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									                                                                                                                                                                                     ||||           Greece | | 1
                     | SPECIAL REPORT

        Greece: ready for business
        A 12-page special report in association with Strategic Media

      High table: Despite some doubts at the time of Greece’s admission to the EU, the Athens administration has supped successfully with its more economically powerful partners.    Photograph by Colin Dutton/4Corners Images
 2 | | Greece                                                                                                                                                                                 SPECIAL REPORT |

Why the economy is on
It’s not just the football team that’s been doing well
– the Greek economy is resurgent, with the second
highest growth in the EU, says Nick Mathiason

           fter 20 years of socialist rule,   investment in newly emerging Balkan
           the centre-right New Democ-        economies will raise Greece to a new
           rat party led by Kostas Kara-      level.
           manlis swept to power in              Greek banks are expanding into
Greece two years ago. From the minute         south-east Europe with gusto and its
Karamanlis took the country’s reins, the      tourism industry is diversifying into
world’s eyes were on him and Greece.          upmarket sectors by capitalising on the
Just six months after he won power,           country’s history. Museums are now free
Athens was to host the Olympic Games,         in Greece, helping to furnish a cultural
but things appeared to be slipping. In        renaissance. The Olympic legacy has
fact, the odds were stacked against the       brought Athens and the surrounding
country delivering the sporting and           area new roads, underground and tram
transport infrastructure in time.             links. Conscious that investment has
   National embarrassment seemed              been skewed to Attica – one of 13 admin-
inevitable, but in the months before the      istrative regions and the one in which
Games, the national football team, a no-      Athens lies – the government is trying to
hope outsider, pulled off one of the          modernise the rest of the country.
game’s all-time shocks by winning Euro        Improvements to Greek universities are
’04. It was no fluke. A hard-working          beginning to transform the workforce.
Greek team beat tournament favourites            The effect has been a significant
France and twice saw off hosts Portugal.      rebranding exercise. ‘Greeks have more
Then in August 2004 Greece pulled off a       confidence in their abilities and realise
stunning Olympic Games.                       they can excel and deliver prospects of
   National pride surged, as has the econ-    great complexity and magnitude,’ says
omy. Experts predicted growth in 2005         George Mergos, secretary-general of the
would be sluggish – infrastructure            ministry of Economy and Finance.
spending had fallen after an Olympic-            The rebranding has been taken into
induced splurge and the government had        other areas. Greek cuisine – possibly the
to wrestle with a huge deficit. Despite       most underrated in Europe – has been          Greek captain Theodoros Zagorakis holds the Euro ‘04 cup – the team’s win helped galvanise the economy. Photograph by Milos Bicanski
this, growth last year was 3.6 per cent –     aggressively pushed, using celebrity
second-highest in the European Union.         chefs. A ‘Made in Greece’ legend is now       tives measure aims to increase foreign          Though these are early days, the poli-     gone unopposed. Attempts to slash pub-
   But, with a population of only 11 mil-     part of the government’s export drive.        direct investment (FDI) from the current     cies are bearing fruit. By the end of 2005    lic spending and unravel two decades of
lion, Karamanlis knows that Greece’s             Entrepreneurship is being actively         1 per cent of GDP, the lowest in the EU.     there had been applications for 1,100         socialist rule unleashed a series of strikes
domestic market is too small to deliver       fostered. Corporation tax is falling from        There are new investment incentives       new business projects worth more than         earlier this year as Greeks protested over
lasting growth. The answer to economic        35 per cent in 2004 to 25 per cent next       for priority sectors: energy, industry,      €2.2bn (£1.5bn). In 2005 exports rose by      growing economic hardship.
renewal lies overseas. The nation is his-     year. A new investment incentives law is      research and technology. Bureaucracy         nearly 10 per cent on the previous year.         Walkouts by bank workers and sea-
torically among the poorest in Europe,        helping businesses with up to 55 per cent     has been cut for small businesses, while        The International Monetary Fund last       men could encourage action in other
but the government hopes that increased       of the cost for new projects in the distri-   bankruptcy laws have been reformed to        year commended the initiatives. ‘Reg-         sectors. Retail prices have soared since
trade with its European partners and          bution and warehouse sector. The incen-       make risk taking more attractive.            arding product markets and improving          the introduction of the euro four years
                                                                                                                                         the business climate, the authorities have    ago and many Greeks find it difficult to

                                                                                                                                         put in place a number of initiatives          pay the bills. The National Centre for
                                                                                                                                         which should be built on in the years to      Social Research estimates that 21 per
                                                                                                                                         come,’ it said.                               cent of the population live below the
                                                                                                                                                                                       poverty line, compared with 19 per cent
                                                                                                                                         UNION OPPOSITION                              in Portugal, long in bottom place in the
                                                                                                                                         But Greece has a long way to go. The          EU wealth league. Runaway profits in
                                                                                                                                         Olympics bill smashed its original £3bn       banking and shipping have also widened
                                                                                                                                         budget. An inventory of the economy by        the gap between rich and poor.
                                                                                                                                         the new administration found that the 2          Under pressure to cut a budget deficit,
                                                                                                                                         per cent figure attributed by the previous    the New Democrats have sought to end
                                                                                                                                         administration to government deficit          the jobs-for-life deal in the public sector,
                                                                                                                                                                                       privatise state utilities – privatisation rev-
                                                                                                                                                                                       enue is expected to raise more than £1bn
                                                                                                                                                                Greek prime            this year – and liberalise labour laws. A
                                                                                                                                                                minister Kostas        controversial incomes policy envisages
                                                                                                                                                                Karamanlis knows       below-inflation wage rises for civil ser-
                                                                                                                                                                only too well that     vants. Trade unionists say this is an ‘aus-
                                                                                                                                                                the domestic           terity programme’, which they believe
                                                                                                                                                                market is too small    hurts workers but benefits business.
                                                                                                                                                                to deliver lasting        Greece has the highest number of
                                                                                                                                                                growth.                long-term unemployed (5.7 per cent) in
                                                                                                                                                                                       pre-enlargement Europe. But it is also
                                                                                                                                                                                       considered to have the weakest social
                                                                                                                                         was disastrously inaccurate. The real         welfare system, with just 0.41 per cent of
                                                                                                                                         figure was 6.6 per cent – almost twice        GDP allocated to social protection. The
                                                                                                                                         that permitted in the eurozone. Already       average monthly wage in Greece is about
                                                                                                                                         burdened with a bloated public sector,        £700, despite consumer prices being
                                                                                                                                         the government has acted. The deficit         some of the highest in the bloc, accord-
                                                                                                                                         was reduced last year to 4.2 per cent of      ing to Eurostat, the EU’s audit arm.
                                                                                                                                         GDP with a target of 2.6 per cent by the         But the government is confident that
                                                                                                                                         end of this year.                             the public is behind measures to reduce
                                                                                                                                             Plutarchos Sakellaris, chairman of the    the country’s deficit and any political
                                                                                                                                         council of economic advisers, says: ‘This     backlash will be contained. Sakellaris
                                                                                                                                         will be the first time we have stayed         says: ‘The fiscal adjustment process we
                                                                                                                                         below 3 per cent since we entered the         follow is a mild one. Public opinion is
                                                                                                                                         eurozone. It will be achieved partly with     very much in favour of our fiscal “house-
                                                                                                                                         a limited number of temporary measures        cleaning”, setting the economy on a
                                                                                                                    It’s like            on the revenue side.’                         firmer and healthier basis.’
                                                                                                                                             The government also intends to con-
                                                                                                                    I’m the kid          trol wage and pension costs and reduce        PENSIONS WORRY
                                                                                                                    in the               public spending by 1 per cent of GDP          This is by no means the only challenge
                                                                                                                    sweetshop.           every year. But the measures have not         facing the government. Greece’s central
                                                                                                                    I’d be
                                                                                                                    happy to                  FOREIGN DIRECT INVESTMENT: AVERAGE 2001-2003, US$ MILLIONS

                                                                                                                    spend the            120,000

                                                                                                                    rest of my

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                                                                                                                                                                                                                                OECD FACTBOOK 2005

                                                                                                                    talks to                     REAL GDP GROWTH: AVERAGE ANNUAL GROWTH 1991-2003, PER CENT
                                                                                                                    Lynn                   7.0

                                                                                                                    Barber                   %


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                                                                                                                    Pages 10-11




























































                                                                                                                                                                                                                                OECD FACTBOOK 2005
                | SPECIAL REPORT
                                                                                                                                                                                                                                                                  Greece | | 3

to a winner
                                                                                                                                            B O S N I A                                                      B U L G A R I A
                                                                                                                                                 &                 MONTENEGRO
                                                                                                                                             H E R Z .
                                                                                                                                                                             M A C E D O N I A                          MACEDONIA

