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(1) Motorola
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Its economic successes have prompted Standard & Poor's to upgrade the country's credit rating, reducing the cost of foreign borrowing and giving the country a further push. Morgan Stanley is also expected to follow suit. The country's growing relationship with the United States will get a boost with a three-day visit of US President Bill Clinton to Greece November 13 to 15. The trip is expected to give further impetus to business ties, which have been improving quite considerably. "The United States would like to convey our deep commitment to improve and elevate our relationship with Greece politically, militarily and economically," said Nicholas Burns, US Ambassador to Greece. Also this month the European Commission is taking the first step toward Greece's accession to the Economic and Monetary Union (EMU) when the council of finance ministers meets in Brussels. The council is expected to confirm that Greece has met the crucial criterion of limiting its fiscal deficits and satisfactorily reducing the public debt. This precedes the country's application for entry into the Euro zone in March 2000.
Prime Minister Costas Simitis has vigorously rejected demands by the opposition conservative New Democracy party to hold early national elections before the EU decides in June 2000 on whether to admit Greece as a member of Euroland. He says that to hold elections before the critical EU decision could compromise the country's drive to meet the inflation criterion for entry. Parliament's term expires in September. The Greek parliament in 1992 voted in favor of the Maastricht Treaty. As a result, successive governments have pursued the stated macroeconomic objectives to meet the Treaty's convergence criteria and participate fully in the EMU. As the country heads toward Euro integration on January 1, 2001, it has to downsize its public sector via privatizations to make it more efficient and improve the competitiveness of its economy. The government is moving toward a broad plan of privatization by expanding the number and type of companies that it plans to sell off continuing into 2001. Privatization proceeds amounted to $3 billion in 1998 and run to $1.5 billion so far this year. A recent key sell-off was of a 51 percent stake in Ionian Bank by state-run Commercial Bank to private Alpha Credit Bank for close to $900 million.
This has been a summer full of developments in the banking sector. Greek financial institutions are in a transitional stage of mergers and acquisitions, consolidating toward four main groups, controlled by the state-owned National Bank of Greece and the private institutions Alpha Credit Bank, Eurobank and Piraeus Bank. This is happening in expectation of an unprecedented impact that entry into the Euro zone will have on domestic banking. "The new currency will reshape the market, it will increase the average size of the banking institution and it will expand the range of products available to investors and borrowers," said Nicholas Karamouzis, economic advisor of Eurobank. So far, this has been a golden year for banks, which have posted huge leaps in net profits in the first half. A general feeling of optimism is widespread in the country and is reflected in the Athens Stock Market, making it Europe's best performing bourse by far this year. Continuous capital inflows in the money market have sent trading skyrocketing and price/earnings ratios for 1999 are now running at around 53 times compared to the mid-30s for US Blue Chips and around 24 times in west European markets. The high cash flow is expected to continue for some time boosted by falling interest rates. Stocks could be driven still higher when Greece joins the EMU with its lower interest rates. However, the Athens bourse is far from transparent and is prone to huge swings often based on nothing more than hearsay and rumors. Especially vulnerable to the "bubbles" are the legions of small investors who are gambling on small-capitalized stocks, many of which have delivered four-digit returns this year. Some of the highest gains are being seen in construction sector stocks, as well as in firms active in infrastructure projects such as mining and construction materials. This enthusiasm is fuelled by ongoing construction work on several dozen infrastructure projects in the country. The larger projects recently received a new injection of funds from the EU's Third Community Support Framework. Some of that funding went to the 750-kilometer road transportation backbone of the country, the PATHE motorway that will cross Greece along its north-south axis and link its three main cities, Patras, Athens and Thessaloniki with the country's borders. The European Union is also helping to fund the 2.5 kilometer span Rio-Antirio suspension bridge, which is one of the 14 top priority European projects in the Trans-European Network. The bridge link is a branch of the PATHE Motorway that connects the Trans-European Network with one of Greece's most important seaports at Patras. Another recipient is the 680-kilometer long Egnatia motorway in the north of the country. It has been designed to Trans-European Network standards to contribute to the productive reorganization of northern Greece and to provide fast and easy links from Greece to the Balkans and the Mediterranean countries. Work is also in progress on a ring road around Thessaloniki in the north, as well as to the city's seaport and airport. Construction of the city's Metro is expected to begin soon. The ring road around