2012 Investment Climate Statement - Greece

2012 Investment Climate Statement
Bureau of Economic and Business Affairs
June 2012

Openness to Foreign Investment

Greece provides a challenging climate for investment, both foreign and domestic. The country is contending with an intractable government deficit (-10.8% of GDP in 2010, -9.6% estimated in 2011), increasing public debt (149.1% of GDP for 2010, 165.1% predicted for 2011), and is entering its fifth year of recession. The economy is expected to shrink by more than 6% in 2011 after a contraction of 4.5% in 2010, resulting in a 15% contraction since the beginning of the recession. A recovery is now expected no sooner than 2013. The protracted economic crisis has lead to a contraction in bank lending and investment. There is no evidence yet of improvement in investor sentiment or a related increase in investments.

Greece scores very poorly on a number of widely used business and investment environment scorecards. 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. This reflects a business environment that is burdensome for business, creates barriers to entry for new firms, permits a few incumbents to earn high profits, and creates scope for arbitrary decisions and corruption on the part of public servants.

Greece’s rank rose very modestly on the June 2011 World Bank Doing Business index to 100 out of 183 (up from 101 in 2010) and dropped to 80 out of 178 on the Transparency International Corruption Perception Index in 2011 (down from 78 in 2010), second only to Bulgaria for last place among EU countries. Greece dropped in the Heritage Foundation’s 2011 Economic Freedom Index, coming in at 88 (down from 73 in 2010), out of 179.

Recent Events Affecting the Investment Climate in Greece

Due to its sizable debt and deficit, in May of 2010, Greece requested financial assistance from the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF)—the so-called “troika.” A multiannual financing package for Greece of €110 billion was announced, payable in installments through 2012. In exchange, Greece agreed to implement tough fiscal austerity measures and structural reforms. However, political opposition slowed the pace of needed reforms, the recession deepened and Greece did not meet its fiscal targets in 2011. On October 26, 2011, the EU agreed to a second multiannual financing package for Greece that is expected to be negotiated in early 2012 and in place shortly thereafter. The second package includes €130 billion in official loans and a voluntary write-down of 50% of the nominal value of privately-held Greek government debt (€103 billion in absolute terms) and an additional €30 billion of official assistance to recapitalize Greek banks after the bond write-down.

In 2010, the Greek government identified an extensive portfolio of assets for potential privatization, including listed and non-listed companies, concessions and commercially viable real estate (buildings and real estate). In order to manage the divestment process, the Greek government established an independent non-governmental privatization fund (Hellenic Republic Asset Development Fund) under Greek law for a period of 6 years. The fund has the mandate to privatize assets at prevailing market conditions as soon as technically feasible and in an open and transparent manner. Foreign and domestic investor participation in the privatization program is generally not subject to restrictions, although the economic environment may make it difficult for the private sector to raise funds to purchase firms scheduled for privatization. The detailed inventory of targeted assets consists of 50% land, 35% infrastructure (including energy infrastructure, such as the natural gas grid) and 15% corporations (public utilities). The initial target for proceeds from divesting such asset was €5 billion by the end-2011, €15 billion by end-2012 and €50 billion by end-2015. The Greek government revised downwards its privatization objectives for 2011, however, and received revenue of only €1.7 billion from privatizations and concessions in 2011.

On November 11, 2011, a provisional coalition government was formed with the task of passing the 2012 budget, and negotiating the Greek sovereign debt write-down with the private sector and the second EU bailout package. Lucas Papademos, a Greek economist, former Governor of the Bank of Greece and former Vice President of the European Central Bank, was appointed Prime Minister. The political parties in the coalition have agreed to hold elections once the coalition government achieves its objectives, most likely in the spring of 2012. Papademos has stated that there are significant positive indications that support the forecasts for economic recovery in 2013, including an increase in exports, stabilization of income and consumption expenditure, and major public works which will boost employment and improve the investment climate. As of the end of 2011, however, Greece has not completed negotiations on the debt write-down with private bond holders and has yet to complete several promised reforms, including liberalizing closed-shop professions, overhauling tax administration and putting 30,000 public sector workers on labor reserve. In a report issued on December 13, 2011, the IMF stated, "Greece is still well away from the critical mass of reforms needed to transform the investment climate."

