2010 Investment Climate Statement - Greece
Greece, a member of the European Union, provides a reasonably hospitable climate for foreign investment. On the upside, Greece’s membership in the EU’s Economic and Monetary Union offers currency stability, the infrastructure has improved significantly in the last five years, and the ongoing liberalization of the energy and telecommunication markets offer investment opportunities. Greek businesses are among the leading investors in Southeast Europe, and Greece is actively positioning itself as a hub for Balkan trade.
On the downside, after a decade of high GDP growth (between 1997 and 2007, Greece averaged 4 percent GDP growth, almost twice the EU average), the financial crisis and resulting slowdown of the real economy have taken their toll on Greece’s rate of growth, which slowed to 2 percent in 2008 and is projected to shrink by 1.5 to 2.0 percent in 2009 and by 0.3 percent in 2010. Key economic problems with which the government is currently contending include a burgeoning government deficit (12.7 percent of GDP in 2009)and rapidly increasing public debt (113.4 percent of GDP projected for 2009), both of which are the highest in the Eurozone. The EU recently moved Greece one step closer to sanctions under the Excessive Deficit Procedure. Both markets and the EU have mandated that Greece develop a plan to immediately restore fiscal discipline and reduce its deficit to the 3 percent EU ceiling within an agreed period of time (as yet, undetermined).
Greece's economy continues to be hampered by extensive government regulation. Many international corporations state that bureaucracy remains the number one impediment to doing business in Greece. International organizations such as the OECD, Transparency International, the World Bank (in its Annual Doing Business and Governance Reports), and the World Economic Forum (in its Global Competitiveness Report) cite issues with corruption and government regulations that complicate investment and other commercial activities. As a result of both factors, Greece has had relatively modest levels of foreign investment as a percentage of the economy. It ranked 21 out of 30 OECD countries in level of FDI in 2008. The position of Greece in the world indices of the above organizations has deteriorated in the last year. Greece ranks 109 in 2010 World Bank’s Doing Business index (9 slots down from 2009 index). Its economic freedom ranked as the 81st freest in the 2009 Heritage Economic Freedom Index. It dropped to the 71th position on the Transparency Corruption Perception Index in 2009 from the 57th in 2008 (in the last position together with Bulgaria and Romania among the 27 country-members of the EU).
Historically, growth has been financed by private sector borrowing and public sector spending and absorption of EU structural adjustment funds, which totaled roughly 24 billion dollars from 2000-2006. The EU has allocated a similar amount of funding, approximately 26.5 billion USD, for Greece for 2007-2013.
The GoG strongly encourages private foreign investment as a matter of policy. Investments are screened by the Ministry of Economy, Competitiveness and Shipping only when the investor wants to take advantage of government provided tax and investment incentives; foreign and domestic investors face the same screening criteria. Although Greece previously restricted foreign and domestic private investment in public utilities, it opened its telecommunications market and is in the process of slowly liberalizing its energy sector. Restrictions exist on land purchases in border regions and on certain islands due to national security considerations. Greece is the only EU country that does not have a land registry, which is a barrier to investment. U.S. and other non-EU investors in Greece’s banking, mining, broadcasting, maritime, and air transport sectors are required to obtain licenses and other approvals that are not required of Greek and EU investors. Foreign investors can buy shares on the Athens Stock Exchange on the same basis as local investors.
Major investment laws are:
-Legislative Decree 2687 of 1953 which, in conjunction with Article 112 of the Constitution, gives approved foreign "productive investments" (basically manufacturing and tourism enterprises) property rights, preferential tax treatment and work permits for foreign managerial and technical staff. The Decree also provides a constitutional guarantee against unilateral changes in the terms of a foreign investor's agreement with the Greek Government, but the guarantee does not cover changes in the tax regime.
-Law 3299/2004, the investment incentives bill, as amended by Law 3522/2006 and Law 3752/2009, provides grants to cover up to 60 percent of qualifying investments (generally those made in less-developed regions of Greece). Through a combination of incentives and corporate tax breaks, this law attempts to boost entrepreneurship, foster technological change, and achieve regional convergence throughout Greece. Law 3522/2006 introduces grants to newly founded small enterprises (Greek and foreign) to assist them with operational expenses for up to five years and attempts to simplify and expedite procedures for the evaluation of investment projects. Law 3752/2009 encourages investors to take advantage of tax breaks instead of grants and increases incentives to investment in energy from renewable sources, in modernization of tourist installations and in high technology services.