Athens, the country's capital was negotiated as a build-operate-transfer project. The Athens Ring Road is designed to connect all public transport services and infrastructure in the greater Athens area and link the new Athens International Airport with the entire city. Some 70 percent of the work on the airport has been completed and it is scheduled to open in 2001. The airport will also be connected to the capital city by a new Metro line. The Metro is envisaged to ease the choking traffic at least in the center of Athens. Two new sections will open in January. But the initial public relations hoop-la that accompanied the outset of the project has dampened dramatically and the assessments of the real benefits to the city have become more sober as the project comes closer to completion. Construction of the direct infrastructure of the 2004 Athens Olympic Games is at varying stages ranging from 80 percent finished for some sports facilities to the Olympic Village which has yet to be started. "The Athens Games mean big business for American entrepreneurs, who are looking for joint venture schemes with Greek counterparts," said Patrick Santillo, commercial attaché of the US Embassy in Athens. Organizers hope that 50,000 Greeks living abroad will come to volunteer their help with the Games. They are also expecting the diaspora to donate in excess of $20 million toward the cost of the Olympics, estimated at $1.6 billion. Greeks around the world will help, because "we see Greece as a nation, not as a country," explained Tzavella. The Athens Olympics will be unique in that half of Europe will arrive without the need of a passport and will use the same currency. But there are concerns that Athens may run short of beds for visitors to the Olympic Games. Greek ship owners are coming to the rescue by offering to anchor a score of ships at the port of Piraeus and at a local bay. The Olympics are estimated to generate an additional 2.5 percent increase in the country's GDP and to draw an extra two million foreign visitors. This year, more than 12.5 million people are expected to visit Greece setting a new record despite the crisis in Yugoslavia. As part of its ongoing privatization and liberalization campaign, the Greek State has sold a number of its government-run Xenia hotels and has created a private real estate company to administer state properties in the tourism sector. The Hellenic Tourism Organization (EOT) is tendering for an international real estate consultant who will handle EOT's assets and lead the way to fully utilize EOT's resources, which include spas and ski resorts to camping grounds and tourist information centers. "We have transferred about 200 asset listings to the new company," said Evgenios Giannakopoulos, secretary general of EOT. The country is attracting a small, but growing number of tourists from the Balkans and the Black Sea region as some of the more developed countries there begin to form a fledgling middle class. But Greece's impact on those countries is far more profound than simply as a tourist destination. Its geostrategic location is providing access and opportunity to Greeks and foreign investors to the regional markets, while Thessaloniki has become the financial and trading center for the emerging markets of the entire Balkan Peninsula. Greece's scond city is the seat for the regional Black Sea Trade and Development Bank, and the city's stock exchange center has online connection with the Athens bourse and is expected to develop into a source of capital for enterprises in the wider region. Greece already has a foothold in the regional markets and can potentially be used as a vehicle for entering these markets through joint ventures or other agreements as part of the new five-year Balkan Reconstruction Plan. To date, some 3,500 companies of Greek interest have invested nearly $2.5 billion in the regional markets, placing Greece among the top five countries in terms of capital invested. Americans are very bullish about the economic developments taking place in the country and region and the US Embassy is jumping on that opportunity to help clarify the issues to both Americans and Greeks. The embassy is planning a big conference in Thessaloniki in October next year on "Doing Business with the USA" and next month companies from 30 countries and seven US Chambers of Commerce are planning to participate in a big tourism infrastructure and development conference in Athens. "This place is a hell of a lot better than it was 10 years ago," said an exuberant Santillo. "It is in transition." Indeed, the leadership have been making very good decisions lately by taking seriously its commitment to join the monetary union, cooperating with NATO during its campaign against Yugoslavia and building bridges with its neighbors in very difficult circumstances. |
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(1) Europe's most improved player |
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Greece is one of the rising stars of Europe. It has a foot in the European Monetary Union door, an eye on the 2004 Olympics in Athens and a hand in the Balkans. Observers are calling it Europe's most improved player.
Greece's National Economy Ministry is now turning its attention to inflation, the last criterion for entry. The target of about 2 percent has been partly difficult to meet because of extremely low inflation in other European countries. Average annual inflation is now hovering around 3 percent.
By the end of the year at the latest, the government also intends to sell a 10 to 15 percent stake in Commercial Bank to a major foreign bank.