2011 Investment Climate Statement - Greece

2011 Investment Climate Statement
Bureau of Economic, Energy and Business Affairs
March 2011

Openness to Foreign Investment

Greece, a member of the European Union, provides a somewhat hospitable climate for foreign investment. Greece’s membership in the EU’s Economic and Monetary Union offers currency stability, the infrastructure has improved significantly in the last six years, and if fully implemented, the ongoing liberalization of the energy, telecommunication and tourism markets will offer investment significant opportunities. Ongoing liberalization of the labor market may also make Greece more attractive to investors. The road transportation sector has been liberalized, as have several other “closed” professions (notaries, lawyers, pharmacists, engineers, etc.). Greek businesses are among the leading investors in Southeast Europe, and Greece has actively worked to position itself as a hub for Balkan trade.

After a decade of high GDP growth (between 1997 and 2007 Greece averaged 4% GDP growth, almost twice the EU average) the financial crisis and resulting slowdown of the world economy took their toll on Greece’s growth rate. Growth slowed to 1.1% in 2008 and the economy entered recession in 2009, contracting -2.6% in 2009 as a result of the world financial crisis’ impact on access to credit, world trade, and domestic consumption--the engine of growth in Greece. The economy contracted by -4.0% (estimate) in 2010, and is expected to contract by an additional -3.0% in 2011, before returning to growth in 2012. Macroeconomic problems with which the government is currently contending include a burgeoning government deficit (-15.4% of GDP in 2009) and rapidly increasing public debt (126.8% of GDP for 2009), both of which are the highest in the Eurozone. Greece had to call on Brussels (EU and ECB) and the IMF for a €110-billion-euro ($150 billion) rescue package in May 2010, when it could no longer raise fresh funds on the financial markets at sustainable interest rates. In return for the rescue, Athens agreed to a series of tough and very unpopular austerity measures with the aim of restoring its strained public finances to health. The 2010 state budget deficit fell to €19.6 billion ($25.4 billion) from €30.87 billion in 2009.

Many international corporations maintain that bureaucracy is 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) all cite corruption and excessive government regulation as complicating factors for investment and other commercial activities. As a result, Greece has relatively modest levels of foreign investment as a percentage of the economy. Out of 30 OECD countries, Greece ranked 23rd in level of FDI inflow in 2009, down from 21st in 2008. Greece’s position also declined on other major world indices, falling to 109th out of 183 countries in the 2011 World Bank Doing Business index (down from 97th in 2010) and dropping to 78th on the Transparency International Corruption Perception Index in 2010 (down from 71st in 2009, and in last place among EU countries). In one bright spot, Greece climbed 8 positions in the Heritage Foundation’s 2010 Economic Freedom Index, coming in as the 73rd freest country (up from 81st in 2009).

Historically, growth has been financed by private sector borrowing, public sector spending and absorption of EU structural adjustment funds, which totaled roughly $24 billion in the period 2000-2006. The EU has allocated a similar amount of funding, approximately $26.5 billion for Greece for 2007-2013.

The Greek government is currently implementing a new investment strategy that encourages investment through financial incentives. Depending on the size of the investment, proposals to access these financial incentives are screened either by a high level government committee (for large “strategic” investments) or by the Ministry of Regional Development and Competitiveness in conjunction with the Ministry of Finance (for all other investments). Foreign and domestic investors face the same screening criteria, including the projected impact of the proposed investment on Greece’s economy, projected job creation, and the creditworthiness and capacity of the investor.

Although Greece previously restricted foreign and domestic private investment in public utilities, it recently 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 working to complete a land registry in 2011, which upon completion is expected to increase transparency of real estate management. 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 government, but the guarantee does not cover changes in the tax regime.