Recent Major Investment Laws

In recent years, some progress has been made toward adopting laws aimed at fostering growth, reducing bureaucratic hurdles and attracting foreign investment:

Law 3894/2010 (also known as the “fast track”) provides for the transparent acceleration of “strategic” investments. Strategic investments can be implemented either by the Greek government, by the private sector, or through a public-private partnership. Strategic investments are determined by their importance to and positive impact on the national economy and mostly relate to investments in the construction, renovation, and expansion of infrastructure and networks in sectors such as industry, energy, tourism, transportation and communication, health services, waste disposal management, high technology applications and innovations. Amendments to the fast track law, expected in early 2012, will change the definition of “strategic” to: 1) exceeding €100 million (the minimum set in the original legislation was €200 million) regardless of investment sector ; 2) at least €40 million and creating at least 120 jobs (€75 million and 200 jobs in original legislation); 3) at least €15 million invested in industry (a new provision in the amended legislation) or at least €3 million invested annually over three years in high tech, environment, education, or R&D (no change from original legislation); or 4) creating at least 150 new and viable jobs (250 jobs in original legislation). The approval procedure is expedited and certain tax benefits can be provided in the approval decision. More information on the 2010 fast track law can be found at http://www.investingreece.gov.gr.

Law 3853/2010 provides for a “one-stop shop” approach to establishing new businesses.

Law 3908/2011 is the primary investment incentive law currently in force. The investment incentives provided are in the form of cash grants, lease payment subsidies and tax exemptions. The scope of the law is to assist private investment with the intention of promoting economic development in Greece by encouraging the formulation and implementation of investment schemes to improve business, technological development, competitiveness and regional cohesion. The new scheme applies to investments in all economic sectors with some exemptions. The incentives depend on the category within which the investment project falls. The law builds on previous investment incentives by extending 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. Investors seeking capital grants must submit a business plan to the Ministry of Regional Development, which ranks the plan based on several criteria, including the viability of the planned investment. The limited capital grants are awarded to the highest ranked projects. Preference is given to projects in renewable energy, tourism, innovative technologies and “green” projects.

Law 3919/2011 is a comprehensive reform law which aims to liberalize more than 150 regulated professions.

Law 3982/2011 reduced the complexity of the licensing system for manufacturing activities and technical professions and modernized qualification and certification requirements.

Law 4014/2011 simplified the environmental licensing process.

Other investment laws include:

-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 3389/2005 introduces public private partnerships (PPP). This law aims 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. Special tax treatment is 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.

Restrictions on Foreign Investment

As a member of the EU and the European Monetary Union (eurozone), Greece is committed to structural reform to meet EU and eurozone regulations. To this end, the government has opened the telecommunications market, and the energy market has undergone some deregulation. The electricity market in Greece is currently partially deregulated and already 6 private companies are operating in the market. The European Commission is pressing for the complete deregulation of the market by selling or privatizing the power plants of the Public Power Corporation. Restrictions exist on land purchases in border regions and on certain islands because of national security considerations. Greece is undergoing extensive reforms with respect to foreign investment and licensing procedures. It is not yet clear if, after implementation of reforms, additional licenses or restrictions will apply for U.S. and other non-EU investors in the banking, broadcasting, transport or other strategic sectors. Foreign investors can buy shares on the Athens Stock Exchange on the same basis as local investors.

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; however, the court system is a time-consuming means for enforcing property and contractual rights. The government committed, as part of the EU bailout packages, to reforms intended to expedite the processing of commercial cases through the court system. Foreign companies report that Greek courts still 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. Problems with judicial 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 (Law 3908/2011, which replaced Law3299/2004) provides incentives in the form of tax relief, cash grants and leasing subsidies on qualifying investments in all economic sectors with some exceptions.

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. Although a recent Greek defense procurement law eliminated offsets, the Greek government is seeking to reopen offset contracts that expired before being completed, to impose possible penalties. This could affect a large number of U.S. firms.

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 establishing, acquiring, and disposing 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 remain as disincentives to investments.

On intellectual property rights (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 the 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 licensed software 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. 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. A new law enacted in June 2011 (Law 3982/2011), which provides police ex officio authority to confiscate and destroy counterfeit goods, appears to be enforced, at least in some areas. Statistics regarding the efficacy of this new legislation are not available at this time, however.

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 packages for Greece, the Greek government committed to implement reforms to simplify the investment framework, including eliminating bureaucratic obstacles. The “fast track” law, passed in December 2010, 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 licensing/approval of fast track investment projects. Additionally, in February 2011 another development law was passed, in an effort to stimulate investment. This law provides additional incentives, beyond those in the fast track law, that apply to all projects regardless of monetary value or number of jobs created.

