07GreekEconomy&Markets

Targets set in new agenda

Foreign investors take positions

Ship owners upgrade fleets

PPPãs move ahead

5th issue - October 2007

(-1.7*)

4

Themes

Venturing in Greece, TANEO’s strong comebackTANEO expands scope and aims at helping revitalize market.

(page 10)

Shipowners sail into changing global conditionsGreek shipowners invest in upgrading fleets (pages 11 – 13)

Public-Private Partnerships (PPP)Ministerial committee gives green light to 24 projects worth 31billion euros. PPPs in waste management projects grow.

(pages 39 – 46)

Greek Economy & Markets 07A publication of the “Agora Ideon” forum.

Project manager: BusinessOnMedia118 Kremou str, Kallithea, 17675

Athens, Greece

tel: +30-210.953.3095

fax: +30-210.953.3096

Greek Economy & Markets 07 is also distrib-

uted along with the International Herald Tribune

(IHT) and Kathimerini English Edition newspa-

pers in Greece, Cyprus and Albania. The content

of the magazine does not involve the reporting or

the editorial departments of the IHT.

Cover Story

The 2008 draft budget estimates another year of strong economicgrowth as the Finance Ministry takes steps to reduce the budget deficit.After the re-election of the conservative government in September, theeconomic policy being formed includes steps on energy, telecommunica-tions and structural reforms. (pages 20 – 29)

Contents

5th issue - October 2007

Markets

Investors waiting for privatizations after the elections(page 18)

Foreign funds eye Greek companies(page 30)

Leading European players take positions in Greece (page 34 – 36)

Perennial underperformer shows growth in foreigninvestments (page 37 - 38)

5

Facts & figures

In September, the Consumer Price Index increased by 2.9 percent incomparison to September 2006. The unemployment rate decreased

from 9.1 percent in the first quarter of 2007 to 8.1 percent in the secondquarter. Furthermore, in the first quarter of 2007 the gross domesticproduct expanded by 4.6 percent whereas in the second quarter the

growth rate decreased to 4.1 percent. Also, the total value of exports inthe first half of 2006 was 8.1 billion euros and in the first half of 2007increased to 8.5 billion euros. This is in line with the improvement of

external competitiveness of the Greek economy, which has been underobservation during recent years and improved its standing by eight

positions within the ranking of Institute for Management Developmentin 2005.

Period Value

Consumer Price Index (CPI)1 September 07/September 06 2.9

Harmonized Index of Consumer Prices (HICP)1 September 07/September 06 2.9

Producer Price Index in Industry1 August 07/August 06 1.2

Industrial Production Index (excluding construction)3 August 07/August 06 -0.4

Turnover Index in Retail Trade1 July 07/July 06 5.5

Gross Domestic Product (provisional data)1 Q2 2007 4.1

Unemployment Rate2 Q2 2007 8.1

Population (2001 Census)4 2001 10,964,020

Building Activity)3 July 07/July 06 -9.6

1Annual rate of Change, 2Rate, 3Periodical rate of change, 4Value

Latest Statistical Data

The profile of the Greek economy

6

Your strategic partner in Southeast EuropeYour strategic partner in Southeast Europe

GREECE:

¸ Gateway to the fast-growing market ofSoutheast Europe with 140 million con-sumers.

¸ Access to a broad business network of morethan 3,000 Greek firms operating in theregion.

¸ Banking hub with 2,300 branches of Greekbanks operating in Southeast Europe.

¸ One of the most highly skilled labor forcesand some of the most renowned universitiesand research centers in the region.

¸ Energy hub in the East-West energy corridorwith a new transbalkan pipeline connectingGreece with the Black Sea.

¸ Maritime and shipping hub as Greece hasthe largest fleet in Europe and the thirdlargest in the world. Major transhipmentcenter for the East Mediterranean andSoutheast Europe with the upgrading andprivatization of the Greek ports underway.

Key geopolitical position

7

¸ Stable macroeconomic and favorable busi-ness environment as a member of the euro-zone. Public finances are back on track (thedeficit fell from 8% of GDP in 2004 to 2.7%in 2006).Inflation rates are decelerating(3.5% in 2005, 3.2% in 2006, 2.9% in Sept2007). Labor productivity is continuouslyincreasing (72% of the EU-15 average in2000, 79% in 2004). In addition to the highquality of the greek workforce, labor costs areamong the lowest within the EU-15.

¸ Strong economic growth — among the high-est in the eurozone. Over the last three yearsthe Greek economy has grown at an averagerate of 4%.