-Law 3299/2004 provides investment incentives, mainly tax breaks and capital grants, to boost entrepreneurship, technological change, and regional development throughout Greece. Law 3299/2004 has been amended several times. The most recent amendment in early 2011 extends tax breaks to small and medium investment projects (foreign and Greek) for up to 6 years for investments in existing companies and 8 year for startup companies. The amendment provides for some capital grants, but in a change from previous practice, requires investors to compete for the grants. Investors seeking grants must submit a business plan to the Ministry of Regional Development, which ranks the plan based on several criteria, including viability of the planned investment. The limited capital grants are awarded to the highest ranked projects. The 2011 amendment also builds on a 2009 amendment (Law 3752/2009), which gives preference to projects in renewable energy, tourism, and high tech. The 2011 amendment extends this preference to investments in innovative technologies and “green” projects.

Law 3894/2011 (also known as “fast track”), provides foreign and Greek investors with incentives for “strategic” investment. Strategic is defined as: 1) exceeding €200 million, or 2) at least €75 million and creating at least 200 jobs, or 3) at least €3 million invested annually over three years in high tech, environment, education, or R&D, or 4) creating at least 250 new and viable jobs. Projects must be in key sectors to receive fast track incentives. Key sectors include construction, industry, energy, tourism, transportation, communications, health, waste management, high tech, or innovation. The incentive offered is primarily expedited issuance of licenses/approvals, hence the term “fast track.” More information on the fast track law can be found at http://www.investingreece.gov.gr.

-Law 3389/2005 on public private partnerships (PPP). This law is designed to facilitate PPPs in the service and construction sectors by creating a market-friendly regulatory environment.

-Law 89/67, as amended by Law 3427/2005, provides special tax treatment for offshore operations of foreign companies established in Greece. The Greek government recently announced that special tax treatment would be offered only to operations in countries that comply with OECD internationally-agreed tax standards. The most up-to-date list of countries in compliance can be found at http://www.oecd.org/dataoecd/50/0/43606256.pdf

-Law 468/76 governs oil exploration and development in Greece. Law 2289/95 amended this legislation, allowing private (both foreign and domestic) participation in oil exploration and development.

-Law 2773/99 opened up 34% 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 EU 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 government has opened the telecommunications market, and the energy market has undergone some deregulation. Since 2001, about 34% 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 is currently partially deregulated and already 6 companies are operating in the market. The European Commission is pressing for the complete deregulation of the market by selling or privatizing the energy producing factories of PPC.

The PASOK government elected in October 2009 pledged fiscal and structural reforms to enhance competitiveness. The new administration promised fiscal consolidation and tax reforms, reduction of red tape in business transactions and expedited market deregulation. The administration also planned to generate €3 from privatizations. As part of the EU/IMF rescue agreement signed in early 2010, this target was revised upwards, first to €7 by 2013 and then to €50 billion by 2015. The government recently announced a list of some 20 companies to be privatized, including ATE bank, Postal Savings Bank, gaming firm OPAP, and railway company TRAIONSE. Foreign and domestic investor participation in privatization programs is generally not subject to restrictions, though the global economic environment may make it difficult for the private sector to raise funds to purchase privatized firms.

The Greek government 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% unless special approval is granted by an inter-ministerial privatization committee. The European Commission contested the policy on investment in strategic firms, saying that it contravened EU regulations on free movement of capital. The Commission issued a final warning to Greece in November 2008 to change the policy or face court action. In February 2011 the European Commission indicated it would send the matter to the European Court of Justice, noting that Greece had also not indicated which companies or sectors were bound by the policy, or could be in the future.

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 the law requires this be done in a nondiscriminatory manner and with prompt, adequate and effective compensation. Due process and transparency are mandatory, and investors and lenders receive compensation in accordance with international norms. There have been no expropriation actions involving the real property of foreign investments in recent history.

Dispute Settlement

The Embassy is aware of a few ongoing investment disputes, most dating from more than ten years ago. Greece accepts binding international arbitration of investment disputes between foreign investors and the Greek government, 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 government. 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 government 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.