                                                                                                                                                           A L B A N I A           WEST

                                                                                                                                                                                                                           A   E       G       E       A   N
bank forecasts average inflation in 2006       with the liberalisation of electricity and    security contributions and immigrants         I T A L Y                                         THESSALIA                             S       E       A
                                                                                                                                                                                                                                                                        T U R K E Y
to rise well above the eurozone average        gas markets, in accordance with EU            with social protection.                                                         IPIROS
at 3.3 per cent, compared to a target of 3.2   directives. It will sell 49 per cent of the      But the IMF wants Greece to go fur-
                                                                                                                                                       Corfu Town                        G            R       E        E                   C                E
per cent.                                      Public Electricity Company – the only         ther. It is arguing for the relaxation of
    ‘A systematically higher inflation in      provider of electricity to seven million      strong employment protection legisla-
Greece erodes competitiveness and pre-         customers – and is seeking investment         tion to stimulate hiring. It considers high                                                                                       Athens
vents the poorer sections of the popula-       partners in all forms of energy provision.    minimum wages negotiated at the cen-                                                                                          ATTIKI

tion from sustaining their consumption            Labour markets are undergoing imp-         tral level are inappropriate, resulting in
patterns without borrowing,’ said Bank         ortant reforms, though the pace remains       job losses or a shift to the underground                                                                     PELOPONNISOS                             CYCLADES

of Greece governor Nicholas Garganas.          relatively slow. The recent easing of         economy. It wants to see a mechanism
‘The rate of consumer loans in arrears is      overtime restrictions is meant to provide     allowing opting-out of aspects of central             I   O   N   I   A    N    S   E   A

higher in Greece than in the rest of the       flexibility and create a more fluid labour    agreements.                                                                                                                                                               CYPRUS

eurozone, but this is also causing infla-      market. Reforms to immigration laws              But that is for the future. The present                                                                                                                    Iraklion
tion to rise.’                                 may help to bring workers into the for-       is about ensuring business-friendly envi-                                                                                                                                  Nicossia
                                                                                                                                           0                           100                                                                                     CRETE
    The the Bank of Greece’s annual            mal economy, providing the government         ronments to increase foreign direct           Miles
report forecast GDP growth reaching 3.5        with revenues from taxes and social           investment and improve trade overseas.
per cent in 2006, but warned that the
benefits are not being felt by the majority
of citizens.‘Neither has unemployment
been significantly reduced in recent
years, despite the high growth rates,’
according to Garganas. The government
is targeting an unemployment rate of 9.8
per cent in 2006, down from an esti-
mated 10.4 per cent in 2005 and 11 per
cent in 2004.
    A combination of factors, including
rigidity in the labour market, pension
fund insolvency and high public deficits
and debt, together with consistently
higher inflation, are depriving the major-
ity of Greeks of the benefits of participa-
tion in the eurozone, said the central
bank chief.
    The economy has been growing rob-
ustly for some time, underpinned on the
demand side by the sharp decline in
interest rates due to the adoption of the
euro, financial market liberalisation and
the associated rapid growth of private-
sector credit; and on the supply side by
strong capital formation, immigration
and productivity gains.
    Reforms have been implemented to
address the pension difficulties faced by
some banks, improve product markets
and the business climate, increase labour
market flexibility and promote infra-
structure investment.
    The OECD concluded: ‘Fiscal consol-
idation must continue for a number of
years, the need to act on pension reform
is becoming increasingly pressing and
further structural reforms are required
in product and labour markets and in the
public sector.’
    There is hope, it believes. ‘If these
challenges are met, Greece will be well-

‘Greeks have more
confidence in their
abilities and realise
they can excel’
placed to catch up to the productivity
and income levels of western Europe.’
   The IMF last year outlined some con-
cerns: ‘Most prominent is the planned
securitisation of overdue taxes, esti-
mated to bring in revenue of about 1 per
cent of GDP in 2005, and again in 2006.
   ‘This is a temporary measure that does
not improve the underlying budget posi-
tion. An issue that has arisen this year is
tax receipts, principally from VAT, that
have fallen well short of budget forecasts
because of increased evasion. The suc-
cess of measures to stem this shortfall,
which are already under way, will be
critical to meet consolidation goals.’
   The international community is look-
ing to Karamanlis to introduce signifi-
cant reforms to expenditure manage-
ment and tax administration. There are
signs that he is doing just that.
   The long-term fiscal outlook is domi-
nated by the fiscal costs of an ageing pop-
ulation, principally through rising pen-
sion outlays, but also increasing health
costs. These will rise sharply after 2010
and, if not attended to, will eventually
result in a soaring public debt. Some
public debate on pension reform has
already started and the government has
referred the issue to the Economic and
Social Council.
   The Greek financial system has evol-
ved rapidly in recent years, reflecting the
privatisation of public-sector banks,
deregulation and economic integration
with the EU. Commercial banks have
benefited most and have expanded
rapidly. Capital markets and insurance
companies, by contrast, have not gained
proportionately and remain small by
European standards.
   The government is moving ahead
 4 | | Greece                                                                                                                                                                            SPECIAL REPORT|

                                                                                     No more dealings
                                                                                     under the counter
                                                                                     Judges have been thrown out of office and government lawyers jailed in
                                                                                     a crackdown on corruption – and it’s not letting up, writes Conal Walsh

                                                                                          n a country with one of the biggest    but many ordinary Greeks tend to                planning application,’ says one Greek
                                                                                          black economies in Europe, under-      respond to such episodes with a shrug or        expat, now living in London.
                                                                                          the-counter payments have long         even an indulgent smile.                           Not any more, says the Greek govern-
                                                                                          been an effective way of doing           ‘It’s the same in ordinary life. If you       ment, which has repeatedly declared its
                                                                                     business.                                   want to build an extension on your              commitment to fight corruption, foster
                                                                                       Greece has had more than its fair         house, the belief in some places is that it’s   public-sector transparency and safe-
Justice Minister Anastasios Papaligouras: ‘We are challenging the mentality.’   AP   share of ‘bribes for contracts’ scandals,   better to pay a bribe than to prepare a         guard the interests of investors.
                                                                                                                                                                                    ‘What we really want is to change the
                                                                                                                                                                                 way things are,’ says Anastasios Papa-
                                                                                                                                                                                 ligouras, Greece’s justice minister. ‘We
                                                                                                                                                                                 are challenging the mentality that kept us
                                                                                                                                                                                 all these years in a state of economic stag-
                                                                                                                                                                                 nation or, even worse, fake growth. We
                                                                                                                                                                                 remain as determined as ever in our
                                                                                                                                                                                 efforts to cleanse the public sector.’
                                                                                                                                                                                    The purge has yielded some high-pro-
                                                                                                                                                                                 file results. Last year, seven judges were
                                                                                                                                                                                 sacked, and a dozen more are being pros-
                                                                                                                                                                                 ecuted. Two court officials were jailed;
                                                                                                                                                                                 seven suspended; and a further 36 court
                                                                                                                                                                                 officials and prosecutors are under
                                                                                                                                                                                 investigation. More than 70 other court
                                                                                                                                                                                 officials have been moved to prevent
                                                                                                                                                                                 unofficial fiefdoms developing.
                                                                                                                                                                                    ‘We have taken legal initiatives such as
                                                                                                                                                                                 making the bribery of a judge a felony –
                                                                                                                                                                                 previously it was just a minor crime.
                                                                                                                                                                                 That was one of my very first actions as a
                                                                                                                                                                                 minister. On a practical level, we exam-
                                                                                                                                                                                 ine every serious accusation,’ says
                                                                                                                                                                                    ‘We do not want to simply be a slightly
                                                                                                                                                                                 better government than the last one,’ he
                                                                                                                                                                                 adds, and declares himself pleased with
                                                                                                                                                                                 the results of his work so far. ‘It would
                                                                                                                                                                                 have been folly to believe that a practice
                                                                                                                                                                                 of decades can be eliminated in a few
                                                                                                                                                                                 months. Nevertheless, the results of our

                                                                                                                                                                                 Public projects such as the Olympics have
                                                                                                                                                                                 led to a crackdown against corruption.

                                                                                                                                                                                 initiatives are encouraging.’
                                                                                                                                                                                    The second phase of the plan is to
                                                                                                                                                                                 modernise the judicial system for swifter
                                                                                                                                                                                 handling of cases. Cases often drag on for
                                                                                                                                                                                 more than seven years, and there are lit-
                                                                                                                                                                                 erally millions of pending cases. There
                                                                                                                                                                                 will also be a more business-friendly
                                                                                                                                                                                 bankruptcy code.
                                                                                                                                                                                    The building frenzy prior to the
                                                                                                                                                                                 Athens Olympics in 2004 gave Greece a
                                                                                                                                                                                 taste for big infrastructure projects
                                                                                                                                                                                 which has not abated. The Egnatia high-
                                                                                                                                                                                 way – part-funded by the European
                                                                                                                                                                                 Union – is nearly finished, and major gas
                                                                                                                                                                                 pipelines to Italy and Turkey are in the
                                                                                                                                                                                 offing. With so much public money at
                                                                                                                                                                                 stake, the need to prevent it being
                                                                                                                                                                                 siphoned off is more urgent than ever.
                                                                                                                                                                                 ‘We know that the level of corruption in
                                                                                                                                                                                 Greece not only affects life inside this
                                                                                                                                                                                 country, it also hinders potential foreign
                                                                                                                                                                                 investors,’ says Papaligouras.
                                                                                                                                                                                    There have been legislative battles to
                                                                                                                                                                                 force some reforms through, and com-
                                                                                                                                                                                 plications arising from the need to
                                                                                                                                                                                 implement separate EU directives on
                                                                                                                                                                                 corruption. But the minister is confident
                                                                                                                                                                                 of success. Only when asked whether
                                                                                                                                                                                 ministers will see some of their own
                                                                                                                                                                                 long-held immunities from prosecution
                                                                                                                                                                                 and investigation abolished is
                                                                                                                                                                                 Papaligouras less forthcoming.
                                                                                                                                                                                    ‘I wouldn’t like to speak in advance
                                                                                                                                                                                 about our actions on that matter,’ he says.
                                                                                                                                                                                 ‘We have to find the balance between the
                                                                                                                                                                                 safety of politicians from persecution
                                                                                                                                                                                 from political adversaries and common
                                                                                                                                                                                 sense, which says that politicians cannot
                                                                                                                                                                                 be more immune to legal penalties than
                                                                                                                                                                                 any other citizen.’
               | SPECIAL REPORT
                                                                                                                                                                                                 Greece | | 5

