MARKET ANALYSIS

MARKET OVERVIEW

Greece finds itself in one of its most challenging economic periods in recent history. The global financial crisis has exposed and exacerbated fiscal and other structural weaknesses in the Greek economy that have lead to a ballooning fiscal deficit (12.7 percent of GDP estimate in 2009 compared to the E.U. ceiling of three percent) and one of the highest levels of public debt in the Eurozone. Additionally, Greece has a history of other challenges such as high levels of corruption and tax evasion, and very low levels of business transparency. Under pressure from markets, ratings agencies and the E.U., the new center-left PASOK government has developed a three-year updated Stability and Growth Program that seeks to reduce the fiscal deficit to three percent by the end of 2012. Implementation of this plan will be difficult and will require vigilance by the Greek government and the E.U.
In spite of these challenges, many U.S. companies have been quite successful in the Greek market. A key to successfully doing business in Greece is partnering with a local representative, and there are many effective Greek companies assisting U.S. firms in this market. U.S. products are viewed favorably in Greece for their innovation and quality, and despite stiff competition from the E.U. and Asia, are ubiquitous in this market.
•
Population: 11.0 million (2009 estimate)
•
Demographics:
0-14 years – 14.3 percent
15-64 years – 66.6 percent
65 and over – 19.2 percent
•
GDP: 371.2 billion dollars in 2008*
Real Growth Rate: 2.9 percent
Per Capita: 33,440 dollars in 2008*
•
Unemployment Rate: 7.5 percent (annual average) in 2008*
•
Greece is an import-dependent economy


MARKET CHALLENGES



•
Stiff competition from Greece’s traditional E.U. trading partners - Italy, Germany, France, U.K. and the Netherlands. Page | 2
•
E.U. suppliers have duty-free status and proximity to the Greek market (lower transportation costs and faster service).
•
Competition in many industry sectors in Greece can be characterized as oligopolistic, making it difficult for new entrants.
•
Eurostat ranks Greece at the bottom of its Payment Index, meaning that the risk of non or delayed payment is high, especially for public sector contracts.
•
According to the OECD, Greece has one of the more restrictive business environments as pertains to inward investment. Business is heavily regulated.
•
The public sector share of the GDP approaches 40 percent. Public procurement is consequently an important feature of the commercial landscape. The government of Greece (GoG) prefers, and often requires, foreign bidders to partner with Greek companies.
Though Greece is a signatory to the OECD Anti-bribery Convention, Transparency International’s 2009 Annual Perception of Corruption Index ranked Greece 71st overall and 29th out of 30 European countries.


MARKET OPPORTUNITIES



Sectors: Information Technology and Business Software; Medical Equipment;
Renewable Energy Power Plants Systems and Equipment;
Environmental Equipment and Engineering Services; Security and Safety Equipment; Telecommunications: Convergence & Broadcasting; Information Technology (IT) and Business Software.
•
The U.S. trade surplus with Greece in 2008 totaled 765 million dollars*.
•
Among agricultural products, the best U.S. prospects are seeds, tree nuts, wood products and frozen seafood.
•
Services represent the largest and fastest growing sector of the Greek economy. Trade, banking, insurance, transportation and shipping, communications, healthcare, education, and tourism are the largest service sub-sectors. The world-wide economic slowdown has negatively impacted some of these sectors.
•
Energy is a best prospect sector for U.S. companies because of recent deregulation of Greece’s energy sector. There are many opportunities for U.S. businesses in the electricity, gas and renewable energy sectors.
•
Greece’s proximity to other countries in southeastern Europe, and the traditional trade ties of Greek business people with these neighboring countries, offer a variety of additional opportunities for U.S. businesses with Greek partners. Greece, particularly through its northern port city of Thessaloniki, sees itself as a natural gateway to the Balkan countries. Greek firms enjoy good commercial ties to central and eastern European markets as well, including the Black Sea region. U.S. firms may wish to target these markets from a base in Greece or to explore three-way arrangements with Greek companies or partners.


TRADE REGULATIONS AND STANDARDS
IMPORT TARIFFS

Greece is a full member of the European Union and applies the E.U. tariff schedule. The Ministry of the Economy and Finance http://www.mnec.gr/en/ has the authority for Greek customs and for applying the E.U. tariff schedule.  .