Performance Requirements/Incentives

Greece is in compliance with WTO TRIMS requirements. 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 government provided investment incentives. Investment incentives are available on an equal basis for both foreign and domestic investors in productive enterprises. The basic investment incentives law (Law3299/2004) provides new and already-established companies incentives worth up to 55% of overall investment. In December 2006, the law was amended to increase the incentives to cover up to 60% of an investment in less developed areas. The law was again amended in March 2009 (Law 3752/2009) to facilitate investment in renewable energy, tourism, and high tech. The law was most recently amended in 2011 to alter the mix of incentives, which was previously weighted toward capital grants. The new mix of incentives includes mostly tax breaks (reaching to 100% in some cases), low cost loans, and leasing subsidies, with some capital grants still available on a competitive basis. The 2011 amendment also gives priority to investments in innovative technology and “green” projects. Law 2687/53 also provides additional tax incentives to foreign investors if they establish export-oriented businesses.

In evaluating applications for tax and other financial incentives for investment, the Greek authorities consider several criteria, including: the viability of the planned investment, the expected impact on the economy and regional development (job creation, export orientation, local content use, energy conservation, environmental protection, etc.), the use of innovative technology, and the creditworthiness and capacity of the investor. Progress assessments are conducted on projects receiving incentives, and companies that fail to implement projects as planned 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. As far as real property is concerned, development of a land registry is in progress, but 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 World Intellectual Property Organization, the Paris Convention for the Protection of Industrial Property, the European Patent Convention, 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 and incorporated them into Greek legislation (Laws 3183 and 3184/2003) in 2003. Greece's legal framework for copyright protection is contained in Law 2121 of 1993 on copyrights and Law 2328 of 1995 on media.

Enforcement of patent rights is adequate in Greece. Patents are available for all areas of technology, and compulsory licensing is not used. The law protects patents and trade secrets for a period of twenty years. Violations of trade secrets and semiconductor chip layout design are not problems in Greece, though some companies have expressed concern about possible problems protecting test data of non-patented products.

Although patent rights are adequately enforced, overall enforcement of IPR laws is not rigorous, and rights holders continue to experience problems in Greece. Audiovisual, music, and software industries bear the brunt of IPR violations in Greece. 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 also common. Trademark violations, especially in the apparel sector, are widespread. The judiciary is not focused on the issue and has little training on IPR issues. The lack of enforcement resulted in Greece being put back on the U.S. Special 301 Watch List in 2008, after having been removed from the list in 2005 for resolving issues related to broadcasting of copyrighted materials on national airwaves. Recently the government improved enforcement by establishing a department at the Ministry of Citizen’s Protections for economic and cyber crimes, including copyright infringement; shutting down copyright-infringing Internet sites; and preparing a code of conduct for Internet service providers. To date, however, Greece remains on the Special 301 Watch List for lack of consistent IPR enforcement.

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. As part of the IMF/EU/ECB bailout package for Greece to avoid default in early 2010, the Greek government committed to implement reforms to simplify the investment framework, including eliminating bureaucratic obstacles. The recently passed “fast track” law aims to simplify the licensing/approval process for “strategic” investments, i.e., large scale investments that will have a significant impact on the national economy. The Invest in Greece agency is responsible for providing all licenses/approvals for fast track investment projects within two months.

Greek labor laws define working hours, limit overtime, and apply certain rules for 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 2% 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. The government has committed to comprehensive tax reform as part of the IMF/EU/ECB bailout package in early 2010, and is in the process of implementing this commitment.

Generally, in sectors open to private investment, foreign investment is not prohibited or restricted in any way. Proposed laws and regulations are 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 Greek and foreign investors. Two American banks operate in Greece (Citibank and Bank of America), serving both the local and international business communities. 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 Exchange), 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 and shares are traded on the Athens Stock Exchange (ASE), which has held "developed country" status since 2001, according to key Western investment firms. ASE was placed on the FTSE group’s “watch list” for 2011, but the newly appointed CEO expects high frequency traders to begin investing in ASE in January 2012, when the tax on stock sales (currently 20%) is abolished by a provision of the draft tax bill currently being considered by the Greek government. It is mandatory for the shares of banking, insurance and public utility companies to be registered. Greek corporations listed on the ASE that are also state contractors are required to have all their shares registered.