Greece’s tax regime lacks stability, predictability, and transparency. In response to the economic crisis, the government has imposed new taxes and increased existing tax rates, sometimes retroactively. Foreign firms are not subject to discriminatory taxation. The government has committed to comprehensive tax reform and cracking down on wide-spread tax evasion as part of the IMF/EU/ECB bailout packages.

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.

Greece is working to complete a land registry, which upon completion is expected to increase transparency of real estate management. Properties in most of the main cities and urban areas have been registered and processing of urban land is expected to finish in 2012. The next phase of the program includes the registration of suburban, rural and forest areas, which is scheduled to be completed by 2020.

Efficient Capital Markets and Portfolio Investment

The challenges for the Greek banking system became more pressing in 2011. The deterioration in overall macroeconomic conditions and heightened uncertainty weighed heavily on deposits and the quality of banks’ loan portfolios, leading to the continued inability of banks to draw funds from the interbank market. Bank balance sheets were further burdened by the impact of the loss in market value of Greek government bonds. Throughout 2011, the overall effect of these factors was a squeeze on bank liquidity. Funding provided by the ECB and the Bank of Greece helped to mitigate these pressures. In 2011 the Greek government provided €96.25 billion to support the financial system: €36.25 billion provided to Greek banks from the Emergency Liquidity Assistance (ELA) mechanism of the Bank of Greece and €60 billion provided in state guarantees. Greek banks are currently dependent upon ELA financing for liquidity to offset dwindling deposits and lack of international capital market access.

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. Only one American bank, Citibank, operates in Greece, 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. Greece was placed on FTSE group’s “watch list” for possible downgrade to “advanced emerging” market status and will remain on the watch list through 2012, according to its annual country classification review. 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. Two banks, ATEBank and PostBank, are government-owned, but Postbank is slated for privatization in 2012. One small bank, Proton, was nationalized in 2011 in the aftermath of an embezzlement scandal. State banks are supposed to operate on free market criteria and limit their exposure to public enterprises of questionable financial health, though this is not always the case.

Credit expansion continues to slow as a result of the economic crisis. According to the Bank of Greece, the loan-deposit ratio for private banks in Greece has deteriorated from 116.8% in Dec. 2010 to 128% in June 2011.

All Greek banks passed the European-wide stress tests in July 2011, but have come under increasing pressure to raise their capital ratios through deleveraging. The Greek banking sector will be very heavily affected by the agreement, reached in October 2011, for private holders of Greek government bonds to take a 50% reduction in the nominal value of their holdings. Most Greek banks will need recapitalization after the debt exchange is executed.

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, sewage, and urban transportation, private companies are not allowed to enter the market. As mentioned above, the electricity market is currently partially deregulated and the European Commission 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 also sit on the board. The Chairman of the Board and the Managing Director are usually technocrats affiliated 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 now promote 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 sustainable economic 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.

Strikes and Political Violence

The Greek government’s implementation of austerity measures included in the IMF/EU/ECB bailout packages has been met with an ongoing series of strikes and demonstrations. On May 5, 2010, a large demonstration in Athens turned violent, resulting in the deaths of three employees trapped in a bank set on fire by demonstrators. Subsequent demonstrations and strikes in 2010 were more subdued, but anarchists 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 the parliament building on Syntagma square to his nearby office. On 23 February 2011, protests again turned violent, with injuries to both police and demonstrators, but no deaths reported. From May-August 2011 the peaceful “Indignant Citizens Movement” staged an almost continual protest in Syntagma square. The on-going protest occasionally turned violent when infiltrated by so-called anarchists.

New austerity measures were announced in early September 2011 and strikes and demonstrations continued into October, with a nationwide general strike bringing Greece to a standstill on October 19, 2011. Police estimate that between 70,000 and 100,000 protesters gathered in front of the parliament building in Athens. The protest was infiltrated by anarchists who pushed past police barricades, hurled chunks of broken marble and Molotov cocktails at police and looted and vandalized multiple retail establishments. Strikes, demonstrations and rioting continued for a second day on October 20. Over eighty people were injured and one protester died from a heart attack. Another strike, the seventh in 2011, took place on December 1, 2011, after the installation of the interim government of Prime Minister Lucas Papademos. The demonstration was peaceful, however, with a lower turnout than some of the previous anti-austerity demonstrations.

2007-2011 saw a resurgence in domestic terrorism dominated by three groups: “Revolutionary Struggle” (RS), “Conspiracy of Fire Nuclei” (CFN) and “Sect of Revolutionaries” (SR). These groups typically have targeted security forces, government ministries, politicians, and Greek business. However they have also launched attacks against U.S. and other Western businesses. The 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 CFN first surfaced in January 2008 and claimed responsibility for several bomb attacks, including several mail bombs sent to foreign embassies and European officials in 2010. The SR 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 the assassination of journalist Sokratis Giolias in July 2010.