Greece applies a Value Added Tax (VAT) of 19 percent for the majority of product categories. For foodstuff, water, agricultural chemicals, pharmaceuticals for animal use, medical and health products, mopeds, vehicles the VAT is nine percent. For books and periodicals the VAT is 4.5 percent. The VAT on imported goods is payable at the time of import.
U.S. firms may discuss any questions with their potential Greek importer and suggest that the importer also consult their customs broker in Greece.


TRADE BARRIERS

Greece maintains nationality restrictions on a number of professional and business services, including legal advice. These restrictions do not apply to E.U. citizens
A 1997 Presidential Decree established a method for fixing minimum fees for audits and established restrictions on the use of different types of personnel in audits. It also prohibited auditing firms from doing multiple tasks for a client, thus raising the cost of audit work. The Greek government has defended these regulations as necessary to ensure the quality and objectivity of audits. Due to these restrictions, however, the U.S. access to the Greek accounting market remains limited.
Page | 50
Greek film production is subsidized by a 12 percent admissions tax on all motion pictures.
Greece has not been responsive to applications for introduction of bioengineered (genetically modified) seeds for field tests despite support for such tests by Greek farmers and Greece’s agricultural science community. Recently, Greece extended its ban on all uses of MON810 corn, a product that the E.U. specifically approved for food, feed and cultivation. Greece has not approved field release for any biotech crop, either for research or cultivation. In September 2008, the Greek Ministry of Rural Development and Food announced intensified and strict controls for GMOs, aflatoxins, heavy metals and plant diseases in grain and feed imports originating in third countries including E.U. members Romania and Bulgaria. Greek customs authorities require 100 percent sampling and testing. Importers have protested and characterized the measures as “non tariff barriers” and not in compliance with E.U. free trade regulations.
The Greek testing method for karnal bunt disease in U.S. wheat, which initially resulted in a high incidence of false positive results, has been improved to the point that it is no longer an obstacle to importation of U.S. wheat. Imports of U.S. wheat, however, have not recovered and are close to nil.
In implementing the 2002 Food Supplement Directive (2002/46/EC), Greece restricted the sale of protein based meal replacement products solely by pharmacies and specialized stores, limiting the ability of U.S. companies to sell such products through direct sales.


INVESTMENT CLIMATE IN GREECE



Openness to Foreign Investment Return to top
Greece, a member of the European Union, provides a reasonably hospitable climate for foreign investment. On the upside, Greece’s membership in the E.U.’s Economic and Monetary Union offers currency stability, the infrastructure has improved significantly in the last five years, and the ongoing liberalization of the energy and telecommunication markets offer investment opportunities. Greek businesses are among the leading investors in Southeast Europe, and Greece is actively positioning itself as a hub for Balkan trade.
On the downside, after a decade of high GDP growth (between 1997 and 2007, Greece averaged 4 percent GDP growth, almost twice the E.U. average), the financial crisis and resulting slowdown of the real economy have slowed GDP growth to two percent in 2008. It is projected to shrink by 1.5 to 2.0 percent in 2009 and by 0.3 percent in 2010. Key economic problems with which the government is currently contending include a burgeoning government deficit (12.7 percent of GDP in 2009) and high public debt (113.4 percent of GDP projected for 2009), both of which are the highest in the Eurozone. The E.U. recently moved Greece one step closer to sanctions under the Excessive Deficit Procedure. The E.U. has mandated that Greece develop a plan to immediately restore fiscal discipline and reduce its deficit to the three percent E.U. ceiling within an agreed period of time (as yet, undetermined).
Greece's economy is hampered by extensive government regulation. Many international corporations state that bureaucracy remains the number one impediment to doing
Page | 67
business in Greece. International organizations such as the OECD, Transparency International, the World Bank (in its Annual Doing Business and Governance Reports), and the World Economic Forum (in its Global Competitiveness Report) cite issues with corruption and government regulations that complicate investment and other commercial activities. As a result, Greece has had relatively modest levels of foreign investment as a percentage of the economy. It ranked 21 out of 30 OECD countries in level of Foreign Direct Investment (FDI) in 2008. The position of Greece in the world indices of the above organizations has deteriorated in the last year. Greece ranks 109 in 2010 World Bank’s Doing Business index (nine slots down from 2009 index). On economic freedom it ranked 81st out of 179 in the 2009 Heritage Economic Freedom Index. It dropped to the 71th position on the Transparency Corruption Perception Index in 2009 from 57th in 2008 (in last place, together with Bulgaria and Romania among the 27 country-members of the E.U.).