Banks break over the border
Despite record domestic profits in the sector, the
real growth story is the emerging Balkans markets
to the north and east, writes Heather Connon

            he last three years have been     tant corporate bank and finally entering
            good for Greek banks. Profits     the retail sector, establishing branches
            have risen by an average of 30    with an aggressive strategy, developing
            per cent each year for the last   products and employing centralised
three years and the share prices of the       processes. Since the beginning of 2005
top five have nearly trebled, handsomely      we have started rolling out retail prod-
beating the European stock market.            ucts, so next year we expect to be a
   The growth has been fuelled in part by     booming year for this sector.’
a credit boom in their home market as            He believes Greek banks have more
low interest rates and good economic          than 15 per cent of the market in Bulgaria,
growth has encouraged Greek con-              Romania and Albania. ‘The Balkan mar-
sumers to start taking out mortgages and      ket in general is very much like the Greek
personal loans. But the real excitement is    market in terms of culture and politics,
not the domestic economy – it is the          hence Greeks have a comparative advan-
prospects for expansion across the            tage when it comes to understanding this
Balkans.                                      market. Furthermore, we can understand
   Many of Europe’s leading banks are         the phase their economy is going through
equally enthused about the Balkans, and       because we have already gone through it.
with good reason. Already, two Balkan         We can also understand their institutions,
countries – Bulgaria and Romania – have       currency fluctuations and their desire to
signed up to join the EU within the next      enter the EU.’
two years; Croatia and Turkey have               It is his belief that these cultural simi-
embarked on accession talks and others        larities mean Greek banks can fight off
are anxious to join them. That will give      competition from the better-capitalised
renewed impetus to the economic and           Austrian and Italian banks that are also
political reforms which have been in          targeting the region. ‘It is not a matter of
progress for much of the last decade and      money, rather a matter of efficiency. I am
which are, slowly, starting to bring          confident that we are in a more compet-
stability and prosperity to the region.       itive position than other foreign banks.’
   It is hardly surprising that the Greeks       Already, he says, Piraeus’s interna-
should be first to tap into this market.      tional network contributes more to total
Geographically, Greece is ideally placed      profits than those of other banks. ‘We
to do business there, particularly since      believe that we shouldn’t be spending
the building of the so-called Bear Tunnel     huge amounts of money to buy banks,
between Bulgaria and Greece, opened at        rather than make sure to keep the return
the end of last year, which cuts the          on our investment at an efficient level.’
journey time between the two countries.          EFG Eurobank, another top five bank
Greece has also spent much of the last        aggressively expanding in the Balkans,
decade in its own painful restructuring       was the first Greek bank to invest in
process, giving its banking executives a      Turkey. Nicholas Nanopoulos, its chief
real insight into what is involved. And,      executive officer, says the step is a ‘rela-    Piraeus Bank pioneered expansion abroad and now has around 165 branches overseas with plans for more.
for a country with just 11 million people,    tively modest one’.
the prospect of tapping into a regional          ‘We decided that the financial sector        gross domestic product, less than half
market with 50 million consumers is           was an area that presented relatively           the average of the rest of the eurozone.
hard to resist.                               low-risk opportunities that gave us the            Similarly, the Agricultural Bank,
   Already, Greek banks have invested         ability to capitalise first, on a competitive   recently rebranded as ATEbank, was loss
around €2bn (£1.4bn) on acquiring and         edge that we possess and, second, on the        making but is now being transformed. It
opening more than 700 branches in the         growth opportunities of the Turkish cap-        is the only remaining bank in Greece
Balkans, giving them about 15 per cent of     ital market. At the same time, it pre-          where the state has a majority share, but
the market. Greek banks are invariably        sented us with an entry point into the          will soon be partially privatised.
on the list of bidders when Balkan banks                                                         Piraeus’s Mantakas thinks there is
are privatised or sold.                                                                       scope for up to to three years of growth
   One of the pioneers was Piraeus Bank,                             Head of EFG              before the market slows. It has aggres-
which made its first foray abroad a                                  Eurobank, Nicholas       sively expanded its branch network and
decade ago, when it established the                                  Nanopoulos, said         aims eventually to increase their number
Tirana Bank in Albania. Chios Bank, one                              the step to              by a third to between 340 and 350
of the smaller banks that Piraeus has                                investing in Turkey      branches – which, given that its new
absorbed on its consolidation spree,                                 was a ‘relatively        branches grow three times as quickly as
started even earlier when it established                             modest one’.             its older ones, should be good for profits.
the first foreign private bank branch in                                                      EFG is one of the most diversified of
Bulgaria. Over the last year alone,                                                           Greek banks, with interests in everything
Piraeus has doubled the number of                                                             from fund management and private
branches in the Balkans and it now has        Turkish economic system, which is very          banking through small businesses to
around 165 branches abroad, compared          vibrant, likely to grow fast and with good      treasury and capital markets. Nanopou-
to 260 in Greece, which contribute            results in the medium to long term.’            los believes this breadth of interests was
between 13 and 14 per cent of its profits.       The Balkans are not the only source of       key to its rapid growth last year and he
   George Mantakas, director of               growth for Greek banks. They are doing          sees considerable scope for the future
Piraeus’s international division, thinks      rather nicely at home too. Piraeus more         with mortgages, small businesses and
his bank could double overseas branches       than doubled its profits last year and          asset management particularly targeted.
by the end of the year. ‘Growing abroad is    EFG grew by almost 50 per cent in 2005             ‘The Greek market is underserved in
a vital part of our strategy, no question     by taking advantage of robust economic          asset management, private banking and
about that. The way we are working            growth and the cost-cutting benefits            life insurance,’ he says. ‘In Greece, life
towards this goal is not by throwing          from consolidation and deregulation.            insurance penetration is a fifth of that in
money into huge investments but first         This allowed them to increase the range         other European nations. So there are
understanding the corporate market,           of products. The market is still some way       opportunities to expand our domestic
where we have a definite advantage, and       from maturity – household borrowing,            business and I think we are well-placed
then establishing ourselves as an impor-      for example, is around 40 per cent of           to take advantage of such opportunities.’

Turkey’s unlikely ally within the EU
                                                 Athens is using financial and eco-           while the productive department is
by Heather Stewart                            nomic ties, as well as political                situated in a Balkan state,’ he
                                              diplomacy, to help strengthen the               explains. ‘This gives us the opportu-
GREECE’S FOREIGN policy is                    argument for Balkan integration into            nity to combine the comparative
shaped by its geographical position,          the European project.                           advantages of both areas’ – know-
sitting between the Balkan states                Part of that is aid: Greece has              how and modern infrastructure on
which are vying for entry to the              established a €500m Balkan                      the Greek side, and cheap labour, low
European club, and Turkey, which              Reconstruction Fund, which has                  taxes and low-cost materials in the
many Old European sceptics want to            helped to pay for a number of pro-              Balkans.
keep out.                                     jects, including the rebuilding of the             But Greece is determined to
   Yannis Valinakis, deputy foreign           old telecommunications tower in the             spread its economic and political
minister, says that despite age-old           centre of battle-scarred Sarajevo,              influence beyond the Balkans: it
enmities between the two countries,           now renamed The Building of Greek-              chairs the 12-country Black Sea
bringing Turkey into the fold is a key        Serbian-Bosnian Friendship.                     Economic Corporation, which
aim for Greece.                                  Euripides Stylianides, also a                includes Russia, Ukraine, Turkey and
   ‘The issue of Turkey is a part of          deputy foreign minister in Athens,              Georgia. One result has been a gas
transforming our region into a part           says with 3,500 of its companies                pipeline from Azerbaijan, through
of modern Europe,’ he says.                   already established in the Balkans,             Greece to Italy beyond. ‘This project
   ‘This will be to the advantage of          Greece can act as a gateway to the              brings Greece to the centre of the
the Turkish people, as well as the            region for foreign investors. ‘The              energy network, making it a transit
Greek people and the rest of our              mother company and its research                 country with significant strategic
region.’                                      department remain based in Greece,              importance,’ said Stylianides.
6 | | Greece                                                                                                          SPECIAL REPORT |

               So much more
               Golf, gambling – and being nice to visitors: the Greek government is pulling out
               all the stops to attract punters into high-end tourism, writes Ros Weaver