-Law 3389/2005 on Public Private Partnerships (PPP). This law is designed to facilitate public-private partnerships in the service and construction sectors by creating a market-friendly regulatory environment.
-Law 89/67 as amended in November 2005 by Law 3427/2005 provides special tax treatment for offshore operations of foreign companies established in Greece.
-Law 468/76 governs oil exploration and development in Greece. Law 2289/95, amending this legislation, allows private (both foreign and domestic) participation in oil exploration and development.
-Law 2773/99 opened up 34 percent of the Greek energy market in compliance with EU Directive 96/92 concerning the regulation of the internal electricity market. Law 3175/2003 harmonizes Greek legislation with the requirements of the EU’s Directive 2003/54/EC on common rules for the internal market in electricity. Law 3426/05 completed Greece’s harmonization with EU Directive 2003/54/EC and provided for the gradual deregulation of the electricity market.
-Law 2364/95 as amended by Laws 2528/97, 2992/02, 3175/03 and 3428/05 governs investment in the natural gas market in Greece.
-Law 2246/94 and supporting amendments have opened Greece’s telecommunications market to foreign investment.
When Greece joined the European Monetary Union (EMU) Eurozone on January 1, 2001, it committed to serious structural reforms to meet EMU convergence criteria. To this end, the Greek Government has opened the telecommunications market, and the energy market has undergone some deregulation. Since 2001, about 34 percent of eligible consumers of middle and high-tension voltage have had the choice to obtain their electricity from producers other than the parastatal monopoly, the Public Power Corporation (PPC). The electricity market in Greece was to be completely deregulated by mid-2007. The process, however, has been slow, and the goal not yet realized. Only three private producers are operating at this time due to problems in arranging financing and obtaining state licenses.
The new center-left government of PASOK, elected in October 2009, pledged fiscal and other structural reforms to enhance the competitiveness of the Greek economy. The new administration promised to gradually adopt policies and programs designed to achieve fiscal consolidation and tax reforms, reduce red tape in business transactions and expedite market deregulation. The new Finance Minister recently announced plans to raise about 2.5 billion euros ($3.6 billion) from privatizations in 2010 to help pay down the country’s burgeoning public debt. It is not yet clear which companies will be privatized under this plan. Greece has stakes in about 20 listed companies including ATE bank, Postal Savings Bank, gaming firm OAP and telecoms group OTE. The state asset sale program will be clarified in the beginning of 2010. Greece has raised about 8.7 billion euros from privatizations in the period 2003-2009. Some of these privatizations have sparked significant resistance from the public; however, the government thus far is standing firm. The global economic environment may also impact the private sector’s ability to raise financial resources to buy these firms. Foreign and domestic investor participation in privatization programs is generally not subject to restrictions. The previous Greek government had announced in December 2007 that it would cap private investment in companies of "strategic importance" (corporations which own, exploit, or manage national infrastructure networks such as telecommunications, energy etc.) at 20 percent unless special approval is granted by an inter-ministerial privatization committee. The European Commission contested the Greek law on investment in strategic firms and sent Greece in November 2008 a final warning to change the law or face European Court action. Thus far, the European Commission and the Greek government are still in negotiations on how this issue should be addressed.
Conversion and Transfer Policies
Greece’s foreign exchange market is in line with EU rules on free movement of capital. Receipts from productive investments can be repatriated freely at market exchange rates. Remittance of investment returns is made without delay or limitation.
Expropriation and Compensation
Private property may be expropriated for public purposes, but only in a nondiscriminatory manner and with prompt, adequate and effective compensation. Due process and transparency are mandatory, and investors and lenders receive compensation in accordance with international norms. There have been no expropriation actions involving the real property of foreign investments in recent history.
