a more effective manner,
therefore resulting in more cost-effective solutions.
Private entities contributing to the implementa-
tion of the Accommodation Program comprise not
only construction companies, but also include a mul-
titude of other categories, such as real estate man-
agement companies, specialized investors of public-
private partnership projects, institutional real estate
investment companies, technical management
providers, investors in real estate leasing schemes,
and funding entities, such as banks.
The public sector is currently implementing two
basic alternative models in project implementation or
provision of housing services: a) the proprietary
model and b) the leasing model.
In the proprietary model, the public entity assumes
all risks of the project, which often leads to deviation for
the original construction and operation budget. In con-
trast, under the leasing model, the private entity
assumes an extremely large proportion of the risks, and
the public entity on the other hand bears the cost of the
high flexibility retained under this scheme. In both
cases, the overall housing cost for the public entity is
elevated, therefore rendering these conventional meth-
ods less cost-effective. Financial return is defined as the
metric system used to compare the cost to the value of
services offered (value for money).
Private initiatives The goal of the Accommodation Program is to high-
light and select new implementation and funding
tools for housing projects which will increase the
financial return for the public sector in comparison to
conventional methods, thus equally meeting the
requirements of accommodated parties, the public
administration and investors.
The new tools fall under two general categories:
ñ Implementation tools of new housing projects,
or upgrade of existing projects through private
funding;
ñ Fund-raising tools through exploitation of existing
building facilities or other real estate properties.
The first implementation category referring to new
housing projects comprises two basic tools: the pub-
lic-private partnership (PPP) schemes and infrastruc-
ture implemented through long-term operation lease
with construction.
HPREC and the public are especially interested in
the second fund-raising tool category, through the
HPREC targets improved efficiencyof public real estate
Konstantinos GratziosHPREC Chief Executive
Officer/Agronomist Land Surveyer
Urban Plannerwww.ked.gr
Implementation of the program is indispensable for the modernization of theaccommodation of the Greek civil service. The goal is to highlight and select newimplementation and funding tools for accommodation projects, which will increase thefinancial return for the public sector in comparison to conventional methods.
43
exploitation of existing buildings or other real estate
properties. These funding tools are based on the fun-
damental concept of sale and leaseback (S&L). The
funding tools can combine solutions, such as
exploitation of existing real estate with implementa-
tion of new housing projects, as in the case of S&L
with construction.
The Accommodation Program includes 21 cate-
gories of projects which can form one or more agree-
ments each. Of a grand total of 244 projects, 185
will be handled under project implementation agree-
ments, while the remaining 59 projects will be
undertaken through fund-raising agreements.
With the aforementioned data in mind, HPRECãs
goal of preparing and announcing 17 separate ten-
ders of a total value of 1.130 million euros within a
three-year time frame is considered feasible.
A considerable number of Accommodation Pro-
gram projects will be implemented via conventional
implementation tools for public housing projects,
since other tools do not ensure return for the public.
In any case, the new tools are anticipated to operate
as alternatives rather than replacements to the insti-
tution of public works.
As far as the institution of PPPs is concerned,
the tender for the seven fire departments scheduled
to be completed within the first quarter of 2008 is
under way. The technical consultant for the techni-
cal management program of four buildings for the
Hellenic Police has been identified, and by the end
of the year the project should be put to auction.
Furthermore, the tender for the identification of a
technical consultant for the 11 police departments
is also in progress. By December, two more projects
of the Accommodation Program will be submitted to
the Bi-Ministerial Committee for approval: the Hel-
lenic Police Headquarters and the Fire Department
Headquarters.
It is common knowledge that HPREC is managing
a variety of public real estate properties, aiming to cre-
ate added value from the exploitation through flexible
investing schemes, with private sector standard of oper-
ation criteria, thus ensuring public and social welfare.