                            hink Greece and the image          cially exploit the Olympic structures, is      implemented, the redevelopment is
                            most likely to spring to mind is   keen to attract foreign investors and ser-     capable of generating €300m-€500m
                            of supping retsina as the sun      vice providers.                                (£207m-£346m) a year.
                            sets over an island-dotted sea.       ‘These facilities have a broader signif-       Even the facilities originally desig-
               Or perhaps your beachside drink of pref-        icance,’ he says. ‘They include some of        nated as temporary are included in the
               erence is beer, in prodigious quantities.       the largest in a huge city that is excep-      redevelopment plans. The Hellinikon
               But the Greek government, keen to shake         tionally densely built, with few larger        baseball and hockey stadium and the
               off the budget beach holiday image, has         facilities or open spaces.’                    huge International Broadcasting Centre
               come up with a 10-year plan to develop             Twelve of the structures in question        (IBC) in Maroussi, originally designated
               high-end tourism, emphasising the other         are in the greater Athens area. ‘A number      as provisional structures, will be given a
               attractions Greece has to offer. But what       of these will be converted to new uses,’       new lease of life. The IBC is one of the
               will it take to lure Greece’s traditional       says Hadjiemmanuil. They must, how-            venues that has already attracted signif-
               guests away from its perfect beaches?           ever, be accessible to the public and aim      icant interest from investors.
                  There is a lot more than sea, sun and        to promote sports, culture, tourism and           Under the strategic plan, which
               alcohol that Greece can already offer the       family-oriented leisure and entertain-         became an Act of Parliament in June
               discerning traveller. You can make the          ment. ‘The city now has a much imp-            2005, the structures are preserved from
               9,500ft ascent of Mount Olympus to the          roved transport system, commercial             becoming offices or loft apartments. ‘The
               Throne of Zeus, or have a good soak in          facilities have also been improved and         primary objective is not to recover con-
               the hot springs where Hercules regained         buildings renovated, making it easier for      struction costs but to cover the running
               his strength at Thermae Sylla Wellness          visitors to experience the city. Yet there     costs by turning the continuing operation
               Hotel in Evia’s Edipsos, a resort favoured                                                     of the facilities into a viable proposition.’
               by the likes of Maria Callas and Greta
               Garbo. While existing possibilities for         If all goes to plan,                              The new act has also attempted to
                                                                                                              simplify the complicated legal proce-
               higher-end tourism are already being
               promoted, others are being developed.           Greece will become                             dures which have halted many large-
                                                                                                              scale projects in Greece in the past. ‘We
               Agro-tourism, an increasingly popular
               way to become acquainted with rural             the Mediterranean’s                            have attempted something innovative,’
                                                                                                              says Hadjiemmanuil. ‘Facility users will
               life, is a growth sector.
                  Greece already ranks fourth in Europe        new golf Mecca                                 now need to get just one umbrella permit
                                                                                                              issued by a single committee made up of
               in net profits from tourism, contributing                                                      representatives of all the public agencies
               around 18 per cent to its national GDP.         are still elements missing. Our plan           involved.’ If it works, the time taken to
               But options for diversifying the industry       includes opening the city to the sea,’ says    approve investors’ plans will be cut from
               are set to burgeon under the govern-            Hadjiemmanuil.                                 years to just a couple of months.
               ment’s new investment law, particularly            The Olympic tae-kwon-do facility on
               aimed at tourism, with grants of up to 50       the Faliro coastal front is being redevel-     GAMING
               per cent in some areas. A ‘one-stop shop’       oped into an international convention          The one sure way to make money at
               for investors promises to cut processing        centre with a marina and public recre-         gambling is to organise it. Spearheading
               times for issuing investors’ permits and        ational area. Plans include another large-     a boom in the European gambling indus-
               licences. Minister of Tourism Dimitris          scale marina at Agios Kosmas, a golf           try is the Greek state lottery operator
               Avramopoulos has even launched a cam-           course in Markopoulo and two muse-             OPAP, one of Europe’s most profitable
               paign to encourage Greeks to be polite          ums, which, it is hoped, will unify the        organisations with a 2005 profit of
               and hospitable to tourists.                     Olympic stadium area into a significant        €444m. Since its flotation in 2001, its
                  If all goes according to plan, Greece        tourist attraction. The Confederation of       stock has been particularly popular with
               will become the Mediterranean’s new             Greek Industries reckons that, when            foreign investors.
               golf Mecca, while post-Olympic Athens
               will be transformed into a top city-break
               destination and convention capital.                     CYPRUS – IT’S NOT JUST FOR CLUBBERS…
               AFTER THE GAMES                                  As the resort of Agia Napa attracts ever-     Olympic teams. Cyprus is not yet known
               When the Olympics came back home to              larger numbers of 18-30-year-olds keen to     as a winter sports destination, but the
               Greece in 2004, Athenians rejoiced. Not          enjoy its profusion of themed clubs,          slopes of Mount Troodos will provide ideal
               only was their city attracting crowds            Cyprus is keen to avoid becoming a club-      skiing conditions for winter Olympic
               who stayed longer than required for a            bing destination in the tradition of Ibiza.   teams.
               quick peek at the Acropolis before jump-         Agia Napa is one of three resorts where           Other plans include the construction of
               ing on a ferry to the islands, here was the      new marinas will be built with the aim of     a 3,000-seat conference centre and new
               big chance for Athens to become a top            attracting a quieter and more affluent        sports infrastructures including no fewer
               Mediterranean destination, the new Bar-          crowd of pleasure-seekers.                    than 11 golf courses.
               celona. Following the Games, plans were             Another thing which could make hung-           ‘Cyprus is not interested in attracting a
               drawn up to redevelop the 15 purpose-            over clubbers feel uncomfortable will be      large number of tourists,’ claims Yiorgos
               built structures to provide much-needed          the sight of British athletes preparing for   Lillikas, Minister of Commerce, Industry
               sports, leisure and conference facilities.       the Beijing Olympics. A 10-year agreement     and Tourism. ‘I’ll be happy to reach 3.5 mil-
                 Christos Hadjiemmanuil, president of           has been signed for the island to host        lion, but 5 million would be too much.’
               Hellenic Olympic Properties, the com-
               pany formed to manage and commer-
                | SPECIAL REPORT
                                                                                                                                                 Greece | | 7
                                                                                              Tourist agencies are promoting Greece as
                                                                                              more than a beach destination –
                                                                                              broadening its appeal to higher-end
                                                                                              tourists such as hikers and bird watchers.
                                                                                              Photograph by Kreda Katja

than beaches                                                                                     image of a destination and generate prof-
                                                                                                 itable traffic to the place,’ says vice-pres-
                                                                                                 ident Roddy Carr. ‘We have done a lot of
                                                                                                 sports-active lifestyle tourism plans for
                                                                                                 countries that really want to have a
                                                                                                 major event strategy. The influence of
                                                                                                 the Olympics creates a positive percep-
                                                                                                 tion for developing Greece’s image. As
                                                                                                 we developed the tourism consulting
                                                                                                 division, we looked for the place with the
                                                                                                 best opportunities for us to be effective
                                                                                                 as consultants and identified Greece.’
                                                                                                    According to Carr, the country’s num-
                                                                                                 ber-one asset is that it is the ‘Home of
                                                                                                 sport’ in the way Scotland is the ‘home of
                                                                                                 golf’. ‘We did our research and found
                                                                                                 that less than 1 per cent of tourism was
                                                                                                 related to sports. We saw that the brand
                                                                                                 existed, but no one was exploiting it.
                                                                                                    ‘It was an opportunity to propose a
Golf is at the forefront of a drive to attract sporting tourism.Photograph by Tania Cagnoni      holistic solution to the development of
                                                                                                 sports-active lifestyle. We proposed inte-
   Greeks are keen gamblers and have           brainchild of sports agent Mark McCor-            grating the Olympic venues into a strat-
had their confidence boosted by winning        mack, ‘the most powerful man in sport’,           egy that would deliver growth for sports
both the Euro 2004 football and 2005           IMG has offices in 30 countries, employ-          tourism.’
Euro Basket championships. To cash in          ing more than 2,000 people. Its broad-               ‘Greece’s economy is largely based on
on this enthusiasm, OPAP has invested          cast division Trans World International,          the tourist industry,’ says Xenia Vassil-
in a live betting system, with betting ini-    set up in the Sixties to film a handful of        iadi, representative of IMG in Greece, ‘In
tially on two or three live games a week.      golf events, is the world’s largest inde-         order to achieve greater results, this
By the 2006 World Championships in             pendent television sports production              industry has to change to attract tourists
Germany, they plan to offer two or three       company and rights distributor. IMG               all year long.’
a day.                                         Tourism is part of the company’s consul-             A logical area of development in
   The glamorous side of Greek gam-            tancy division, which uses its assets and         IMG’s view is golf, one of the most prof-
bling is represented by the country’s          products to influence the growth of               itable tourist products. ‘Outside Athens
eight casinos and crowned by Greece’s          ‘high-yield’ tourism.                             we saw the potential for a plan involving
only casino resort, the five-star Club            ‘Using events, concerts, fashion, tele-        clusters of golf combined with yachting,
Hotel Loutraki. With 70 roulette tables        vision and internet, we can change the            culture and cuisine that would generate
and 700 slot machines, the casino here                                                           more than €50m a year,’ says Carr.
raked in more than €200m in profits last                                                            To date, IMG is involved with activat-
year, up from €64m in 2004. Loutraki is                AGRO-TOURISM                              ing three projects with public and pri-
the closest thing Europe has to Las                                                              vate sector groups in Athens, but Carr
Vegas, but, rather than surrounding             ‘There is so much for people to see here,’       says the company plans to invest further
themselves in glittering fake antiquity,        says Brigitta Papastavrou, who heads             into the country. ‘We cannot start with
guests here can take archeological tours        Agrotouristiki SA, a new company                 promoting big events because these need
to visit the real thing at Corinth, Olympia     formed to promote agro-tourism, ‘You             money and what we need to do here is to
or the Epidavros amphitheatre.                  can combine culture with walking, hiking,        find a way to generate money and tour-
   At present, more than nine out of 10 of      bird-watching, all the things the British        ism revenues for Greece.’
the casino’s 900,000 visitors each year         like doing.’                                        One man making use of IMG’s golfing
are Greek, but chief executive Antonis             According to Papastavrou another              expertise is lawyer John Papapolitis,
Stergiotis says the resort is aiming to         thing the British are keen on is shooting,       who, in collaboration with the Mandarin
attract a more international clientele          an activity on offer in northern Greece.         Oriental hotel chain, is building a luxury
with a €120m investment in operations:          But whatever your view on hunting, rural         five-star hotel resort in the Western
‘We have succeeded in opening up the            Greece has much to offer.                        Peloponnese. It will have both a nine-
Turkish market, a very important market            Agrotouristiki’s mandate is to make           hole executive golf course and an 18-hole
where there are no casinos but very good        local regions and communities aware of           championship course developed by IMG
players.’                                       the possibilities of agro-tourism,               with the idea of becoming part of the
   The company is also aiming to export         facilitate initiatives and provide planning      PGA tour.
its expertise, beginning with the Balkans.      and advice to enable them to flourish.              ‘Experts say that this will be the only
As a first step, Loutraki has formed a          Papastavrou believes agro-tourism can            links course on the beach on the Euro-
consortium with Serbian State Lotteries         attract mid- to high-end tourists without        pean map,’ says Papapolitis. The hotel
which has been awarded an exclusive             losing any of the character of the country.      will have a kilometre-long beach offering
casino licence for Belgrade for the next           ‘What Greece has to do is not to              water sports and a first class spa. ‘The
10 years. The Belgrade casino will open         increase the number of tourists, but             landscape is fantastic and it is very close
later this year.                                increase their quality,’ she says.               to ancient Olympia. IMG is the biggest
                                                ‘Assuming models that have nothing to            and the best in this field. I think the
THE HOME OF SPORT                               do with our needs or capabilities would          Greek government should hire them.’
IMG, the world’s largest sports and             be disastrous.’                                     Papapolitis hopes to have the place
lifestyle management and marketing                                                               operational as an all-year-round resort
firm, is all set to invest in Greece. The                                                        in 2007.
 8 | | Greece                                                                                                                                                                                                            SPECIAL REPORT|

Calls for a                                                                                                                                                                                                     Aktor plays a
                                                                                                                                                                                                                leading part in
game plan                                                                                                                                                                                                       constructing a
                                                                                                                                                                                                                modern nation
The Olympics cost £8bn to stage. Can the facilities                                                                                                                                                             AKTOR, THE largest construction
now make money? Heather Connonreports                                                                                                                                                                           company in Greece, is the result of a
                                                                                                                                                                                                                merger of two other Greek firms.