No investment disputes have come to the Embassy’s attention for many years, the last couple of cases dating back to the mid-90s. Greece accepts binding international arbitration of investment disputes between foreign investors and the Greek State, and foreign firms have found satisfaction through this arbitration. International arbitration and European Court of Justice judgments supersede local court decisions. Greece has an independent judiciary, but the court system is a time-consuming means for enforcing property and contractual rights. Foreign companies report that Greek courts do not always provide unbiased and effective recourse. The judicial system provides for civil court arbitration proceedings for investment and trade disputes. Although an investment agreement could be made subject to foreign legal jurisdiction, this is not common, particularly if one of the contracting parties is the Greek State. Foreign court judgments are accepted and enforced, albeit slowly, by the local courts. Although the Greek government has been energetically prosecuting corrupt judges and attorneys in the last few years, problems with corruption still exist.
Commercial and bankruptcy laws in Greece are in accordance with international norms. Under Greek bankruptcy law, private creditors receive compensation after claims from the state and insurance funds have been satisfied. Monetary judgments are usually made in Euros unless explicitly stipulated otherwise. Greece has a reliable system of recording security interests in property.
Greece is a member of both the International Center for the Settlement of Investment Disputes and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.
Greece is in compliance with WTO TRIMS requirements. Investment incentives are available on an equal basis for both foreign and domestic investors in productive enterprises. More generous incentives are given to investments in less-developed regions. The Investment Incentives Law (Law3299/2004) provides new and already-established companies incentives worth up to 55 percent of the overall investment made in these regions. In December 2006, the law was amended by Law 3522/2006, which increases the incentive to cover up to 60 percent of an investment in less-developed areas. This amendment also introduces grants to newly founded small enterprises to assist them with operational expenses for up to five years. The amended law is also intended to simplify and expedite procedures for the evaluation of investment projects.
The incentives provided are combinations of grants, interest subsidies, subsidies for the creation of new jobs as well as for leasing equipment, and tax exemptions. The Incentives Law was amended again in March 2009 (Law 3752/2009) to encourage tax breaks instead of grants and to facilitate investment in energy from renewable sources, in modernization of tourist installations and in high technology services.
Additional tax incentives are extended to foreign investors if they establish export-oriented or import substitution businesses (Law 2687/53).
There are no performance requirements for establishing, maintaining, or expanding an investment. Performance requirements come into play, however, when an investor wants to take advantage of tax and/or investment incentives. In evaluating applications for incentives, the Greek authorities consider local content, import substitution, export orientation, creation of new jobs, energy conservation, environmental protection and technology transfers. Companies that fail to meet the specified performance requirements may be forced to give up the incentives initially granted. All information transmitted to the government for the approval process is, by law, to be treated confidentially. Offset agreements, co-production, and technology transfers are commonplace in Greece’s procurement of defense items.
U.S. and other foreign firms may participate in government-financed and/or subsidized research and development programs. Foreign investors do not face discriminatory or other de jure inhibiting requirements. However, many potential and actual foreign investors assert that the complexity of Greek regulations, the need to deal with many layers of bureaucracy, and the involvement of multiple government agencies discourage investment.
Foreigners from EU countries may freely work in Greece. Foreigners from non-EU countries may work in Greece after receiving residence and work permits. There are no discriminatory or preferential export/import policies affecting foreign investors, as EU regulations govern import and export policy, and increasingly, many other aspects of investment in Greece.
Right to Private Ownership and Establishment
Foreign and domestic private entities have the right to establish and own business enterprises. They may engage in all forms of remunerative activity, including the right to establish, acquire, and dispose of interests in businesses.
Private enterprises enjoy the same treatment as public enterprises with respect to access to markets and other business operations, such as licenses and supplies. Liberalization of the banking system and increased compliance with EU norms has made credit also equally accessible to private and public enterprises.