Properties for utilization Last July, an agreement was concluded between
HPREC and the Municipality of Glyfada in southern
Athens: a Memorandum Agreement on the upgrading,
management and secure operation and use of the entire
coastal zone of Glyfada. The goal is for the coastal area
to be remodeled into the most significant open-air
recreational space for aquatic and other sports in the
whole Athens and Eastern Attica region. We have
prepared a plan that envisages the remodeling of 18
hectares on the Glyfada seafront, which aims to
rearrange the entire coastal zone stretching over 2
kilometers, from the Asteria area up to Aghios Cosmas.
According to the plan, modern self-financing ven-
ues and infrastructure will be developed, employing
modern architectural standards and provision for the
creation of footpaths and bicycle lanes running all
along the coast next to the tram lines. This effort is
part of a generalized plan to modernize the coastal
zone, so that it can be returned to the people of
Athens. Finalization of the auction procedure is antic-
ipated by the end of next year.
— Another Memorandum Agreement was concluded
last May for the creation of the International
University of Greece in the region of Michaniona,
Thessaloniki, foreseeing cooperation of the
Municipality of Michaniona with the Ministry of
Education and HPREC for:
ñ The foundation of the International University of
Greece along with auxiliary facilities, which will
trigger development and exposure of the wider
Thessaloniki region;
ñ Contribution to the socioeconomic development of
the region, by creating new employment opportu-
nities for the local population, ensuring local busi-
ness participation in the project works, and thus
boosting the economy of the Michaniona area.
Furthermore, there is a provision for the design and
subsequent operation of an international conference
center along with auxiliary facilities. Thessaloniki is
currently lacking such facilities, which are indispen-
sible for the unobstructed operation of both the
International University and the Pole of Research and
Innovation, already operating in eastern Thessaloniki.
— Regarding the former US Telecommunications
Facility of Gournes in Iraklion, Crete: The initial
approach to development of the area focuses on
implementing two operational and building units:
a business park, featuring a business center with
office space, stores and recreational facilities; a
leisure park for tourism, recreation, culture and
sport, including hotels, specialized facilities for
tourist activities, auxiliary activities, aquatic sport,
multifunctional recreational centers, and more.
— The real estate property of Antirio, which stretch-
es over some 22.3 hectares, mainly comprises
sections of the former construction site of the Rio-
Antirio Bridge. This property is in a strategic loca-
tion, expected to attract significant investments in
the coming years, especially in light of the com-
pletion of the Ionian Highway.
HPREC is in close cooperation with the regional fund
for development of Western Greece, the Aitoloakar-
nania Prefecture and the Municipality of Antirio, on
this issue, and utilization of the property is already in
the pipeline, first viewing to enhance development
and investing opportunities in the project. The auc-
tion procedure of the project, focusing on identifying
a suitable investment scheme for development, is
anticipated to be initiated at the end of 2007 and to
be completed by the year 2009.
— The last property is where the broadcasting sta-
tion of Voice of America was based. The proper-
ty’s land area totals approximately 800 hectares
and the building surface is approximately 25,000
m2. This is coastal land on the estuary of the
Nestos River in the Xanthi Prefecture with excep-
tional ecological characteristics. It is included in
the NATURA 2000 network, and is protected by
the International Ramsar Convention for Wet-
lands of International Importance. The property is
also part of the National Park of Eastern Macedo-
nia and Thrace.
HPREC’s goal is to develop the property by high-
lighting its natural characteristics; to this end, col-
laboration has been initiated with the Prefecture of
Xanthi and the National Park Managing Body.
The strategic goal of HPREC is to develop and uti-
lize major properties through private funds. These prop-
erties feature adequate size and potential of attracting
trustworthy private investors. In this manner, the con-
ditions will be set for both development of investment
initiatives and optimization of public revenue.