                                                                                                                                                                                                                   Aktor was heavily involved in
       t has been one of the biggest chal-         erve, so further development has to be                                                                                                                       projects connected to the Athens
       lenges of the Olympics: what can            non-intrusive and quiet. IMG’s solution                                                                                                                      Olympic Games, including the
       the 22 facilities built for the Athens      would be to create a recreational park,                                                                                                                      construction of the city’s new metro
       Olympics be used for now – and,             raising income from charging visitors                                                                                                                        system.
more importantly, how can they gener-              and organising treks and other nature                                                                                                                            But the company’s biggest project
ate income for the country?                        activities. Vassiliadis says that similar                                                                                                                    to date has been the construction of
   Greece is estimated to have spent as            schemes have been successful in Spain                                                                                                                        Attiki Odos, the new ring road around
much as $14bn (£8bn) on the games,                 and IMG hopes to be able to demon-                                                                                                                           the capital – plans for the expansion
including upgrading infrastructure and             strate how it could work in Greece.                                                                                                                          of which the company recently pre-
building the stadia – three times the orig-           At the Markopoulo equestrian centre,                                                                                                                      sented to the governmentand is wait-
inal estimate – while simply maintaining           where ownership was complicated,                                                                                                                             ing for approval.
them is costing more than $100m a year.            IMG’s proposal is to combine an eques-                                                                                                                          Dimitris Koutras, Aktor’s CEO, says
But, unlike host cities such as Barcelona          trian centre with a nine-hole golf course                                                                                                                    that future goals for the company
and Sydney, deciding how they should be            that would give players a handicap, the                                                                                                                      include expanding operations in
used after the games were over was not             first such course to do so in Greece.                                                                                                                        foreign markets.
part of the initial planning.                         That fits with another IMG project –                                                                                                                         ‘The EU, for us, stands for a unified
   Now the government is asking for pro-           working with the government on a                                                                                                                             market where we can exploit business
posals on how they can be used. And                sports tourism study designed to attract                                                                                                                     opportunities, especially in our
IMG, the sporting consultancy founded              cultural and leisure tourists, as well as                                                                                                                    neighbouring countries, with which
by Mark McCormack and renowned for                 sun lovers who head to the islands. ‘Post                                                                                                                    we share similar mentalities. I believe
representing sports heroes ranging from            the Olympics, Greece should have been                                                                                                                        we can play an important role in our
Venus and Serena Williams to Tiger                 able to capitalise on sports tourism but it                                                                                                                  sector on a European level,’ he says.
Woods, is keen to take on two of the               didn’t,’ said Vassiliadis. ‘The country                                                                                                                         Aktor also operates in the Middle
toughest challenges.                               should excel in tourism, but does not. It                                                                                                                    East. It currently has construction
   It has already submitted proposals for          doesn’t attract the right type of tourists.’                                                                                                                 projects in Qatar and road-building
the Markopoulo equestrian centre and                  So IMG is working with the govern-                                                                                                                        projects in Kuwait.
hopes to work on the Schinias rowing               ment on municipality marketing, similar           Protected: the Olympic canoeing centre.               Athens has just one – to compete for                    ‘The rapid development of the
and canoeing centre.                               to the work it did to rebrand and pro-            Photograph by Doug Pensinger                          tourists with countries such as Portugal             Emirates means that there is a
   ‘Taxpayers gave so much for these               mote Miami to help stimulate tourism by                                                                 and Turkey. ‘The climate is ideally suited           growing need for more companies,’
facilities to be built, it is vital to find ways   promoting cities and encouraging ‘Mice’                                                                 for golf courses,’ says Vassiliadis, but the         says Koutras. ‘We are entering into
                                                                                                                                                                                                                this market not to replace these com-
of giving a return back to the people,’ said
Xenia Vassiliadis, IMG’s country repre-
                                                   events – meetings, incentives and corpo-
                                                   rate events. IMG is looking at ways to            Simply maintaining                                    government would have to pass new
                                                                                                                                                           laws on things such as zoning, as Cyprus             panies, but to fulfil an evident need.’
                                                                                                                                                                                                                   Koutras admits that foreign
sentative for Greece. ‘But it is a very dif-
ficult process, everything was done so
                                                   link this to sporting and leisure events,
                                                   like golf or country clubs.                       the Olympic facilities                                has done, to facilitate their development.
                                                                                                                                                              ‘In the past, private initiative has led          companies have an advantage over
                                                                                                                                                                                                                Aktor in terms of size and experience,
haphazardly in the lead-up to the
Olympics and there was no after-plan.’
                                                       The company is already working on a
                                                   proposal to build more golf courses –             is costing more than                                  the government,’ said Vassiliadis. ‘Hope-
                                                                                                                                                           fully, we will be able to work even more             but hopes his company’s strong
                                                                                                                                                                                                                reputation may lead to partnerships
   Schinias’s challenge stems from the
fact that it is in a protected nature res-
                                                   currently there are five across Greece but
                                                   they are mainly on the islands and                $100m each year                                       closely with the government, as IMG has
                                                                                                                                                           done in other countries.’                            with them in the future.

                                                                                                                                                                                                                       A D V E R T I S I N G F E AT U R E

 Greek Gaming has
 Big Prospects for Better Betters                                                                                                                         pean football and basketball champion, but          The operator is also looking forward to ap-
  New Year’s Eve in Greece is traditionally a playful get-together for friends and families, whereby some                                                 also brought this year’s event home to Ath-         proaching new markets with its services by
                                                                                                                                                          ens. The sell-out final is set to take place at      expanding into the lottery operation of anoth-
  households pull out a pack of cards and others stroll out to the casinos for some Roulette. Gaming is in fact                                           the Athens Olympic Complex on May 20th,             er European country. Following a European
  popular throughout the holiday season and this was grandly reflected in the 2005 Full Year Results of lottery                                            and if first round participations are anything       Parliament decision of February 16th, 2006,
  operator OPAP.                                                                                                                                          to go by, OPAP looks guaranteed to draw             excluding gambling from its Services Direc-
      In particular, the final three months saw a spectacular rise in revenues for the gaming giant. Whereas the                                           even more players than with the Oscars. At          tive, OPAP has secured its 20-year conces-
  first semester of 2005 saw the game named Stihima register a 31.8 per cent drop, fourth quarter results saw                                              the ceremony to select the song representing        sion of operations in Greece. It is a measure
                                                                                                                                                          Greece this year, 200,000 people voted by sms       taken to curb illegal internet gambling within
  it skyrocket to a positive 30 per cent increase. Considering the game averages a €1.4 billion yearly profit,
                                                                                                                                                          text message in 15 minutes for ‘Everything’,        the EU. Should OPAP become active else-
  this percentage represents a tremendous amount. According to Basile Neiadas, the Chief Executive Officer                                                 sung by Hellenic pop icon Anna Vissi. Where-        where within Europe, it would comply with
  of OPAP S.A., the pleasing results were not only attributable to the Greek people’s love of playing. “The per-                                          as viewers will only be able to vote for one        the rules and regulations of the target coun-
  formance of Stihima was a big satisfaction for the management of the company because it proved that all                                                 song, excluding their own country, Stihima          try, respecting its borders and not offering
  the rejuvenation measures we took in June 2005 had an immediate result, having a significant effect in both                                              players will have the privilege of predicting       local activities outside of the country in ques-
  sales and profits,” muses Neiadas.                                                                                                                       first, second and third places out of 24 entries.    tion. Even if there aren’t any concrete plans at
                                                                                                                                                          More than this however will be the amount of        the moment, OPAP has its eyes open and with
      Another game that contributed to the satisfaction of investors and analysts was KINO. During the festive                                            participation with the classically successful       the first available opportunity will announce
  season OPAP increased the game’s playing hours by four at its 5500 agencies, making the usual morning and                                               football World Cup taking place in Germany          the developments to its shareholders.
  evening sessions a non-stop bonanza. In total, OPAP’s revenues rose 16.3 per cent to €3,695.2 billion in 2005.                                          this June, which OPAP this year will ad an ex-      OPAP’s priorities for the moment lie at home
                                                                                                                                                          tra dimension to by introducing live betting on     in Greece, with its agencies. As new games
                                                                                                                                                          two games per day. The World Cup four years         are attracting an increase in players to their
                                                   a half Oscars out of the eight it was nomi-       category was George Clooney in Syriana, who          ago sold €100 million in bets alone.                network of shops, OPAP is activating a refur-
 The Over/Unders                                   nated. The odds were 1.70 for both. You had       won, and although Paul Giamatti in Cinderella        The entry into television broadcasts is an-         bishment and identity upgrade. “This is a huge
 of Brokeback Mountain                             to bet either for five, six, seven or eight Os-    Man was paying 1.40 as the favourite, only 5         other outlook for OPAP which it envisions           project that will be ‘euro-free’ for our agents,”
                                                   cars, which was the over, or for zero, one,       per cent of the betting was done on Giamatti.        materialising later this year. Their brand new      explains Basile Neiadas. “We will take the ex-
 What were the odds? This year’s favourite         two, three and four, which was the under. Of      Even though Clooney was the outsider, paying         game Bingo-Lotto is set to take off in Octo-        penses, the cost of which has been forecast
 to win top prize at the Academy Awards not        course Brokeback Mountain only obtained           3.25, it was preferred by 67 per cent of the total   ber as part of a nationally broadcast show.         from the income of KINO. This will have a
 only lost the Best Movie Oscar to a relative      three Oscars. It was very surprising to us        betting. We have a suspicion that the female         “OPAP is obtaining a very strong communi-           very impressive and aesthetic effect. We will
 outsider, but also surprised many critics, film    that 92 per cent of our players predicted cor-    population won a lot of money on this.”              cation tool which will permit us to communi-        change the outside as well as the inside look
 lovers and bookmakers. Except for a few           rectly that the movie would get less.”            The most successful player was a coupon              cate a lot of information, both to our agents       of the agencies, installing the latest technolo-
 lucky Greeks. The 2006 Oscars marked a first       It gets better. Basile Neiadas outlines the       holder in Athens, who had predicted all nine         and our players,” says Neiadas. “It will help       gies like new terminals and plasma screens
 for OPAP who entered the glamorous cere-          fact that its strategy to rejuvenate OPAP’s       included categories correctly. With a €90            us with our social responsibility strategy and      and more.” The renewal also includes a ten-
 mony as its first non-sports betting event on      activities includes opening up the games to a     coupon the Athenian won €6,308.                      it will allow us to give some additional gifts to   der for the supply of a new IT system to OPAP’s
 the Stihima coupon. The Awards were also          wider target group. The Oscars were a prime                                                            our players.” Sotirios Kostakos, President of       network, all of which will boost an even bet-
 an excellent opportunity for players to get       example of this. “Best Movie nominee Crash        Euro-vision is Everything                            the group, says that corporate responsibility       ter experience for betters. “The target is to
 acquainted with alternative types of betting      was played by only 17.60 per cent of the bet-                                                          towards Greek society is fully rewarding for        create an environment where the player will
 like over/under, introduced by the operator       ting while Brokeback Mountain was played          The second non-sports related event that             OPAP. “We particularly contribute to the sec-       enter a nice environment to not only play but
 in November last year alongside live betting.     by 57 per cent and of course Crash won. The       OPAP will cover is the increasingly popular          tors of Sports, Culture, Education and Health       also have some coffee, chat with friends and
 CEO Neiadas knows very well what the odds         lucky 17.60 per cent got odds of 4.50, which      Eurovision song contest. There is very good          by applying the company’s Social Activity           spend some happy hours in our shops.” With
 were. “There was an over/under for Broke-         means that for betting €100 you obtain €450.      reason for this since Helena Paparizou not           Program. We are looking at more initiatives         the luck Greeks have been experiencing dur-
 back Mountain on whether or not it would          This was normal. Not so normal was that the       only won the contest for Greece last year,           of which, among others, theatre and litera-         ing the past three years, there will be plenty
 manage to win more or less than four and          outsider in the Best Actor in a Supporting role   continuing a spate of success for the Euro-          ture are considered important.”                     more happy hours to look forward to.
                | SPECIAL REPORT
                                                                                                                                                     Greece | | 9