Protection of Property Rights
Greek laws extend protection of property rights to both foreign and Greek nationals, and the legal system protects and facilitates acquisition and disposition of all property rights. Regarding real property, the continued lack of a land registry, and more importantly, the multiple layers of authority concerning land use and zoning permits is one of the most significant disincentives to greenfield investments. On IPR, Greece is a member of the Paris Convention for the Protection of Industrial Property, the European Patent Convention, the World Intellectual Property Organization, the Washington Patent Cooperation Treaty, and the Bern Copyright Convention. As a member of the EU, Greece has harmonized its legislation with EU rules and regulations. The WTO-TRIPS agreement has been incorporated into Greek legislation since February 28, 1995 (Law 2290/1995). The Greek government has also signed and ratified the WIPO Internet treaties, which were incorporated into Greek legislation in 2003 (Laws 3183 and 3184/2003)
Greece's legal framework for copyright protection is contained in Law 2121 of 1993 on copyrights and Law 2328 of 1995 on media. Implementation and enforcement of these provisions, however, is not rigorous, and intellectual property problems continue in Greece. Greece was a special mention country on the Special 301 Watch List from 1994 until 2003, during which time Greece worked to resolve specific areas of violation, particularly those related to the broadcasting of copyrighted materials on the national airwaves. Violations, particularly in copyrighted audio-visual products, software and apparel and footwear continue to raise industry concerns. Despite the existence of adequate IPR legislation, Greece lags in implementation of enforcement of these laws. The judiciary is not focused on the issue and has little training on IPR issues. The lack of enforcement resulted in Greece being placed on the U.S. Special 301 Watch List once again in 2008 and 2009.
Audiovisual, music, and software industries bear the brunt of IPR violations in Greece. This is likely to rise with increased internet penetration. Unlicensed sharing of a licensed copy among multiple computers is the largest problem for the software industry, while street vending of pirated DVDs and CDs is a common practice. Efforts by local authorities to safeguard copyrights have been inconsistent and at present provide inadequate protection. An audit program initiated in early 2009 by the Ministry of Finance tax police unit (YPEE) was effective in discouraging the use of unlicensed software by enterprises; however, this program was short-lived and is no longer in effect. The new government has not yet indicated its intention to launch similar initiatives, but the Ministry of Citizens’ Protection has announced a new department, expected to begin operations in the first quarter of 2010, to combat various forms of economic crime, including violations of intellectual property. A formal interagency coordinating committee on IPR issues established in 2008 published a National Action Plan in February 2009 to combat IPR infringement and coordinate efforts among ministries to improve enforcement of IPR rights. Unfortunately, the government has not implemented its own recommendations.
Trademark violations, especially in the apparel sector, are an area of some concern. Although Greek trademark legislation is fully harmonized with that of the EU, U.S. companies believe the importation and sale of counterfeit products may be increasing. Although in the past, U.S. companies reported a lack of support in combating this problem, recently, they report they are receiving more.
Intellectual property appears to be adequately protected in the field of patents. Patents are available for all areas of technology. Compulsory licensing is not used. The law protects patents and trade secrets for a period of twenty years. There is a potential problem concerning the protection of test data relating to non-patented products. Violations of trade secrets and semiconductor chip layout design are not problems in Greece.
Transparency of the Regulatory System
As an EU member, Greece is required to have transparent policies and laws for fostering competition. Foreign companies consider the complexity of government regulations and procedures and their inconsistent implementation to be the greatest impediment to investing and operating in Greece. On occasion, foreign companies report that they encounter cases where there are multiple laws governing the same issue, resulting in confusion over which law is applicable.
In order to simplify and expedite the investment process, a quasi-state investment promotion agency, the Hellenic Center for Investment (ELKE), was established in 1996. ELKE, reorganized and renamed Invest in Greece Agency in March 2008, is designed as a one-stop shop for investors in cutting through red tape and acquiring the numerous permits needed to proceed with investments. For investors seeking government incentives under Law 3299/2004, the Agency is responsible for helping investors with projects valued at over 8.8 million euros ($11.9 million), or over 3 million euros ($4 million) in cases in which there is at least 50 percent foreign participation. It also advises the government on streamlining investment and promoting Greece as a favorable investment destination, and improving the investment climate in Greece. The new investment incentives laws 3522/2006 and 3752/2009 that amended 3299/2004 are also intended to simplify and expedite the evaluation of projects.
Greek labor laws limit working hours, limit overtime, restrict part-time employment, and are restrictive regarding the dismissal of personnel. A labor law (3385/2005) passed in July 2005 gives greater flexibility to employers to ask employees to work without overtime premium pay during peak times, in return for compensatory time off during non-peak times. Under current regulations, both private and public companies are prohibited from firing or laying-off more than two percent of their total workforce per month without government authorization.