¸ International orientation of the economy.Exports rose twice as fast as nominal GDPpresenting a 34.4% increase in the lastthree years, while outward FDI increasedby 40.9% in 2004/5 and 184% in 2005/6.

¸ Job creation and falling unemployment.Unemployment is decreasing steadily.From 11.3% in March 2004, it fell to7.8% in July 2007. More than 200,000new jobs have been created over the lastthree years.

¸ Increasing investment. Total investment inGreece went up by 12.7% in 2006 incomparison with 2005. In 2006, foreigndirect investment net value reached 4.3billion euros (2% of GDP), nine timeshigher than 2005.

¸ Structural reforms paving the way for greatbusiness opportunities:

ñ Competitive tax regime with corporate taxrates reduced from 35% to 25%.

ñ The Investment Incentives Law led to 8.8billion euros of new investment in the lasttwo years.

ñ The new framework for Public-PrivatePartnerships facilitates the construction ofpublic infrastructure. Twenty-four PPPprojects of 3.1 billion euros have alreadybeen approved and will start in 2008.

ñ An extensive privatizations agendaaccounting for 6.2 billion euros hasalready stimulated competition in thebanking sector and continues to presentsignificant investment opportunities invarious sectors.

ñ The flourishing tourism, energy and servic-es sectors present significant investmentopportunities.

PUBLIB

usinessOnM

edia

Dynamic economy

8

Facts & figures

Deficit seen sliding to 1.7 pct

2005 2006 2007 2008

Finance Ministry -5.6 -2.7 -2.5

draft budget

European Commission -5.5 -2.6 -2.4 -2.7

(Public Finance

in EMU 2007)

OECD -4.5 -2.3 -1.9 -2.2

(Economic Outlook 2007)

General government financial balance (deficit/GDP ratio)

(-1.7*)

According to the recent speech of Economy and Finance Minister Giorgos Alogoskoufis to the WorldBank and International Monetary Fund, the public deficit to GDP ratio is forecast at 2.5 percent in 2007and 1.7 percent in 2008. Also, the fiscal consolidation is not at odds with the development of the Greekeconomy because the government has undertaken supply side reforms which have improved thereallocation of recourses and enhanced private investments. According to the European Commission(Public Finance in EMU 2007) the Greek deficit to GDP ratio is forecast at 2.4 percent and 2.7 percentin 2007 and 2008 respectively. Additionally, according to the OECD (Economic Outlook 2007) thedeficit of the general government is seen at 1.9 percent of GDP in 2007 and 2.2 percent in 2008.

Authorized and regulated by the Hellenic Capital Market Committee (HCMC No 3/88/1991)

Registered in Greece (No. 24829/06/B/91/50), Ministry of Development.

Registered office as above.

MEMBER OF THE ATHENS EXCHANGE

SECURITIES MARKET / DERIVATIVES MARKET15 Valaoritou St, 106 71 Athens, Greece

Tel. +30-210.367.8600, Fax +30-210.364.1002

KAPPA Securities SA is a member of the Athens Stock Exchange and the

Athens Derivatives Exchange. Founded in 1991, it constitutes the con-

tinuation of the brokerage house of the Komninos family, whose long-

standing presence in the market goes back to 1921. At the beginning of 1996

the company was reorganized under a new management team, headed by chair-

man and major shareholder Spiros Bellos. The new management's main objec-

tives were, apart from the upgrading the company's EDP systems, to incorporate

capable and experienced executives from the stock and banking markets, in order

to offer a complete range of brokerage services of high quality to foreign and

domestic institutional and private investors. Under the new management the

company has achieved an impressive increase of its market share in the past

three years, thus joining the top ranks of Greek brokerage firms. The leading posi-

tion and the recognition it has received are a result of excellent brokerage and

corporate services and successful investment proposals. In November 1997, the

company's status was upgraded by the Capital Markets Committee to an Invest-

ment Services Company (EPEY), which enables KAPPA Securities SA to provide

a broader range of investment services, such as underwriting and asset manage-

ment. In mid-1999 KAPPA Securities SA became a member of the Athens Deriv-

atives Exchange (ADEX) as a market maker and it was one of the first companies

to become active in derivative products.

Products and servicesñ A complete range of brokerage servic-

es, research and investment consul-

tancy on stocks listed on the Athens

Stock Exchange.

ñ Underwriting and financial Advisory

Services - Mergers & Acquisitions,

IPOs, rights issues, private place-

ments.

ñ Custodian services.

ñ Investment advisory services on stock

and derivative products to institutional

and private investors.

ñ Equity and market research. Funda-

mental and technical analysis of listed

equities.