Reflecting change: Romania’s past mirrored in the windows of a Bucharest business centre.                           Photograph by Vadim Ghirda

Bridge that links
east and west
For the eurozone, Greece is the investment platform to the Balkans;
for its eastern neighbours it is a beacon of achievement
                                                formance is due to inflows of foreign                 expected to have distributed some
  Fotis                                         funds, which are expected to have
                                                reached €5.2bn in 2005. It is likely that at
                                                                                                      €550m across six of its neighbours.
                                                                                                          It is not just one-way traffic. Greece
  Mavrokefalos                                  least some of those inflows are using the             benefits from the fact that foreign
                                                Greek economy as a safer way of access-               investors want to invest in the Balkan
 COMMENT                                        ing the more volatile Balkan markets.                 states due to their strong economic
                                                   Greece’s role as interlocutor between              prospects, low labour costs and taxation
GREECE IS the eurozone's easternmost            east and west is not new, but is becoming             rates. Greek investment in the region
outpost. It is often regarded as its weak-      increasingly important. The fall of com-              surpassed €8bn in 2005 and Greece was
est economic link, but everything is rela-      munism allowed many Balkan states to                  listed as the largest investor in the
tive. To the countries to its east that         move towards political democracy and a                former Yugoslavia, Albania and Serbia-
aspire to join the European Union, it is a      free market economy.                                  Montenegro, was placed second in Bul-
beacon for what can be achieved. And               Following Turkey, Bulgaria and Roma-               garia and third in Romania.
increasingly, it is being seen by its eastern   nia are the most economically developed                   The banking sector is perhaps where
neighbours as a key partner in making           countries with a single digit inflation rate          Greece’s growing influence in the
that transition. This is no more true than      and relatively high GDP growth. Roma-                 Balkans is most obvious. Backed by West-
in Turkey, as old hostilities are pushed        nia and Bulgaria are expected to become               ern investors, Greek banks have
aside by shared economic and political          EU members in 2007 or 2008. The                       expanded aggressively. The country’s
ambitions.                                      bloody fallout from the break-up of the               five largest commercial banks now oper-
   Greece is also increasingly being seen       former Yugoslavia has held back the                   ate a network of 950 branches across the
by its Western allies as the investment                                                               region, employing 16,000 people and
platform to the Balkans, reviving a role
that it first played, with great success,       Greece’s potential                                    accounting for 16 per cent of market
                                                                                                      share. And there is plenty of scope for fur-
some 3,000 years ago, as the bridge
between east and west.                          growth rate is the                                    ther growth. Total assets in the Balkan
                                                                                                      banking sector amounted to just €36bn in
   While Spain and Ireland are often
held up as the exemplars of European            highest in the eurozone,                              2005, compared with €260bn in Greece.
                                                                                                          Greek financial know-how has even
economic miracles, Greece’s perfor-
mance since ridding itself of military rule     at around 4 per cent                                  helped it to penetrate the Turkish mar-
                                                                                                      ket. Last year saw the establishment of
and joining the EU in 1981 has been                                                                   the first Turkish-Greek private bank,
impressive. In 1981, headline Greek infla-      development of Serbia and Montenegro,                 Aegean Bank, which plans to open
tion averaged close to 25 per cent. The         Kosovo and Albania. But even there, EU                branches in Izmir and Athens. This joint
government was in the red to the tune of        accession is a key economic and political             Turkish-Greek bank project has received
9 per cent of GDP and nominal interest          objective.                                            backing from both the Turkish and Greek
rates were above 20 per cent. By 2001,             Given its shared cultural ties,                    Prime Ministers. Izmir Chamber of Com-
with inflation down to 3 per cent, it was       geographical location and relatively                  merce chairman Ekrem Demirta recently
deemed to have made sufficient progress         developed financial market, Greece has                said that he wanted see the volume of
to be ready to join the euro club.              become a strategic ally for many of its               annual trade between Turkey and
   At the time, the euro’s many detrac-         neighbours. It facilitates cheaper trans-             Greece, which stands at around €2.2bn,
tors predicted that Greece’s inclusion          fer of funds and the building of infra-               rise to €5bn over the next few years.
would fatally devalue the still infant sin-     structures in fields like telecommunica-                  Construction is another sector where
gle currency. Five years on, the trade-         tions and energy. In 2002, Greece                     Greece’s experience, not least in the run-
weighted euro is 12 per cent higher and         launched the Hellenic Plan for the Eco-               up to the 2004 Games, is increasingly
against the dollar the currency has             nomic Reconstruction of the Balkans                   being sought across south-eastern
gained 27 per cent since 2001.                  (Hiperb), which by the end of this year is            Europe. Romania has recently invited
   Financing the 2004 Olympic Games                                                                   Greek construction companies to bid to
cut deep into Greece’s reserves, but it is                                                            improve its road network which is only
on course to meet the excessive deficit                ATHEX COMPOSITE PRICE INDEX                    250kms in its entirety. In addition, a new
criteria in 2006, according to the Euro-        4400
                                                                                                      road network is set to unite northern
pean Commission, which is more than                          4245.14                                  Greece with Belgrade and the rest of
can be said for some of the eurozone’s                         LAST
                                                                                                      Europe. The project will be financed by
bigger economies. According to the                           4054.80                                  the Hiperb and other international
Organisation for Economic Develop-              4000                                                  organisations.
ment and Co-operation, Greece’s poten-                                                                    The European Union may have had its
tial growth rate is the highest in the euro-                                                          fill of enlargement for now, but when it is
zone at around 4 per cent. That reflects                                                              ready to expand further east, Greece is
both Greece’s relatively low starting                                                                 ensuring that it will have a crucial role as
point and its success in putting in place                      LOW                                    the bridge between what will then be old
the conditions needed to realise that                                                                 Europe and new Europe. Until then, it
catch-up potential.                                                                                   seems happy to continue to provide its
   This success has not gone entirely                                                                 neighbours access to the rich countries
unnoticed. The Greek stock exchange             2800                                                  to its west; and opportunities for the
has soared by 338 per cent since 2003. To                                                             brave investor to the east.
put that in context, the Morgan Stanley
global index has risen by 67 per cent,                                                                Fotis Mavrokefalos is director of Fathom
while its US and European indices are up                                                              Hellas, an affiliate of Fathom Financial
                                                       APR                            JAN     MAR
by 43 per cent and 207 per cent respec-                 05                             06             Consulting. Fathom Hellas provides
tively (see chart). Much of that outper-                               THOMSON FINANCIAL DATASTREAM   analysis of the Balkans and Turkey.
 10 | | Greece                                                                                                                                                                                    SPECIAL REPORT|