Greece’s tax regime lacks stability, predictability, and transparency. The government often makes small adjustments to tax levels and has not hesitated to impose retroactive taxation. Although foreign investors object to the frequent changes in tax policies, foreign firms are not subject to discriminatory taxation.
Generally, in sectors open to private investment, foreign investment is not prohibited or restricted in any way. Proposed laws and regulations are usually published in draft form for public comment before being debated in Parliament. The International Financial Reporting Standards (IFRS) for listed companies was introduced in fiscal year 2005, in accordance with EU directives. These rules improved the transparency and accountability of publicly traded companies.
Efficient Capital Markets and Portfolio Investment
Greece has a reasonably efficient capital market that offers the private sector a wide variety of credit instruments. Credit is allocated by public and private banks on market terms prevailing in the Eurozone and credits are equally accessible by private Greek and foreign investors. Two American banks operate in Greece (Citibank and Bank of America), serving both the local and international business communities. There is sufficient liquidity in the market to enter and exit sizeable positions.
An independent regulatory body, the Hellenic Capital Market Commission, supervises brokerage firms, investment firms, mutual fund management companies, portfolio investment companies, real estate investment trusts, financial intermediation firms, clearing houses and their administrators (e.g., the Athens stock market), and investor indemnity and transaction security schemes (e.g., the Common Guarantee Fund and the Supplementary Fund) and encourages and facilitates portfolio investments. Owner-registered bonds, bearer bonds and shares are traded on the Athens Stock Exchange, which has held "developed country" status since 2001, according to key western investment firms. It is mandatory for the shares of banking, insurance and public utility companies to be registered. Greek corporations listed on the Athens Stock Exchange that are also state contractors are required to have all their shares registered.
Private Greek and foreign banks hold about 70 percent of the banking system's assets. Following an ambitious privatization program, only two banks remain under state control: Agricultural Bank of Greece and Postal Savings Bank (there is limited state participation through government controlled social security funds in another two banks: National Bank of Greece and Bank of Attica). According to the Bank of Greece, Greece’s central bank, private banks in Greece have healthy loan-deposit ratios (over 90 percent). State banks operate on free market criteria and limit their exposure to public enterprises of questionable financial health. Total combined assets of the five largest banks are estimated at 360 billion dollars (based on 2007 data).
Despite the Greek banks’ limited exposure to risky financial products at the center of the 2008-2009 global financial crisis, credit markets in Greece have been affected by the ensuing freeze in the capital markets. Following the examples elsewhere in Europe and the U.S., the Greek government announced in October 2008 that it would support the Greek credit system to restore flows in credit markets with a combination of state guarantees, state participation in the share capital and liquidity increase in the total amount of 28 billion euros (about $38 billion). The majority of Greek banks have made use of the 28-billion euros rescue plan in 2009 thus strengthening their liquidity and capital base; however, as in other countries, as a response to tightened risk criteria, credit expansion has slowed tremendously. In addition, as a result of the slowing economy, the non-performing loans (NPLs) ratio increased to 7.2 percent in the nine months of 2009 compared to 5.0 percent in 2008 The results of stress tests conducted in 2009 by the Bank of Greece in the context of the annual regular consultation with the IMF were encouraging, indicating that the Greek banking sector had enough buffers to weather the expected slowdown. The merely marginal exposure of Greek banks to assets directly or indirectly linked with the initial causes of the international crisis, the satisfactory level of their capital adequacy, their relatively strong deposit base, the tightening of credit standards and the continuous audits by the Bank of Greece have all helped alleviate the adverse impact of the crisis on banks’ key aggregates. As a result, the Greek banking system remains fundamentally sound, given the current conditions.
There are a limited number of cross-shareholding arrangements in the Greek market. To date, the objective of such arrangements has not been to restrict foreign investment. The same applies to hostile takeovers (a practice which has been recently introduced in the Greek market).
Competition from State-Owned Enterprises (SOEs)
Greek State-Owned enterprises (SOEs) are active in utilities, defense industry and banking. In sectors where the SOE is practically a monopoly, i.e. water and sewage, urban transportation, private companies are not allowed to enter the market. The electricity market, which was to be completely deregulated by mid-2007, still presents problems to the entry of private producers. Only three private producers are operating at this time due to problems in arranging financing and obtaining state licenses. In sectors which have been opened to private investment, such as the telecommunications market and the banking sector, private enterprises compete with public enterprises under the same terms and conditions with respect to access to markets, credit and other business operations, such as licenses and supplies.