The number of bomb attacks fell significantly in 2011, and no deaths were reported, following a series of arrests of some 20 suspected members of RS and CFN starting in 2009 and continuing through 2011. In July 2011, a Greek court found 6 members of CFN guilty and handed down stiff sentences for their involvement in terrorist attacks. One other alleged CFN defendant was acquitted and another was convicted of an unrelated theft charge. Nine alleged members of RS still await trial. SR’s activities also declined significantly, with the group not claiming any attacks in 2011. Overall, Greek government cooperation on counterterrorism with U.S. law enforcement is very good, and is excellent with respect to the protection of American interests in Greece.


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 Financial Crime Unit (Greek acronym: SDOE). 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 (TI) closely follows developments to press for investigation and prosecution of corruption cases. Greece dropped to 80 (out of 178 countries) on TI’s Corruption Perception Index in 2011, down from 78 in 2010 and second only to Bulgaria for last place among EU countries. Polling conducted in 2011 echoed TI’s results, showing that 98% of Greeks believe that members of parliament are corrupt, 97% say the national government is corrupt and 90% believe that tax and local officials and the news media are corrupt. Courts and police are viewed as corrupt by 81% and 74%, respectively. In 2011 there weren’t any major corruption cases brought to court.

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.


The unemployment rate in Greece in the 3rd quarter of 2011 was estimated at 17.7%, (up from 12.4% the same quarter of 2010) as a result of the recession. 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 as well as in agriculture. Greece has started a process to regularize the status of some immigrants. Approximately half of the estimated 1.2 million aliens in the country are from neighboring Albania.

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 set a minimum age (15) and wage for employment, determine acceptable work conditions and minimum occupational health and safety standards, define working hours, limit overtime, and apply certain rules for the dismissal of personnel. The government sets restrictions on mass dismissals in private and public companies that employ more than 20 workers. Dismissals that exceed the numbers set by law require consultations with workers’ representatives and government authorization.

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. Legislation to open several other “closed” professions, including pharmacists, lawyers, notaries, and engineers, was passed in 2011 but the necessary presidential decrees to implement the reforms have not been issued yet. Effectively, the professions remain “closed.” Reforms to finally open all closed professions will be included in an omnibus bill the government plans to pass by the end of January 2012.

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 may 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 (BoG) and the 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 BoG, 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. BoG records of capital inflows do not distinguish among greenfield investments, acquisitions, foreign borrowing by Greek companies, or other capital transfers. The Greek government has claimed for several years now that a new data system based on surveys is being set up, though it remains to be put into action.

According to statistics from UNCTAD (United Nations Conference on Trade & Development), foreign direct investment (FDI) in Greece totaled €36.2 billion from 2003-10. By sector, most of the inflow in this period was directed to the services sector (70% or €25.496 billion) and manufacturing sector (28% or €8.746 billion). In the 2011 UNCTAD report, statistics show that Greece’s rank among EU countries receiving FDI rose to 16 in 2010 from 17 in 2009. Additionally, Greece ranked 119 in 2010 (up from 122 in 2009) in the inward FDI performance index and 43 in 2009 (up from 48 in 2008) in the inward FDI potential index. Despite the increase in UNCTAD rankings in 2010, statistics from Invest in Greece indicate that FDI inflows to Greece decreased in 2009 and 2010. According to Invest in Greece, in 2010 total capital inflows to Greece were €4 billion and net inflows were €1.6 billion ($2,188 billion), a 10% decrease from net inflows in 2009 ($2,436 billion). Although inflows decreased in 2009 and 2010, they remained higher than inflows from 2003-2005. Moreover, the decline in inflows to Greece was lower than the decrease in overall international FDI inflows in 2009 and 2010. International inflows in 2009-10 were 15% lower than average international FDI inflows prior to the global economic crisis and 37% lower than the peak reached in 2007, according to the 2011 UNCTAD report. Regarding outflow, a significant percentage was capital expansion/movement by Greek parent companies of subsidiaries in the energy, commerce and transit sectors of neighboring countries in southeast Europe.

According to UNCTAD’s 2011 report, in 2010 the total stock of foreign investment in Greece is estimated at $33.5 billion or approximately 11.1% of 2010 GDP. It is also estimated that for the period 2003-2009, total FDI inflows from the United States were approximately €1 billion. U.S. firms employ about 11,200 people in Greece.