Historically, growth has been financed by private sector borrowing and public sector spending, and absorption of E.U. structural adjustment funds, which totaled roughly 24 billion dollars from 2000-2006. The E.U. has allocated a similar amount of funding, approximately 26.5 billion USD, for Greece for 2007-2013.
The GoG encourages private foreign investment as a matter of policy. Investments are screened by the Ministry of Economy, Competitiveness and Shipping when the investor wants to take advantage of government provided tax and investment incentives; foreign and domestic investors face the same screening criteria. Although Greece previously restricted foreign and domestic private investment in public utilities, it opened its telecommunications market and is in the process of slowly liberalizing its energy sector. Restrictions exist on land purchases in border regions and on certain islands due to national security considerations. Greece is the only E.U. country that does not have a land registry, which is a barrier to investment. U.S. and other non-E.U. investors in Greece’s banking, mining, broadcasting, maritime, and air transport sectors are required to obtain licenses and other approvals that are not required of Greek and E.U. investors. Foreign investors can buy shares on the Athens Stock Exchange on the same basis as local investors.
Major investment laws are:
- Legislative Decree 2687 of 1953 which, in conjunction with Article 112 of the Constitution, gives approved foreign "productive investments" (basically manufacturing and tourism enterprises) property rights, preferential tax treatment and work permits for foreign managerial and technical staff. The Decree also provides a constitutional guarantee against unilateral changes in the terms of a foreign investor's agreement with the Greek government, but the guarantee does not cover changes in the tax regime.
- Law 3299/2004, the investment incentives bill, as amended by Law 3522/2006 and Law 3752/2009, provides grants to cover up to 60 percent of qualifying investments (generally those made in less-developed regions of Greece). Through a combination of incentives and corporate tax breaks, this law attempts to boost entrepreneurship, foster technological change, and achieve regional convergence throughout Greece. Law 3522/2006 introduces grants to newly founded small enterprises (Greek and foreign) to assist them with operational expenses for up to five years and attempts to simplify and expedite procedures for the evaluation of investment projects. Law 3752/2009
Page | 68
encourages investors to take advantage of tax breaks instead of grants and increases incentives to investment in energy from renewable sources, in modernization of tourist installations and in high technology services.
- Law 3389/2005 on Public Private Partnerships (PPP). This law is designed to facilitate public-private partnerships in the service and construction sectors by creating a market-friendly regulatory environment.
- Law 89/67 as amended in November 2005 by Law 3427/2005 provides special tax treatment for offshore operations of foreign companies established in Greece.
- Law 468/76 governs oil exploration and development in Greece. Law 2289/95, amending this legislation, allows private (both foreign and domestic) participation in oil exploration and development.
- Law 2773/99 opened up 34 percent of the Greek energy market in compliance with E.U. Directive 96/92 concerning the regulation of the internal electricity market. Law 3175/2003 harmonizes Greek legislation with the requirements of the E.U.’s Directive 2003/54/EC on common rules for the internal market in electricity. Law 3426/05 completed Greece’s harmonization with E.U. Directive 2003/54/EC and provided for the gradual deregulation of the electricity market.
- Law 2364/95 as amended by Laws 2528/97, 2992/02, 3175/03 and 3428/05 governs investment in the natural gas market in Greece.
- Law 2246/94 and supporting amendments have opened Greece’s telecommunications market to foreign investment.
When Greece joined the European Monetary Union (EMU) Eurozone on January 1, 2001, it committed to serious structural reforms to meet EMU convergence criteria. To this end, the Greek government has opened the telecommunications market, and the energy market has undergone some deregulation. Since 2001, about 34 percent of eligible consumers of middle and high-tension voltage have had the choice to obtain their electricity from producers other than the l state monopoly, the Public Power Corporation (PPC). The electricity market in Greece was to be completely deregulated by mid-2007. The deregulation process has been slow, and the goal not yet realized. Only three private producers are operating at this time, due to problems in arranging financing and obtaining state licenses.