The SOEs in Greece are governed by a board of directors the majority of the members of which and senior management are appointed by the government. The appointment of senior management is subject to parliamentary approval. Representatives of labor unions and minority shareholders are also sitting on the board. The Chairman of the Board and the Managing Director are usually technocrats with political affiliation with the ruling party. Although they enjoy a fair amount of independence, they report to the line Minister. SOEs are required by law to publish annual reports and to submit their books to independent audit. There are no sovereign wealth funds (SWF) in Greece but public pension funds may invest up to 20 percent of their reserves to state or corporate bonds.
Corporate Social Responsibility (CSR)
Awareness of corporate social responsibility has been growing over the last decade among both producers and consumers. Several enterprises, particularly large ones, in all fields of production and services have accepted and promoted CSR principles. A number of non-profit business associations have been established in the last few years (Hellenic Network for Corporate Social Responsibility, Eurocharity, etc.) in order to disseminate the values of CSR and promote it in both the business world and society as a whole. Their members have incorporated in their practices programs that contribute to the economic and sustainable development of the communities in which they operate; minimize the effects that their activities may have on the environment and the natural resources; create healthy and safe working conditions for their employees; provide equal opportunities for employment and professional development; and provide their shareholders with satisfactory returns through responsible social and environmental management. Firms that pursue CSR in Greece definitely enjoy public acceptance and respect.
Greece is a parliamentary democracy currently governed by a pro-EU, center-left government. The country witnessed massive riots in December 2008 following the accidental shooting of a young student in an encounter with the police. Anarchists and students attacked and destroyed police stations and businesses. Since that time, there has been a resurgence of domestic terrorism. Active groups include both established entities such as Revolutionary Struggle and newly emerged organizations such as the Sect of Revolutionaries. These groups currently target security forces, government ministries, politicians and Greek business. However they have also launched attacks against US and other western businesses.
Revolutionary Struggle (RS), an anti-establishment radical leftist group, has claimed responsibility for a large number of attacks on police, banks, and other targets, including an RPG attack on the U.S. Embassy in January 2007, and the bombing of the Athens Stock Exchange in September 2009. The Sect of Revolutionaries claimed responsibility for the murder of a police officer in Athens in June 2009, in addition to a number of other attacks on police and other targets throughout the year. Unknown assailants attacked a police station in suburban Athens with AK-47s in October 2009, critically wounding several officers, and a powerful bomb went off outside the building of the National Insurance Company in Athens in December 2009. Self-styled anarchists have continued to attack what they call "imperialist-capitalist targets" with tools such as firebombs and Molotov cocktails. Since these incendiary attacks typically occurred outside normal business hours, only a few people have been seriously injured and there have been no deaths. Several U.S. businesses have been targeted.Corruption
Bribery is considered a criminal act and the law provides severe penalties for infractions, although diligent implementation and enforcement of the law remains an issue. The problem is most acute in the area of government procurement, as political influence and other considerations are widely believed to play a significant role in the evaluation of bids. As a signatory of the OECD Convention on Combating Bribery of Foreign Government Officials and all relevant EU-mandated anti-corruption agreements, the Greek Government is committed to penalizing those who commit bribery in Greece or abroad. The OECD Convention has been in effect since 1999.
The Greek Government has tried to fight corruption in public administration and has established a number of inspection bodies to investigate cases of corruption. The main authority is the Public Administration’s Inspectors and Auditors Unit, established in 1997, at the Ministry of Interior. Independent inspection divisions exist at various Ministries and in the Greek Police and the Hellenic Coast Guard. Investigation procedures and preliminary inquiries on financial crimes come under the jurisdiction of a special unit in the Ministry of Economy and Finance, the Special Audits Service (Greek acronym: YPEE). The responsibility for the prosecution of bribery cases lies with the Ministry of Justice. In cases where politicians are involved, the Greek Parliament decides whether parliamentary immunity should be lifted to allow a special court action to follow. The Greek Chapter of Transparency International closely follows developments to press for investigation and prosecution of corruption cases. Greece dropped to the 71th position on the Transparency Corruption Perception Index in 2009 from the 57th in 2008 (in the last position together with Bulgaria and Romania among the 27 country-members of the EU).