Private Greek and foreign banks hold about 70% 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). State banks operate on free market criteria and limit their exposure to public enterprises of questionable financial health. According to Greece’s central bank, the Bank of Greece, the loan-deposit ratio for private banks in Greece has deteriorated as a result of Greece’s debt crisis, from 113.8% in 2009 to 120% in the first nine months of 2010. Total combined assets of the five largest banks are estimated at $370 billion (based on 2010 data).

The six largest Greek banking groups (NBG, EFG Eurobank, Alpha Bank, Piraeus Bank, ATEBank and Postbank) account for more than 90% of the Greek banking sector’s assets (excluding foreign banks’ subsidiaries). Despite Greek banks’ limited exposure to risky financial products at the center of the 2008-2009 global financial crisis, bank liquidity has deteriorated as a result of Greece’s debt crisis and resulting sovereign downgrades. The Greek government has provided €68 billion in state support to the financial system since October 2008 (the initial €28 billion was part of the response to the global crisis, while the support since then has been to help banks contend with liquidity constraints resulting from Greece’s debt crisis) through a combination of state guarantees (€55 billion) and state participation in share capital and liquidity support.

Most Greek banks have made use of the government support, particularly the state guarantees; Greek banks have used the guarantees as collateral to borrow from the European Central Bank (ECB) for liquidity. Greek banks are currently dependent upon ECB financing for liquidity to offset dwindling deposits and lack of international capital market access. Credit expansion continues to slow, and according to the latest data from the Bank of Greece (the central bank), the non-performing loans ratio rose 8.2% on average for Greek banks, up from a 7.7% rate at the end of 2009 to 10% at the end of the third quarter of 2010. Though only one Greek bank (state-owned ATEBank) failed the stress tests conducted during the European-wide stress tests in July 2010 and Greek banks’ capital adequacy remains resilient, the Greek banking sector will continue to face market pressures until the government is able to re-access capital markets and its sovereign ratings improve. The Greek banking system, however, 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

Greek state-owned enterprises (SOEs) are active in utilities, the 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. As mentioned above, the electricity market is currently partially deregulated and the European Committee is pressing for the complete deregulation of the market. 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 the board and all 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 relevant Minister. SOEs are required by law to publish annual reports and to submit their books to independent audit. There are no sovereign wealth funds in Greece, but public pension funds may invest up to 20% of their reserves in state or corporate bonds.

Corporate Social Responsibility

Awareness of corporate social responsibility (CSR) 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 natural resources; create healthy and safe working conditions for their employees; provide equal opportunities for employment and professional development; and provide shareholders with satisfactory returns through responsible social and environmental management. Firms that pursue CSR in Greece enjoy public acceptance and respect.

Political Violence

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. Several demonstrations have taken place in reaction to the Greek government’s implementation of austerity measures included in the IMF/EU/ECB bailout package authorized for Greece in early 2010. One demonstration in May 2010 resulted in the death of three employees trapped in a bank set on fire by demonstrators. Subsequent demonstrations and strikes have been more subdued, but radicals participating in the demonstrations continued to attack police and damage shops and businesses along demonstration routes. In one episode in December 2010, a member of parliament was attacked and beaten by protestors while on his way from parliament to his office on Syntagma square in downtown Athens.

The past few years have also seen a resurgence of domestic terrorism. Active groups include “Revolutionary Struggle” (RS), the “Sect of Revolutionaries” and “Conspiracy of Fire Nuclei” (CFN). These groups target security forces, government ministries, politicians and Greek business. However they have also launched attacks against U.S. and other Western businesses. 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, a number of other attacks on police and other targets throughout the year, and in July 2010 the assassination of the journalist Sokratis Giolias. The CFN first surfaced in January 2008. The group attacked several targets with bombs, causing sometimes significant damage or injuries and sometime minor damage, but no deaths.