The new center-left government of PASOK, elected in October 2009, pledged fiscal and other structural reforms to enhance the competitiveness of the Greek economy. The new administration promised to gradually adopt policies and programs designed to achieve fiscal consolidation and tax reforms, reduce red tape in business transactions and expedite market deregulation. The new Finance Minister recently announced plans to raise about 2.5 billion euros (3.6 billion dollars) from privatizations in 2010 to help pay down the country’s burgeoning public debt. It is not yet clear which companies will be privatized under this plan. Greece has stakes in about 20 listed companies including ATE bank, Postal Savings Bank, gaming firm OPAP and telecoms group OTE. The state asset sale program will be clarified in the beginning of 2010. Greece has raised about 8.7 billion euros from privatizations in the period 2003-2009. Some of these privatizations have sparked significant resistance from the public; however, the
Page | 69
government thus far is standing firm. The global economic environment may also impact the private sector’s ability to raise financial resources to buy these firms. Foreign and domestic investor participation in privatization programs is generally not subject to restrictions. The previous Greek government had announced in December 2007 that it would cap private investment in companies of "strategic importance" (corporations which own, exploit, or manage national infrastructure networks such as telecommunications, energy, etc.) at 20 percent unless special approval is granted by an inter-ministerial privatization committee. The European Commission contested the Greek law on investment in strategic firms and sent Greece in November 2008 a final warning to change the law or face European Court action. Thus far, the European Commission and the Greek government are still in negotiations on how this issue should be addressed.
Conversion and Transfer Policies Return to top
Greece’s foreign exchange market is in line with E.U. rules on free movement of capital. Receipts from productive investments can be repatriated freely at market exchange rates. Remittance of investment returns is made without delay or limitation.
Expropriation and Compensation Return to top
Private property may be expropriated for public purposes, but only in a nondiscriminatory manner and with prompt, adequate and effective compensation. Due process and transparency are mandatory, and investors and lenders receive compensation in accordance with international norms. There have been no expropriation actions involving the real property of foreign investments in recent history.
Dispute Settlement Return to top
No investment disputes have come to the Embassy’s attention for many years, the last couple of cases dating back to the mid-90s. Greece accepts binding international arbitration of investment disputes between foreign investors and the Greek State, and foreign firms have found satisfaction through this arbitration. International arbitration and European Court of Justice judgments supersede local court decisions. Greece has an independent judiciary process, but the court system is a time-consuming means for enforcing property and contractual rights. Foreign companies report that Greek courts do not always provide unbiased and effective recourse. The judicial system provides for civil court arbitration proceedings for investment and trade disputes. Although an investment agreement could be made subject to foreign legal jurisdiction, this is not common, particularly if one of the contracting parties is the Greek state. Foreign court judgments are accepted and enforced, albeit slowly, by the local courts. Although the Greek government has been prosecuting corrupt judges and attorneys in the last few years, problems with corruption still exist.
Commercial and bankruptcy laws in Greece are in accordance with international norms. Under Greek bankruptcy law, private creditors receive compensation after claims from the state and insurance funds have been satisfied. Monetary judgments are usually made in euros unless explicitly stipulated otherwise. Greece has a reliable system of recording security interests in property.
Page | 70
Greece is a member of both the International Center for the Settlement of Investment Disputes and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.
Performance Requirements and Incentives Return to top
Greece is in compliance with WTO TRIMS requirements. Investment incentives are available on an equal basis for both foreign and domestic investors in productive enterprises. More generous incentives are given to investments in less-developed regions. The Investment Incentives Law (Law3299/2004) provides new and already-established companies incentives worth up to 55 percent of the overall investment made in these regions. In December 2006, the law was amended by Law 3522/2006, which increases the incentive to cover up to 60 percent of an investment in less-developed areas. This amendment also introduces grants to newly founded small enterprises to assist them with operational expenses for up to five years. The amended law is also intended to simplify and expedite procedures for the evaluation of investment projects.
The incentives provided are combinations of grants, interest subsidies, subsidies for the creation of new jobs, and for leasing equipment, and tax exemptions. The Incentives Law was amended again in March 2009 (Law 3752/2009) to encourage tax breaks instead of grants and to facilitate investment in energy from renewable sources, in modernization of tourist installations and in high technology services.