A Platonic relationship                                                                                                                                                                    A warm
                                                                                                                                                                                           wind to
Two thousand years after the Academy, Greece wants to teach the world again, says James Robinson
                                                                                                                                                                                           power the
A                                                                                                                                                                                          economy
           s the birthplace of western phi-
           losophy, Greece has long been
           synonymous with knowledge
           and learning. But modern-day
Greece has not always enjoyed a reputa-
tion for educational excellence. That                                                                                                                                                      THE CONSTRUCTION of natural gas
may soon change. The country’s educa-                                                                                                                                                      pipelines to Italy and Turkey has
tion system is in the middle of a compre-                                                                                                                                                  helped Greece consolidate its position
hensive overhaul. The government                                                                                                                                                           as the area’s centre of energy trading.
wants to turn the country into an educa-                                                                                                                                                      Through its chairmanship of the
tional hub for the region, attracting for-                                                                                                                                                 Black Sea Economic Corporation,
eign students from the Balkans and the                                                                                                                                                     Greece has signed agreements with
southern Mediterranean, while raising                                                                                                                                                      Russia and Bulgaria to build oil
standards at home to discourage domes-                                                                                                                                                     pipelines connecting the countries,
tic students from studying overseas.                                                                                                                                                       which it says will deliver cheaper and
   The process is part of a broader pro-                                                                                                                                                   safer energy to the area.
gramme of educational investment and                                                                                                                                                          Co-operation between BSEC mem-
reform, which aims to improve the sys-                                                                                                                                                     bers has led to the creation of a gas
tem at every level, from primary schools                                                                                                                                                   pipeline between Greece, Azerbaijan
to ‘life-long learning’ programmes for                                                                                                                                                     and Turkey, making Greece a strategi-
adults. The aim is to meet European                                                                                                                                                        cally important transit country. And
standards of education, a vital step                                                                                                                                                       work has also begun on the installa-
towards creating a skilled workforce and                                                                                                                                                   tion of a new underwater electricity
a vibrant economy.
   As a signatory of the Bologna accords,
EU directives designed to raise educa-                                                                                                                                                                         Minister for
tional standards, the government has                                                                                                                                                                           development
access to significant sums of EU money                                                                                                                                                                         Dimitris Sioufas
to help fund its ambitious plans. It has                                                                                                                                                                       says Greece
spent heavily on educational pro-                                                                                                                                                                              presents unique
grammes for prisoners, vocational train-                                                                                                                                                                       possibilities for the
ing and on laptops for disadvantaged                                                                                                                                                                           development of
groups. It also hopes to encourage tele-                                                                                                                                                                       alternative energy.
coms companies to offer cheap internet
access to students, a priority in a country
where broadband prices are the highest        A new international university is being buillt to complement Thessaloniki University above.               Photograph by Pavlos Makridis      cable to Italy. The minister for
in Europe. But the most important                                                                                                                                                          development, Dimitris Sioufas, says
reforms aim to revolutionise the higher       eastern Europe provides this opportu-          the project in principle [although] there      after the passing of regulation allowing       the government is looking for
education system, an area that has tradi-     nity. At the moment there are 30 private       are still negative reactions coming for a      joint degrees. ‘The LSE now offers a           investment in the field of renewable
tionally resisted change.                     institutes of higher education, most of        small percentage of the students,’ Dr Ski-     degree exclusively in Greece, because          energy, and hopes British companies
   The reforms have been given a high         which are English-speaking, throughout         adas says. Last year, Greece passed a law      they are certain that the quality of edu-      will be interested.
priority by the Prime Minister, Kostas        the Balkans and Turkey. We want to             paving the way for an independent eval-        cation offered here is of the same level as       ‘Our country presents some unique
Karamanlis, who has been involved in          compete in that area by providing an           uation authority. Marietta Giannakou,          the quality offered in London, in terms of     possibilities for the development of
the boldest initiative – the building of an   institution designed specifically for for-     the minister of national education and         academic facilities and educational staff,’    alternative forms of energy, which
international university in Thessaloniki,     eign students.’                                religious affairs, says evaluation is an in-   says Dr Skiadas.                               remain unexploited to a great extent,’
Greece’s second city. The city, in the           Lectures will be in many languages,         tegral tool for the reorganisation of edu-        Not all the collaboration is welcomed,      he says. ‘The enormous potential of
north, is named after Alexander the           including English. Dr Skiadas calls the        cation according to European standards:        however. Some privately run institutions       the sector relies on the rich aeolic
Great’s sister, and its new university is     new university ‘an experiment’ but if it is    ‘We can no longer accept students with         have negotiated commercial deals with          [wind] dynamic of Greece, sunshine,
seen as a contemporary equivalent of the      a success more could follow – as long as       very low marks entering universities.’         British universities allowing them to use      the available geo-thermic fields and
ancient Athenian academy established          the government can overcome opposi-               The government is also encouraging          theirnames, an arrangement the                 water resources.
by Plato more than 2,000 years ago. The       tion to its reforms from within the acad-      greater co-operation between universi-         government is keen to discourage. ‘Some           ‘These elements in combination
college forms part of the government’s        emic community.                                ties and employers. While some                 99 per cent do not maintain the high           with the substantial experience and
attempt to reverse the ‘brain drain’ that        The government’s attempt to over-           universities are crowded and oversub-          standards of the UK universities,’ says        know-how of British companies can
has exacted a heavy economic price for        haul the system has been controversial         scribed, other departments are facing          Ms Giannakou.                                  lead to a booming development for
generations. Large numbers of students        and there has been industrial action at        closure due to a lack of students.                With the legislative programme pro-         the sector, resulting in great
still study overseas – there are about        some universities. One flashpoint was             According to Ms Giannakou: ‘The             ceeding at last, the state system is likely    profitability for the companies
30,000 in Britain – but few foreign stu-      the attempt to improve standards by            complete separation of the universi-              to improve significantly over the com-      involved.’
dents attend Greek institutions.                                                             ties from the market has led to                     ing years. ‘Greece’s 22 universities
   The university should help change
                                              ‘Nowadays, Greece                              problems. Greece has a population                     were behind European standards,
that when it opens for the next acade-
mic year, according to Dimitrios Ski-
adas, the official at the education affairs   is not just a tourist
                                                                                             of medical doctors three times
                                                                                             greater than its actual needs.’
                                                                                             There are about 2,000 unem-
                                                                                                                                                   therefore action had to be taken in
                                                                                                                                                   that area first,’ says Ms Giannakou.
                                                                                                                                                     Similar plans are already being       3G phones
ministry responsible for implementing
                                              destination, but a                             ployed doctors in Greece.                                      implemented at primary
the reforms: ‘The idea is to attract stu-
dents in Greece rather than export stu-
dents and this is a major change of pol-      place that can export
                                                                                                Dr Skiadas says: ‘Linking
                                                                                             higher education to
                                                                                             the labour market
                                                                                                                                                               and secondary school
                                                                                                                                                                 level. That would
                                                                                                                                                                  have pleased another     could ring
                                              culture and knowledge’
                                                                                                                                                                                           up profits
icy. The greater plan is to inform the                                                       is one of our                                                                 ancient Greek
world that Greece is not just a tourist                                                      objectives.      We                                                            philosopher,
destination but also a place that can                                                        have established                                                               Aristotle,
export culture and knowledge,’ he says.       introducing external evaluation, a mea-        offices of liaison                                                             who remark-
   In the past, similar efforts have been     sure the previous government struggled         between education                                                              ed that an
made to promote the country’s educa-          to get through parliament. Opposition          centres and the                                                               educated man    COSMOTE IS Greece’s leading
tional establishments, mainly by signing      from universities delayed the necessary        market both in                                                              was as superior   mobile phone operator. The growing
bilateral agreements with other coun-         legislation for six years but the process is   higher education                                                          to his uneducated   firm controls five companies with 7.5
tries. But Dr Skiadas believes the univer-    now moving forward.                            and high school.’                                                        brother ‘as the      million customers.
sity stands a far better chance of ensur-        Dr Skiadas says the universities have          Foreign uni-                                                         living are to the        It operates in several eastern Euro-
ing an influx of foreign students, and        now accepted the project in principle          versities are also                                                      dead’.                pean countries including Albania,
helping to change the way Greece is per-      though a ‘small percentage’ of the stu-        being encour-                                                                                 Bulgaria and Romania, and wants to
ceived oversees.                              dents are against about it.                    aged to tie up with                                                 Plato: inspiration for    become the Balkans’ biggest mobile
   ‘We believe that the whole of south-          ‘Now the universities have accepted         Greek universities,                                                 a new university.         company.
                                                                                                                                                                                              Cosmote was the second company
                                                                                                                                                                                           worldwide to introduce i-mode 3G – a

The loan arranger to the rescue
                                                                                                                                                                                           data services provider linked to the
                                                                                                                                                                                           internet – and plans to promote it as a
                                                                                                                                                                                           mass-market product, rather than a
                                                                                                                                                                                              Although i-mode and 3G are
                                                                                                                                                                                           relatively new phenomena in Greece,
by Heather Stewart                               ‘Because of the landscape of Greece, it     we visit large cities, concentrating on        adequate amount.’ Almost a third of his        Cosmote is already exploring their
                                              may not be easy for a businessman on an        those which are the poorest and least          clients are new businesses, which might        potential use in other markets.
                                              island to know what is available in terms      industrialised in Greece,’ he says. One of     find it hard to start up without help.            Other projects are equally ambi-
ALMOST THREE-QUARTERS of                      of support programmes. Now these com-          the aims of the scheme is to increase the         By supporting fledgling businesses,         tious. In co-operation with the Uni-
Greek businesses are concentrated on          panies and institutions can use our net-       strength of the port city Thessaloniki as      the government hopes it will also help to      versity of Thessalonica, Cosmote has
the mainland, in or around Athens. It’s       work, which is huge and covers the             a business centre.                             tackle unemployment in Greece. ‘We             developed SmartEyes, a navigation
Dimitris Alepsis’s job, as president of       entire country,’ Alepsis says.                    Most of the guarantees the fund offers      need to pay attention not only to the          system that uses a speech-to-text con-
Greece’s Credit Guarantee Fund, to try to        Part of his job is to travel around the     are so-called ‘microloans’, worth less         number of jobs created but also to the         version programme to guide people
change that, by nurturing entrepreneurs       country giving roadshows, explaining           than €25,000, aimed at nurturing entre-        number of jobs maintained,’ Alepsis says.      with impaired vision through urban
right across the archipelago.                 what the fund can do for small busi-           preneurs who are keen to expand.               ‘We know that many businesses close            areas.
   With a share capital of €200m, two-        nesses. ‘In a period of one year I visited        Alepsis hopes that by underwriting          down because they do not have the                 ‘This project is an indication of the
thirds financed with European Union           70 chambers of commerce. Now we are            loans, the fund can help to change the         proper support. We offer them our sup-         company’s social awareness and sound
cash and one-third from the Greek gov-        in the second stage of this process where      attitude of Greek businesses towards           port in order to maintain their business.’     social responsibility,’ says Cosmote’s
ernment, the fund offers financial guar-                                                     banks and encourage them to borrow in             Eventually, Alepsis hopes to encour-        CEO, Evangelos Martigopoulos.
antees for small businesses (with up to
30 employees) that are having difficul-       ‘Greece has changed                            order to expand, instead of waiting until
                                                                                             they can stash away enough money
                                                                                                                                            age more inward investment.
                                                                                                                                               ‘Greece is a brand new market,’ he
                                                                                                                                                                                              ‘Microsoft have shown interest in
                                                                                                                                                                                           its commercial potential, yet our main
ties persuading banks to lend them
money. It will offer to underwrite 40-70      and now offers many                            themselves.
                                                                                                ‘It is a widespread practice among
                                                                                                                                            says. ‘The necessary financing tools are
                                                                                                                                            now in place and a major effort is being
                                                                                                                                                                                           goal is SmartEyes’ contribution to the
per cent of the value of a loan. The fund
has already offered financial support to      good opportunities for                         small business owners to save money
                                                                                             before actually venturing into anything.
                                                                                                                                            made to eliminate bureaucracy. The
                                                                                                                                            environment in Greece has changed over
                                                                                                                                                                                              ‘Such initiatives, I believe, should
                                                                                                                                                                                           be reserved for social benefit rather
some 2,500 businesses, with more than
60 per cent of those in rural areas.          foreign investors’                             This allows them to bypass using banks
                                                                                             but it sometimes takes ages to save an
                                                                                                                                            the last few years and it now offers many
                                                                                                                                            good opportunities for foreign investors.’
                                                                                                                                                                                           than profit. The challenge is great, but
                                                                                                                                                                                           so is our excitement.’
               | SPECIAL REPORT
                                                                                                                                                                                                  Greece | | 11