A series of arrests of suspected terrorists started in September 2009 as a result of an escalation of crude time-bomb use in terrorist attacks. The arrests continued in 2010, which was a crucial year for the Greek police’s anti-terrorist efforts. On March 11, 2010, the police had a clash with two men; one of them (Lampros Fountas) was shot dead and the other one escaped. Lampros Fountas was a member of RS and was on the terrorist watch list since 1995. This clash also led to the arrest of 6 other suspected members of RS in April 2010. It is believed that those arrested formed the core cell of the group. Four suspected members of CFN were arrested in mid-2010, and in November 2010 two more suspects were arrested while attempting to mail parcel bombs to embassies and EU leaders and organizations. In December 2010 the police arrested 6 more members of the Sect of Revolutionaries group. During this operation, the police discovered several caches with guns, explosives and other material. However, despite the above arrests, another bombing took place on December 30th, 2010 at the First Instance Court in Athens. CFN claimed responsibility. In March 2011 police arrested 6 additional members of CFN, confiscating weapons and computers containing drafts of CFN claims of responsibility for attacks.


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 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 78th position on the Transparency Corruption Perception Index in 2010 from the 71st position in 2009 (Greece lies in the last position among EU countries.)

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 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, including one involving the Greek Orthodox Vatopedi monastery, 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 30% of them are undocumented or hold expired residence permits. 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 unemployment rate in Greece in the 3rd quarter of 2010 is estimated at 12.4%, increased by almost 3% (from 9.3% the same quarter of 2009) as a result of the recession. Labor-management relations in the private sector are generally good, but have come under some strain due to the recession. While private sector labor unions have participated in the most recent strikes against austerity measures, the majority of strikers are from public sector labor unions, which have legislative guarantees of job security.

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 employment and determine acceptable work conditions and minimum occupational health and safety standards. Legislation passed in mid December 2010 allows private firms to bypass national collective bargaining agreements and negotiate in-house labor agreements with employees under certain circumstances. The government also passed legislation in 2010 to liberalize the road transportation sector and as of early 2011, is considering legislation to open several other “closed” professions, including pharmacists, lawyers, notaries, engineers, etc.

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 can be found mainly from Bank of Greece and Invest in Greece organization. Greek statistical data were previously based on records of investment approvals kept by the (former) 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 Regional Development (formerly Ministry of National Economy) now keeps records of only the investments that seek government incentives. 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 UNCTAD (United Nations Conference on Trade & Development) statistics for 2009, Greece is in the 17th position among EU countries regarding Foreign Direct Investment (FDI). According to Invest in Greece, in 2009 total capital inflows into Greece reached €4.5 billion and net inflows exceeded €2.4 billion. Compared with 2008, net flows of FDI into Greece showed a 21% decrease as a consequence of the international crisis. Nevertheless, the decline is much lower than the decrease of overall international FDI inflows which, according to the recent UNCTAD Report (2010), reached 37%. During 2006-2009 FDI into Greece had steadily sustained higher levels compared with the period 2003 – 2005, despite fluctuations. Even in 2009, when the global crisis began to affect Greece, the volume of net inflows of FDI was higher by far than the period before 2005. Many factors, such as infrastructure improvement, have played an important role in this significant increase of FDI volume. During the 2003-09 period, FDI inflows totaled €32.9 billion, and outflows of foreign capital reached €18.3 billion, leaving an impressive €14.6 billion net inflow. A significant percentage of the outflow was capital expansion/movement by Greek parent companies to subsidiaries in the energy, commerce and transit sectors of southeast Europe. Regarding FDI inflows by sector of economic activity, FDI in Greece during the last seven years has mainly been directed to the services sector (€23.710 billion) and manufacturing sector (€7.544 billion).