Additional tax incentives are extended to foreign investors if they establish export-oriented or import substitution businesses (Law 2687/53).
There are no performance requirements for establishing, maintaining, or expanding an investment. Performance requirements come into play, however, when an investor wants to take advantage of tax and/or investment incentives. In evaluating applications for incentives, the Greek authorities consider local content, import substitution, export orientation, creation of new jobs, energy conservation, environmental protection and technology transfers. Companies that fail to meet the specified performance requirements may be forced to give up the incentives initially granted. All information transmitted to the government for the approval process is, by law, to be treated confidentially. Offset agreements, co-production, and technology transfers are commonplace in Greece’s procurement of defense items.
U.S. and other foreign firms may participate in government-financed and/or subsidized research and development programs. Foreign investors do not face discriminatory or other de jure inhibiting requirements. However, many potential and actual foreign investors assert that the complexity of Greek regulations, the need to deal with many layers of bureaucracy, and the involvement of multiple government agencies discourage investment.
Foreigners from E.U. countries may freely work in Greece. Foreigners from non-E.U. countries may work in Greece after receiving residence and work permits. There are no discriminatory or preferential export/import policies affecting foreign investors, as E.U. regulations govern import and export policy, and increasingly, many other aspects of investment in Greece. Page | 71
Right to Private Ownership and Establishment Return to top
Foreign and domestic private entities have the right to establish and own business enterprises. They may engage in all forms of remunerative activity, including the right to establish, acquire, and dispose of interests in businesses.
Private enterprises enjoy the same treatment as public enterprises with respect to access to markets and other business operations, such as licenses and supplies. Bureaucratic impediments, however, can make this a very slow-going process. Liberalization of the banking system and increased compliance with E.U. norms has made credit also equally accessible to private and public enterprises.
Protection of Property Rights Return to top
Greek laws extend protection of property rights to both foreign and Greek nationals, and the legal system protects and facilitates acquisition and disposition of all property rights. Regarding real property, the continued lack of a land registry, and more importantly, the multiple layers of authority concerning land use and zoning permits is one of the most significant disincentives to greenfield investments. On IPR, Greece is a member of the Paris Convention for the Protection of Industrial Property, the European Patent Convention, the World Intellectual Property Organization, the Washington Patent Cooperation Treaty, and the Bern Copyright Convention. As a member of the E.U., Greece has harmonized its legislation with E.U. rules and regulations. The WTO-TRIPS agreement has been incorporated into Greek legislation since February 28, 1995 (Law 2290/1995). The Greek government has also signed and ratified the WIPO Internet treaties, which were incorporated into Greek legislation in 2003 (Laws 3183 and 3184/2003)
Greece's legal framework for copyright protection is contained in Law 2121 of 1993 on copyrights and Law 2328 of 1995 on media. Implementation and enforcement of these provisions, however, is not rigorous, and intellectual property problems continue in Greece. Greece was a special mention country on the Special 301 Watch List from 1994 until 2003, during which time Greece worked to resolve specific areas of violation, particularly those related to the broadcasting of copyrighted materials on the national airwaves. Violations, particularly in copyrighted audio-visual products, software and apparel and footwear continue to raise industry concerns. Despite the existence of adequate IPR legislation, Greece lags in implementation of enforcement of these laws. The judiciary is not focused on the issue and has little training on IPR issues. The lack of enforcement resulted in Greece being placed on the U.S. Special 301 Watch List once again in 2008 and 2009.
Audiovisual, music, and software industries bear the brunt of IPR violations in Greece. This is likely to rise with increased internet penetration. Unlicensed sharing of a licensed copy among multiple computers is the largest problem for the software industry, while street vending of pirated DVDs and CD’s is a common practice. Efforts by local authorities to safeguard copyrights have been inconsistent and at present provide inadequate protection. An audit program initiated in early 2009 by the Ministry of Finance tax police unit (YPEE) was effective in discouraging the use of unlicensed software by enterprises; however, this program was short-lived and is no longer in effect.