International and domestic NGOs as well as U.S. firms believe that anticorruption efforts need to increase. Mutual accusations of corruption between political parties are frequent and the new center-left government, elected in October 2009, based its pre-electoral campaign on promises for increased anti-corruption efforts. To show how seriously the new government is taking its anti-graft platform, the Deputy Minister of Interior was forced to resign weeks after his appointment on suspicion of favoritism in transfers of policemen and other personnel in the Ministry.
There were a number of corruption cases in the previous government’s tenure which led to the resignation of four Ministers and had a tremendous impact on the popularity of the leading party which eventually lost the elections.
Corruption in the judiciary has been confronted more drastically than in the political world. The Greek judiciary is under continuing corruption investigation resulting in dismissals, suspension from duty, disciplinary action, even imprisonment in about 100 cases of corruption. Greece is also investigating whether German engineering group Siemens bribed companies and officials to win deals. A prosecutor has filed charges and an investigating judge has launched an inquiry.
Bilateral Investment Agreements
Greece has bilateral investment protection agreements with Albania, Algeria, Argentina, Armenia, Azerbaijan, Bosnia, Bulgaria, Chile, China, Croatia, Cuba, Cyprus, Czech Republic, Egypt, Estonia, Georgia, Germany, Hungary, India, Iran, Jordan, Kazakhstan, Korea, Latvia, Lebanon, Lithuania, Mexico, Moldova, Morocco, Poland, Romania, Russia, Serbia, Slovenia, South Africa, South Korea, Syria, Tunisia, Turkey, Ukraine, Uzbekistan, and Zaire. Investments by EU member states are governed and protected by EU regulations.
Greece and the United States signed the 1954 Treaty of Friendship, Commerce and Navigation, which covers a few investment protection issues, such as acquisition and protection of property and impairment of legally acquired rights or interests. Also, Greece and the United States signed the 1950 Treaty for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income.
OPIC and other Investment Insurance Programs
Full Overseas Private Investment Corporation (OPIC) insurance coverage for U.S. investment in Greece is currently available only on an exceptional basis. OPIC and the Greek Export Credit Insurance Organization signed an agreement in April 1994 to exchange information relating to private investment, particularly in the Balkans. Other insurance programs that also offer coverage for investments in Greece include the German investment guarantee program HERMES, the French agency COFACE, the Swedish Export Credits Guarantee Board (EKN), the British Export Credits Guarantee Facility (ECGF), and the Austrian Kontrollbank (OKB). Greece became a member of the Multilateral Investment Guarantee Agency (MIGA) in 1989.
For the purposes of OPIC Currency Inconvertibility insurance, currency inconvertibility is no longer an issue as Greece has been part of the Eurozone since January 1, 2001.
There is an adequate supply of skilled, semi-skilled, and unskilled labor in Greece, although some highly technical skills may be lacking. The total number of immigrants is estimated as high as 1.2 million, nearly one-fifth of the work force, and approximately thirty percent of them are undocumented or hold residence permits that have expired. Illegal immigrants predominate in the unskilled labor sector in many urban areas. Greece has started a process to regularize the status of some immigrants, necessary to integrate them into society. Approximately half of the estimated 1.2 million aliens in the country are from neighboring Albania.
The 2009 unemployment rate in Greece is estimated to have increased to almost ten percent (from eight percent in 2008) as a result of the economic crisis. Labor-management relations in the private sector are generally good. Strikes, labor stoppages, and related job actions occur mostly in the public sector, where job security is guaranteed by legislation.
Greece has ratified ILO Conventions protecting workers' rights. Specific legislation provides for the right of association and the rights to strike, organize, and bargain collectively. Greek labor laws prohibit forced or compulsory labor, set a minimum age (15) for the employment of children and determine acceptable work conditions and minimum occupational health and safety standards.
Foreign Trade Zones/Free Ports
Greece has three free-trade zones, located at Piraeus, Thessaloniki and Heraklion port areas. Greek and foreign-owned firms enjoy the same advantages in these areas. Goods of foreign origin may be brought into these zones without payment of customs duties or other taxes and remain free of all duties and taxes if subsequently transshipped or re-exported.