44
Themes
On August 2, 2007, the Interministerial
PPP Committee, after consulting with the
Special Secretariat for PPPs, a task force
within the Ministry of Economy, agreed to
the ‘implementation of sewerage networks
and a sewage treatment unit in the Municipality of
Rafina.’ This project is the first ever project
planned under the Public-Private Partnerships
regime in the field of sewerage networks and
sewage treatment and involves the design, con-
struction, financing, maintenance, facility manage-
ment and operation of the new infrastructure for
25 years. The project will cost 40 million euros
(plus 20 percent for insurance and conservation
expenses) and it is now at the bidding stage for the
consultants’ appointment. The initial infrastructure
is intended to be constructed during 2008-2009
and to go into operation by 2010.
The Municipality of Rafina had been struggling
for years to find a funding opportunity for con-
structing this project, which is a necessity for local
residents. Finally, after gaining the full support of
all local councilors and the local community, the
Municipality of Rafina succeeded in absorbing the
relevant funds under the Public-Private Partner-
ships regime.
(For further information regarding this project,
please log on to http://www.sdit.mnec.gr/en/proj-
ects/projects/project0022.html.)
Present situation In the past, the population’s sewage treatment
needs were covered via infrastructure funded by
the EU or the Greek government. This was followed
by a huge amount of time taken to submit the proj-
ect proposal to release the relevant funds and final-
ly construct the proposed infrastructure. Despite
the fact that in recent years there has been impor-
tant progress regarding sewerage networks and
sewage treatment in Greece, there are still certain
significant problems, which can be summarized as
follows:
ñ Increase in local and seasonal population cre-
ates drinking water shortages and raises ques-
tions about its required quality. The Prefecture
of Attica and most of the islands popular with
tourists require extended attention in sewage
networking due to population increase needs,
especially during the summer months.
ñ Water availability forecasting in conjunction
with climate change makes the future uncertain
in many areas.
In many cases, misunderstandings regarding
the actual technical and financial capability of
those involved in the construction phase were the
main reason for unreliable project operation or
non-operation. Project parties were usually unable
to account for the real project needs or to take into
consideration any future additional work needed.
There is also significant inactivity reported in man-
aging sewage resulting from sewage treatment,
therefore creating the potential for an additional
service financed under PPP.
ñ Most of the sewerage network and sewage
treatment shortage is concentrated in small or
medium-sized areas.
ñ Most of the current infrastructure is not
designed to cover all expected population and
visitors’ needs and potential funding is not
secured for extensions.
Opportunities On the other hand, it is necessary to identify sev-
eral opportunities which may arise:
ñ Projects regarding sewerage networks and
sewage treatment (unlike waste management
projects) show increased community accept-
ability because the initial cost that citizens
would be required to pay for the establishment
of such a system is less than if there were no
such system at all.
ñ Many of the identified needs are observed in
tourist areas which usually possess the neces-
sary capital to fund such projects, bearing in
mind that such a project creates room for
improvement, therefore greater sustainability
and improvement in tourist indicators.
ñ There are several small areas that would be
Green light given for wastetreatment unit in Rafina
Dr EvangelosMihalopoulos
President of BoD
ASE SYNERGY CONSULTING SA
The government interministerial committee approved a 40-million-euro project that is at thebidding stage. The Rafina project, expected to be completed by 2010, has the backing of thelocal council and residents. However, broader problems regarding sewerage networks remain.
45
very difficult to absorb EU funding:
ñ Technological advancements may offer exten-
sive solutions to different and changing popula-
tion needs. This increased demand makes PPPs
an attractive solution to conservative funding
mechanisms of public infrastructure.
ñ High correlation between conservative and new
technologies in project construction and opera-
tion of sewerage networking - sewage treat-
ments and renewable energy systems occurs to
the betterment of the service using cheaper
options in favor of the citizens.
The role of all stakeholders is crucial: the Ministry
of Economy, PPPs Department and PPP Secretary,
Local Authorities, PPP Consultants as well as
potential investors. For successful implementation
and cooperation there is a need for a new vision
when dealing with such projects.