Page | 72
The new government has not yet indicated its intention to launch similar initiatives, but the Ministry of Citizens’ Protection has announced a new department, expected to begin operations in the first quarter of 2010, to combat various forms of economic crime, including violations of intellectual property. A formal interagency coordinating committee on IPR issues established in 2008 published a National Action Plan in February 2009 to combat IPR infringement and coordinate efforts among ministries to improve enforcement of IPR rights. Unfortunately, the government has not implemented its own recommendations.
Trademark violations, especially in the apparel sector, are an area of some concern. Although Greek trademark legislation is fully harmonized with that of the E.U., U.S. companies believe the importation and sale of counterfeit products may be increasing. Although in the past, U.S. companies reported a lack of support in combating this problem, recently, they report they are receiving more.
Intellectual property appears to be adequately protected in the field of patents. Patents are available for all areas of technology. Compulsory licensing is not used. The law protects patents and trade secrets for a period of twenty years. There is a potential problem concerning the protection of test data relating to non-patented products. Violations of trade secrets and semiconductor chip layout design are not problems in Greece.
Transparency of Regulatory System Return to top
As an E.U. member, Greece is required to have transparent policies and laws for fostering competition. Foreign companies consider the complexity of government regulations and procedures and their inconsistent implementation to be the greatest impediment to investing and operating in Greece. On occasion, foreign companies report that they encounter cases where there are multiple laws governing the same issue, resulting in confusion over which law is applicable.
In order to simplify and expedite the investment process, a quasi-state investment promotion agency, the Hellenic Center for Investment (ELKE), was established in 1996. ELKE, reorganized and renamed Invest in Greece Agency in March 2008, is designed as a one-stop shop for investors in cutting through red tape and acquiring the numerous permits needed to proceed with investments. For investors seeking government incentives under Law 3299/2004, the Agency is responsible for helping investors with projects valued at over 8.8 million euros (11.9 million dollars), or over three million euros (4 million dollars) in cases in which there is at least 50 percent foreign participation. It also advises the government on streamlining investment and promoting Greece as a favorable investment destination, and improving the investment climate in Greece. The new investment incentives Laws 3522/2006 and 3752/2009 that amended 3299/2004 are also intended to simplify and expedite the evaluation of projects.
Greek labor laws limit working hours, limit overtime, restrict part-time employment, and are restrictive regarding the dismissal of personnel. A labor law (3385/2005) passed in July 2005 gives greater flexibility to employers to ask employees to work without overtime premium pay during peak times, in return for compensatory time off during non-peak times. Under current regulations, both private and public companies are prohibited from firing or laying-off more than two percent of their total workforce per month without government authorization.
Page | 73
Greece’s tax regime lacks stability, predictability, and transparency. The new administration has made tax evasion one of its highest priorities. The government often makes small adjustments to tax levels and has not hesitated to impose retroactive taxation. Although foreign investors object to the frequent changes in tax policies, foreign firms are not subject to discriminatory taxation.
Generally, in sectors open to private investment, foreign investment is not prohibited or restricted in any way. Proposed laws and regulations are usually published in draft form for public comment before being debated in Parliament. The International Financial Reporting Standards (IFRS) for listed companies was introduced in fiscal year 2005, in accordance with E.U. directives. These rules improved the transparency and accountability of publicly traded companies.
Efficient Capital Markets and Portfolio Investment Return to top
Greece has a reasonably efficient capital market that offers the private sector a wide variety of credit instruments. Credit is allocated by public and private banks on market terms prevailing in the Eurozone and credits are equally accessible by private Greek and foreign investors. Two American banks operate in Greece (Citibank and Bank of America), serving both the local and international business communities. There is sufficient liquidity in the market to enter and exit sizeable positions.
An independent regulatory body, the Hellenic Capital Market Commission, supervises brokerage firms, investment firms, mutual fund management companies, portfolio investment companies, real estate investment trusts, financial intermediation firms, clearing houses and their administrators (e.g., the Athens stock market), and investor indemnity and transaction security schemes (e.g., the Common Guarantee Fund and the Supplementary Fund) and encourages and facilitates portfolio investments. Owner-registered bonds, bearer bonds and shares are traded on the Athens Stock Exchange, which has held "developed country" status since 2001, according to key western investment firms. It is mandatory for the shares of banking, insurance and public utility companies to be registered. Greek corporations listed on the Athens Stock Exchange that are also state contractors are required to have all their shares registered.