Similarly, documents pertaining to the receipt, storage, or transfer of goods within the zones are free from stamp taxes.
Handling operations are carried out according to EU regulations 2504/1988 and 2562/1990. Transit goods may be held in the zones free of bond. The zones also may be used for repackaging, sorting and re-labeling operations. Assembly and manufacture of goods are carried out on a small scale in the Thessaloniki Free Zone. Storage time is unlimited, as long as warehouse charges are promptly paid every six months.
Foreign Direct Investment Statistics
Statistics on foreign direct investment are not collected systematically, resulting in a wide variation in estimated data on investment levels. By all estimates, though, FDI levels in Greece are the lowest in the EU. Greek statistical data were previously based on records of investment approvals kept by the Ministry of National Economy or the Bank of Greece, but there has been less monitoring of investment since the lifting of foreign exchange restrictions, and the Ministry of Economy now keeps records of only the investments that seek government assistance. Bank of Greece records of capital inflows do not distinguish among greenfield investments, acquisitions, foreign borrowing by Greek companies, and other capital transfers. The Greek Government has claimed for several years now that a new data system based on surveys is being set up.
According to the UN’s trade and development organization’s World Investment Report (which is based on Bank of Greece records, with all the limitations as mentioned above), FDI inflows into Greece in 2008 were 5.1 billion dollars (1.45 percent of GDP), significantly higher than the 1.9 billion dollars reported in 2007. (The increase in FDI inflows in 2008 was almost fully covered by the Deutsche Telekom’s 4.3 billion dollar purchase of the Greek Telecommunications Organization OTE.) Outflows for direct investment abroad were 2.7 billion dollars in 2008 (0.75 percent of GDP) and 5.3 billion dollars in 2007.
Although there is no official estimate of total foreign investment in Greece, the total stock of foreign investment is estimated at around $35 billion, or approximately ten percent of 2008 GDP. Until the Greek government provides more reliable data, this estimate should serve only as a guideline. Again highlighting the absence of reliable data, the U.S. Embassy estimates the total stock of U.S. investment to be about $6 billion, a little more than one-sixth of the total stock of foreign investment. U.S. firms employ about 11,200 people.
Greece’s investment abroad is mainly directed to the Balkans. According to the Greek Ministry of Foreign Affairs, Greek direct investment in the Balkans is estimated at 7.2 billion dollars, one third of which is invested in Serbia, one third in Romania, and the remaining one third in Bulgaria, Albania and the Republic of Macedonia.
Major U.S. investments in Greece:
(Based on 2007 total assets as reported by the companies. Source: 2009 ICAP - Greek Financial Directory)
|NAME OF AMERICAN COMPANY (NAME OF GREEK COMPANY)
|TOTAL ASSETS (2007, U.S. $ MILLIONS)
|Carlyle Group (Neochimiki)
|Philip Morris Group (Papastratos) (Kraft Hellas)
|Coca Cola Hellas Bottling
|Duke Energy (Attiki Gas Supply)
|Johnson & Johnson
|Crown Cork and Seal
|(Crown Hellas Can Packaging Mfrs)
|First Data (First Data Hellas)
|Procter & Gamble
|S.C. Johnson and Son
|* estimate – new investment 2008
|** amount represents 23.81 percent U.S. ownership of the Greek subsidiary’s total assets
Major non-U.S. foreign investments in Greece are:
|NAME OF FOREIGN COMPANY (NAME OF GREEK COMPANY)
|TOTAL ASSETS 2007, U.S. $MILLIONS
|Deutsche Telekom AG (OTE)
|Siemens Tele Industrie A.G.
|Thyssen Krupp (Hellenic Shipyards)
|China Ocean Shipping – COSCO (Piraeus Port Container)
|BC Partners (Regency Entertainment)
|Dixons Overseas Limited (Kotsovolos)
|British American Tobacco
|Lafarge (Heracles General Cement)
|Alcatel (Nexans Hellas)
|Amstel-Heineken (Athenian Brewery)
|Unilever (Elais – Unilever)
|Fulgorcavi Halia (Fulgor Greek Electric Cables)
|Italcimenti (Halyps Building Materials)
|*estimate – new investment 2008