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 10% of 2008 GDP. Until the Greek government provides more reliable data, this estimate should serve only as a guideline. It is also estimated that for the period 2003-2009, total FDI inflows from the U.S. were approximately €1 billion. U.S. firms employ about 11,200 people in Greece.

Greek investment in neighboring countries contributes to the development and stability of the region. A dynamic network of more than 4,000 Greek companies does business in the Balkans and the Eastern Mediterranean in a multitude of sectors ranging from manufacturing to services. Greek investment in southeast Europe over the last decade has exceeded €16 billion. Greece is currently the leading foreign investor in Albania and FYROM and ranks among the three leading foreign investors in Bulgaria, Romania, and Serbia.

Major U.S. investments in Greece

2009 total assets as reported by the companies.

(Source: 2010 ICAP - Greek Financial Directory).

Name of American Company Total Assets

(Name of Greek Company) (2009, USD Millions)
Philip Morris Group
(Papastratos) 933.4

Coca Cola Hellas Bottling 882.5 *

Pfizer 546.6

Johnson & Johnson 394.3

Abbott Laboratories 389.9

Merck Sharp & Dohme (Schering & Plough) 339.2

First Data

(First Data Hellas) 318.8

Crown Cork and Seal

(Crown Hellas Can Packaging Mfrs) 243.3

Procter & Gamble 185.4

Kraft Food Hellas 155.1

Bristol-Myers Squibb 150

Pepsico 132.5

IBM 108.5

(Asty) 97.1

Estee Lauder 76.7

Colgate Palmolive 59.9

Hewlett-Packard 55.9


(Copais) 54.5

Chartis 48.9

3M 46.9

Xerox 43.5

GE Medical Systems 39.6

Georgia-Pacific 38.7

Dow Chemical 32.8

Whirlpool 32

Mobil Oil 16.5

McDonald's 18.4

S.C. Johnson and Son 15.8

Total 5,301.6

* amount represents 23% U.S. ownership of the Greek subsidiary’s total assets.

Major non-U.S. foreign investments in Greece

Name of Foreign Company Total Assets

(Name of Greek Company) (2009, USD Millions)


Deutsche Telekom AG

(Cosmote) 6,084.4

Deutsche Telekom AG

(OTE) 3,436*

Siemens A.G. 376

Boehringer Ingelheim 263.3

Bayer 210.6

Puma 210.1

BSH 198.8

Praktiker 156.6

Siemens Healthcare Diagnostics 95

Adidas 83.4

Siemens Tele Industrie A.G. 64.1

Thyssen Krupp

(Hellenic Shipyards) 61.4**

Beiersdorf 53.8

Miele 55

Total 11,348.9

* amount represents 30% German ownership of the Greek company’s total assets

** amount represents 24.9% German ownership of company’s total assets


China Ocean Shipping – COSCO

(Piraeus Port Container) 123.5


Vodafone 1,861.1

BC Partners

(Regency Entertainment) 1,675

Dixons Overseas Limited

(Kotsovolos) 449.8

GlaxoSmithKline 392.8

British American Tobacco 249.6

Imperial Tobacco Hellas 120.9

Tui Hellas 110.3

Cadbury Hellas 55.9

Total 4,923.7


Carrefour 1,683.7


(Heracles General Cement) 1,362.1

Sanofi Aventis 405.7

L' Oreal 114.7


(Nexans Hellas) 72.2

Air Liquide 92.4

Servie 33.7

Total 3,764.7



(Athenian Brewery) 658.3


(Elais – Unilever) 462.5

Friesland 132.9

Total 1,253.8



(Halyps Building Materials) 189.2

Fulgorcavi Halia

(Fulgor Greek Electric Cables) 180.8


(Misko) 79.6

Total 589.9



(Roche Hellas S.A.C.I.) 782.6

Nestle 425.4


(Novartis Hellas S.A.C.I.) 322.9

Total 1,531