Private Greek and foreign banks hold about 70 percent of the banking system's assets. Following an ambitious privatization program, only two banks remain under state control: Agricultural Bank of Greece and Postal Savings Bank (there is limited state participation through government controlled social security funds in another two banks: National Bank of Greece and Bank of Attica). According to Greece’s Central Bank, The Bank of Greece, private banks in Greece have healthy loan-deposit ratios (over 90 percent). State banks operate on free market criteria and limit their exposure to public enterprises of questionable financial health. Total combined assets of the five largest banks are estimated at 360 billion dollars (based on 2007 data).
Despite the Greek banks’ limited exposure to risky financial products at the center of the 2008-2009 global financial crisis, credit markets in Greece have been affected by the ensuing freeze in the capital markets. Following the examples elsewhere in Europe and the U.S., the Greek government announced in October 2008 that it would support the Greek credit system to restore flows in credit markets with a combination of state guarantees, state participation in the share capital and liquidity increase in the total amount of 28 billion euros (about 38 billion dollars). The majority of Greek banks have
Page | 74
made use of the 28-billion euro rescue plan in 2009, thus strengthening their liquidity and capital base; however, as in other countries, as a response to tightened risk criteria, credit expansion has slowed tremendously. In addition, as a result of the slowing economy, the non-performing loans (NPLs) ratio increased to 7.2 percent in the nine months of 2009, compared to 5.0 percent in 2008. The results of fiscal stress tests conducted in 2009 by the Bank of Greece in the context of the annual regular consultation with the IMF were encouraging, indicating that the Greek banking sector had enough buffers to weather the expected slowdown. The merely marginal exposure of Greek banks to assets directly or indirectly linked with the initial causes of the international crisis, the satisfactory level of their capital adequacy, their relatively strong deposit base, the tightening of credit standards and the continuous audits by the Bank of Greece have all helped alleviate the adverse impact of the crisis on banks’ key aggregates. As a result, the Greek banking system remains fundamentally sound, given the current conditions.
There are a limited number of cross-shareholding arrangements in the Greek market. To date, the objective of such arrangements has not been to restrict foreign investment. The same applies to hostile takeovers (a practice which has been recently introduced in the Greek market).
Competition from State Owned Enterprises Return to top
Greek State-Owned enterprises (SOEs) are active in utilities, defense industry and banking. In sectors where the SOE is practically a monopoly, i.e. water and sewage, urban transportation, private companies are not allowed to enter the market. The electricity market, which was to be completely deregulated by mid-2007, still presents problems to the entry of private producers. Only three private producers are operating at this time due to problems in arranging financing and obtaining state licenses. In sectors which have been opened to private investment, such as the telecommunications market and the banking sector, private enterprises compete with public enterprises under the same terms and conditions with respect to access to markets, credit and other business operations, such as licenses and supplies.
The SOEs in Greece are governed by a board of directors, of which the majority of the members and senior management are appointed by the government. The appointment of senior management is subject to parliamentary approval. Representatives of labor unions and minority shareholders also siton the board. The Chairman of the Board and the Managing Director are usually technocrats with political affiliation with the ruling party. Although they enjoy a fair amount of independence, they report to the line Minister. SOE’s are required by law to publish annual reports and to submit their books to independent audit. There are no sovereign wealth funds (SWF) in Greece but public pension funds may invest up to 20 percent of their reserves to state or corporate bonds.
Corporate Social Responsibility Return to top
Awareness of corporate social responsibility has been growing over the last decade among both producers and consumers. Several enterprises, particularly large ones, in all fields of production and services have accepted and promoted CSR principles. A number of non-profit business associations have been established in the last few years (Hellenic Network for Corporate Social Responsibility, Eurocharity, etc.) in order to
Page | 75
disseminate the values of CSR and promote it in both the business world and society as a whole. Their members have incorporated in their practices programs that contribute to the economic and sustainable development of the communities in which they operate; minimize the effects that their activities may have on the environment and natural resources; create healthy and safe working conditions for their employees; provide equal opportunities for employment and professional development; and provide their shareholders with satisfactory returns through responsible social and environmental management. Firms that pursue CSR in Greece definitely enjoy public acceptance and respect.