                                                                                                                                                                                        cleans up in
                                                                                                                                                                                        DESPITE THE relatively small size
                                                                                                                                                                                        of the Greek chemicals market,
                                                                                                                                                                                        Neochimiki has joined forces with
                                                                                                                                                                                        multinationals to become a major
                                                                                                                                                                                        player in the sector.
                                                                                                                                                                                           The company has taken advantage
                                                                                                                                                                                        of the demand created by Balkan
                                                                                                                                                                                        countries, where local chemicals
                                                                                                                                                                                        production is low, and plans to
                                                                                                                                                                                        expand its operations in eastern
                                                                                                                                                                                           New anti-trust laws introduced by
                                                                                                                                                                                        the Greek government mean
                                                                                                                                                                                        companies such as Neochimiki are
                                                                                                                                                                                        now operating in a more competitive
                                                                                                                                                                                        environment – but one which also
                                                                                                                                                                                        provides greater potential for
Greece’s defence sector is beginning to compete in global markets – such as Hellenic Aerospace Industry’s participation in the new Boeing 787.                             Credit t/c   growth.

Defence firms go into battle
                                                                                                                                                                                           The firm recently built a new
                                                                                                                                                                                        factory for the production of
                                                                                                                                                                                        detergents, but it also acts as a Greek
                                                                                                                                                                                        distributor for chemicals produced
                                                                                                                                                                                        in other countries.
                                                                                                                                                                                           Dr Lavrentis Lavrentiadis, the
                                                                                                                                                                                        company’s CEO, says the fact that
                                                                                                                                                                                        Greece is currently the only EU
A sector controlled by the state will soon see greater                                        That may sound like complacency
                                                                                           from a man whose (state-owned) com-
                                                                                                                                         defence firms and its president, Ioannis
                                                                                                                                         Patsiogiannis, anticipates more – partic-
                                                                                                                                                                                        member in the region has also proved
competition and rewards, writes Conal Walsh                                                pany is unlikely to bear the brunt of
                                                                                           defence cuts, but Philippakos can justly
                                                                                                                                         ularly in fields such as artillery and com-
                                                                                                                                         munication systems.
                                                                                                                                                                                           He believes Neochimiki’s location
                                                                                                                                                                                        will prove as attractive to British

                                                                                           claim to be a moderniser of sorts. For-          Despite the government’s plans to cre-      investors as it has to those from
             igh up the agenda in Greece        Former defence minister Spilios            merly a senior vice-president at              ate a more efficient home-grown indus-         France, Portugal and Austria.
             is the acknowledged need to     Spiliotopoulos makes no apologies for         Moody’s, he was hired specifically to         try with the ability to compete for               ‘We are a growing company within
             reform the country’s cum-       the spending cuts – indeed, he is an          restructure the business, with particular     exports, Athens will favour Greek over         the emerging market of eastern
             bersome defence and aero-       enthusiastic champion of the European         emphasis on research and development.         foreign suppliers where it can and is          Europe, located in a European
nautics industry. The aim is to turn this    Defence Agency’s efforts to encourage         ‘We have to operate like a private com-       piloting laws to facilitate this. Supporters   country but spreading its operations
fragmented and largely state-run sector      similar consolidation at an EU level. ‘We     pany, despite the fact that we are state-     of the new law insist that it contains         beyond its borders, in a time when
into a smaller group of companies able to    are sparing no effort in order to ratio-      owned,’ he says.                              effective provisions against cronyism.         the chemicals sector in Europe is a
compete on a global stage. But before the    nalise our armaments programme,                  So far HAI has made some impressive           For would-be foreign suppliers,             declining market.
gain, comes the pain.                        ensuring at the same time productive          inroads into the international market,        though, the Greek market remains a                ‘They will be investing in a growth
   Greece, with its culture of national      work for our defence industries,’ he says.    signing multi-million dollar agreements       challenge. ‘I believe there are important      case, based in an EU country and
service and occasional stand-offs with          Tassos Philippakos, head of Greece’s       with EADS, Thales and Pratt & Whitney.        opportunities,’ says Patsiogiannis. ‘But       operating in a low-risk developing
Turkey, until recently spent a whopping      biggest defence firm Hellenic Aerospace       Most significantly, a deal with Lockheed      any potential investor has to accept the       market without the political issues of
4.1 per cent of its Gross Domestic Prod-     Industry (HAI), praises the changes as        Martin makes HAI a principal supplier         safeguarding of the local industrial base.’    China or India.’
uct on defence. The figures for other        ‘the only viable direction for the market     of the F-16 fighter jet.
Nato members range from 1.2 per cent to      to take’. He adds: ‘I think we are cer-          ‘We need to understand the technolo-
3.8 per cent. Last year, however, the cuts   tainly in a new era, not only due to the      gies from both a manufacturing and a
began. Committed to new monetary             success of the Olympic Games but also         quality point of view,’ says Philippakos.
policies, Greece reduced defence spend-      because of a change in mentality.’            ‘Another fine example would be our par-
ing to 2.8 per cent, with the promise of                                                   ticipation in the development of the new
more streamlining to come.                                                                 Boeing 787. We have created a segment
   Large-scale job losses have not been                            Head of defence         for engineering and technology develop-
announced, but seem likely. A question                             firm Hellenic           ment. That is why we have hired 50 more
must also hang over the fate of Greece’s                           Aerospace, Tassos       engineers and have plans to hire even
150 small- and medium-sized defence                                Philippakos, says       more in the next few years.’
contractors, some of whom depend                                   Greece is ‘in a            Hellenic Defence Systems (HDS), also
entirely on the state for their income.                            new era’.               state-owned and specialising in missiles,
Small wonder that ministers and                                                            explosives and small arms, is undergoing
business chiefs are calling on the indus-                                                  similar changes. The company has a
try to consolidate fast.                                                                   number of collaborations with British

Young chief steers shipping firm
to success in fuel transportation
AT 27 YEARS OLD, Harry Vafias is one         sold at a profit. He used some of the         ship with another large company in
of the youngest chief executives in world    money to establish Stealth Gas and went       order to secure domination of the gas
shipping. In 2004 he set up Stealth Gas,     on to acquire 22 ships within the space of    market. In April Vafias will float another
an international shipping company that       a year.                                       shipping company on the London Stock
specialises in the transport of liquefied       ‘You should always find the proper         Exchange, although details of the offer-
petroleum gas. The company has a 10 per      timing for your purchases, because            ing are still under wraps.
cent market share and attracted huge         prices go up and down and you should be          Stealth Gas is one of five companies in
international investment when it floated     able to buy closer to the bottom and sell     a larger group, and Vafias has made good
in New York last year.                       closer to the peak,’ he says. ‘You have to    use of the links between them to keep
   Vafias says: ‘Investors liked that we     be very conservative on the employment        costs down and become more competi-
were showing them huge profit poten-         side, especially when you are aggressive      tive. It is this, he says, that has proved
tial from nine ships pre-IPO [initial pub-   in purchasing ships like we are.’             vital in securing the interest of major oil
lic offering] to 28 ships by June 2006, so      Vafias enjoys a guaranteed income by       companies.
they knew they were investing in a small     ensuring that 90 per cent of the ships in        ‘Companies that were reluctant to
company that very soon would become          the Stealth Gas fleet are fixed on long-      work with us in the beginning when we
the leader in the sector.’                   term contracts. He also makes sure there      had two ships saw that we were invest-
   He believes the key to his company’s      is enough spare capital to help the com-      ing a lot in buying new high-tech ships
success is careful investment. He            pany get through the bad times.               and employing well-trained and experi-
launched his shipping career in 1999            In the future he wants to diversify the    enced gas people in our offices and
when his father gave him an old ship to      type of gas vessels used by Stealth Gas to    realised that we were dedicated in our
manage. By taking advantage of a rise in     include medium or large ships. He also        efforts,’ says Vafias.
freight prices, Vafias made enough           wants to expand the natural gas side of          ‘So now, just a year later, our biggest
money to buy more ships, which he later      the business and plans to form a partner-     customers are Shell and Petredec.’

Homeopathic medicine range goes worldwide
KORRES NATURAL Products has its              homeopathic remedies. The com-                ent environment for our products,’
roots in Athens’ first homeopathic           pany now produces homeopathic                 says Lena Korres.
pharmacy, where George Korres                toothpastes, skincare products and               ‘We feel that we are strong enough
worked as a student before eventu-           cough syrups. Despite its lack of a           to open our own store in New York
ally buying the business. In 1996 the        marketing strategy, Korres Natural            because we feel that we know the
Korres family decided to branch out.         Products continues to grow. Its prod-         market.
They applied their knowledge of              ucts are sold in 4,500 pharmacies                Our resources not being endless,
homeopathic medicine to producing            across Greece, as well as in stores           we plan to support the greater mar-
cosmetics, and also established a lab-       from London to Los Angeles.                   kets such as the US, the UK, Germany
oratory for the production of                  ‘In every country we face a differ-         and France.’

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