The new vision Certain crucial matters arose from the open dia-
logue with the Municipality of Rafina:
ñ A new approach is needed. A new approach
that specializes not only in constructing the
infrastructure but in the way this service is
actually distributed. The way public authorities
used to operate sewerage networks and sewage
treatments is no longer appropriate. Population
needs, which change and increase as the years
go by, will be properly satisfied by a new aspi-
ration to create public infrastructure while
maintaining balance and quality vis-a-vis the
increased demand. Interrelation of cost-benefit
analysis must be in place for fighting disopera-
tion, abandonment and poor system conserva-
tion. In this way, citizens will be happy to
receive an up-to-date service.
ñ Public-private partnerships transfer a great deal
of risks (environmental, operational, legal, social
responsibility, demand) to the private sector and
the potential institutional investors. In the
meantime, this current PPP regime provides the
private sector with the opportunity to choose the
appropriate technological solutions depending
on performance indicators, while allowing citi-
zens to pay for a service with value for money.
ñ The European Union, via its potential participa-
tion in funding such projects, may have the
opportunity to increase the acceptability and
effect of fund release while transferring a sig-
nificant part of this shared responsibility to the
private sector. A further reason for participation
of funds in the constructing phase may be to
make this investment more attractive to poten-
tial investors.
46
Themes
Two years after the inauguration of the first
regional sanitary landfill in Greece, the Inter-
ministerial Committee unanimously agreed
on the incorporation of the municipal solid
waste treatment plant (MSWTP) of Western
Macedonia through public-private partnership.
The project, with a budget of 120 million euros
(at current prices), is expected to be subsidized up to
50 percent and this includes the manufacture of the
MSWTP and the operation of the regional integrated
waste management system (RIWMS) of Western
Macedonia for 25 years. It will be the first time at a
national level that an intermunicipal enterprise
undertakes the development of such a complex tech-
nological investment with an unusual institutional
process in this sector.
The objective is ambitious; however, the funda-
mentals are set and our prospects of attracting pri-
vate investors in the section of an integrated waste
management are intensely visible. According to the
chairman of the Waste Management System of
Western Macedonia (DIADYMA), Nikos Totonidis,
‘the cooperation with enterprising figures aims to
secure capital for the project’s development through
intense competition, combining enterprising ability
with the financial and technical know-how in terms
of managing and operating a municipal solid waste
treatment plant of similar scale.’
In mid-2011 the MSWTP will operate and will
quickly appoint the regional IWMS entirely compati-
ble with the European Union’s strategic plan in the
sector of waste management by forming a new model
in Greece which aims to reduce the environmental
implications and the rational management for natural
resources. Totonidis adds that the project’s rapid
development is already obligatory, as the remaining
life cycle of the sanitary landfill does not exceed
seven years.
This undertaking requires great effort and a com-
plete exploitation of technical know-how that the
company has accumulated on issues such as auc-
tioning and managing expenditure since 2002. More-
over, the smooth operation of the RIWMS from mid-
2005 has proved the company’s ability to manage
the technical composition and operation of a multi-
parametric system whose life cycle depends on the
financial stabilization insurance identified with the
revenue bond of the performed usage from the
municipalities.
Totonidis underlines that ‘the success of DIADYMA
is owed to our attentive goals, our ability at the tech-
nical, institutional and administrative levels and main-
ly to the observation of international progress through
the strong managing organization of the company and
its project.’ He adds, ‘The “capital” that we accumu-
lated in previous years in combination with social con-
sent constitute a solid base for the project’s develop-
ment, and the local government once more is asked to
respond to the institutional liability in relation to citi-
zens, environment and public health.’
A 120-million-euro wastemanagement project moves ahead
Nikos TotonidisCEO of DIADYMAwww.diadyma.gr
The objective is ambitious, however the fundamentals are set and our prospects to attractprivate investors in the sector of integrated waste management are intensely visible.