Political Violence Return to top
Historical Perspective:
Demonstrations take place in Athens and Thessaloniki on an almost daily basis. Many demonstrations are normally organized by labor unions or student groups and are directed against the Greek Government. Protests in both cities take place around the city centers and traffic can be seriously delayed as a result. Most protests and demonstrations are peaceful, but violent anarchist groups often attach themselves to demonstrations and clash violently with the police. A common practice of anarchist groups is to march towards the city center from the university areas and smash windows and burn vehicles and/or storefronts along the way. It is best to avoid the public university areas during these times. Police are generally forbidden from even entering university campuses. As a result, violent anarchists use them as a safe base of operations.
Regional Terrorism and Organized Crime:
Athens is designated a high-threat post for political violence based on the high number of demonstrations directed against the Greek government and the U.S. Embassy (40+ annually). Anarchists often burn vehicles and businesses and attack police stations in central Athens.
The last assassination of an American in Greece occurred in 1991. The last assassination attributed to 17 November (17N) was the June 2000 murder of British Defense Attaché who was ambushed on a busy Athens thoroughfare on his way to work. 17N was responsible for 23 killings altogether, of which five were Americans. The Greek Government arrested and prosecuted many of the members of 17N in the run-up to the 2004 Olympics. In 2007 the US Embassy was hit by a mortar attack by another prominent local terrorist group, Revolutionary Struggle.
Police actively continue to pursue 17N members still at large as well as those involved in numerous other domestic terrorist groups , including Revolutionary Nuclei, Revolutionary Peoples’ Struggle, People’s Revolutionary Struggle, Revolutionary Struggle, the People’s Will and some relatively new domestic terrorist groups identifying themselves as the Armed Revolutionary Action, the Sect of Revolutionaries, the Conspiracy of Cells of Fire, the Guerrilla Group of Terrorists, and the Revolutionary Organization of 6th of December.
In 2009, a total of eighteen attacks were claimed by domestic terrorism groups. Revolutionary Struggle claimed responsibility for five attacks mainly targeting large financial institutions. Sect of Revolutionaries carried out two attacks, one targeting an Athens Police Precinct and the other a local television network. People’s Will targeted Page | 76
two attacks against Greek investment institutions. Armed Revolutionary Action was responsible for one attack against the Greek Tax Service. Five attacks by the Conspiracy of Cells of Fire were focused primarily at various Greek political parties and their respective leaders. The Guerilla Team of Terrorists carried out two attacks directed at political leaders and national financial institutions. The Revolutionary Organization of the 6th of December claimed responsibility for one attack against the Office of National Archives. While a majority of the attacks utilized improvised explosive devices placed in areas to cause material damage but limit human casualties, local authorities are concerned that the actions of the various domestic terrorism groups are becoming more reckless and less concerned about human casualties. The Hellenic National Police continue to investigate the possibility of potential collaboration between the various domestic terrorism groups.
Organized crime is also on the increase in Greece. These operations focus on kidnapping for ransoms, and trafficking in persons as well as drugs.
International or Transnational Terrorism:
As with all countries in Europe, International Terrorism continues to be a concern as movement between member countries of the European Union is simple. Greece has specific concerns due to its close proximity to the Middle East. It is for many the first point of entry into the Schengen Area. Due to its expansive water and land borders, it is difficult for Greek authorities to effectively control movement into and out of the country. Greece does have a solid counter-terrorism unit that works closely with the Embassy, but the true extent of any international terrorist threat present within Greece cannot be definitively characterized.
Civil Unrest:
Major U.S. multinational companies have been victims of bombings, rocket and firebomb attacks by anarchists over the years resulting in extensive property damage. Citibank ATMs have always been a favored target as well. To date, attacks against U.S. business interests appear to have been conducted with the intent of causing physical damage only.
Attacks conducted against the Hellenic police appear to be dramatically increasing, and the anarchists’ actions appear to be getting bolder. There were several incidents this year involving attacks against police stations.
Corruption Return to top
Corruption, including bribery, raises the costs and risks of doing business. Corruption has a corrosive impact on both market opportunities overseas for U.S. companies and the broader business climate. It also deters international investment, stifles economic growth and development, distorts prices, and undermines the rule of law.