ñ Brokerage services and proprietary

trading on derivative products of the

Athens Derivatives Exchange

9

PUBLIB

usinessOnM

edia

10

Themes

Tthings are finally looking up for the New

Economy Development Fund (TANEO).

After three years of idle performance, its opera-

tions are beginning to take off.

A year ago the management of the company

claimed that during 2007 the fund should be com-

pletely restructured with the approval of the European

Union to extend its investment period and then use its

uncommitted resources. Another main goal was to get

approval from the Greek authorities and the EU in

order to expand TANEO’s scope and transform it from

a vehicle for innovative investments to the first ven-

ture capital fund for SME funds. Finally, it was envi-

sioned that by accomplishing all the aforementioned

initiatives, it could be possible for the management to

commit all the unused resources to funding equity

participations. After all the previous lack of interest in

collaboration in previous years, reality has certainly

and pleasingly surpassed expectations.

In an interview for a survey on the Greek venture

capital market at the beginning of this year, we

expressed the opinion that we felt quite confident.

Now we may claim with certainty that our confidence

is valid.

November 5 is D-Day for the relaunching of

TANEO in the venture capital market. However, this is

no longer our sole objective.

TANEO is designed to invest jointly with private

investors in order to form new venture capital schemes

that will finance Greek SMEs. For this purpose and

with the financial support of the Greek government, a

total 150 million euros was raised. However, after all

these years, out of 150 million euros, more than 100

million (approximately 70 percent) is still uncommit-

ted. Originally it was said that this was inevitable due

to the structural characteristics of the Greek venture

capital market. It was thought that it would be almost

impossible to attract matching funds from the private

sector and accomplish TANEO’s original task. Current-

ly, though, 160 million euros solely from the private

sector are queuing for TANEO’s co-funding.

Furthermore, some among the most involved pres-

tigious professionals from the venture capital sector

used to claim that there are not enough experienced

and dedicated fund managers adequately competent

to lead new venture capital funds to success. TANEO’s

management, to a certain extent, almost believed

them, but fortunately reality disproved us all.

Today, more than 25 dedicated practitioners with

valid track records have formed six promising man-

agement teams. These people marketed their experi-

ence to TANEO and to other private investors (institu-

tions, wealthy people, etc) and signed on for our

uncommitted resources. Among these private investors

are large international and domestic banks that eager-

ly accepted investing in collaboration with TANEO for

those talented and young managers.

By the end of the current year, those management

teams are expected to feed private equity funding with

an additional 200 millon euros, doubling the number

of venture capital firms currently in operation. Taking

the above into consideration, it is obvious that the

capital structure and therefore the landscape for

Greek small and medium-sized enterprises will not be

the same. The fact that almost 60 million euros come

from foreign investors is indeed challenging. Howev-

er, for us, more important is the aggressiveness and

the spirit that the new management teams will bring

to the market.

Inevitably, TANEO will expand, mature and gain

the trust of industry. Today, market practitioners are

exposed to a better environment compared to previous

years and we may say with confidence that we are

ready to support initiatives in a greek market full of

opportunities.

Our goal for 2007 was mainly to revitalize the

existing market. That is why we are using our strength

to design market-driven, differentiated and mostly

effective financial vehicles such as real estate develop-

ment funds, health and industrial funds, green econo-

my funds etc. Attracting and allocating financial

resources is only a tiny part of our mission.

It is not by coincidence that the current develop-

ments in the Athens Stock Exchange related to the

launch of the ‘Alternative Market’ support our initiative

with good and valuable foundations. The fact that

speaks for itself is that three out five companies wait-

ing to be the first listed in the Alternative Market

belong to TANEO’s portfolio.

What will TANEO do next? Monitor, publicize,

expand. Those are the key terms for next year’s

objectives.

By ‘monitor,’ we mean an environment closely

facilitated by our experience and scope. Step by step,

TANEO’s role is becoming more and more organic in

the development of the venture capital market in

Greece.

Finally, in regards to expansion, the market is

without doubt still lacking in terms of financial avail-

ability of resources. Nevertheless, and as we see it,

restructuring an underdeveloped market is an ongoing

process.

The first major steps, however, have already been

taken...

Venturing in Greece, TANEO’s strong comeback

TANEO is designed to invest jointly with private investors in order to form new venturecapital schemes that will finance Greek SMEs. For this purpose and with the financial supportof the Greek government, 150 million euros in total has been raised.

Nikolas HaritakisVice President & CEO

The New Economy Develoment

Fund SA (TANEO)www.taneo.gr

11

Greek shipowners are preparing for changing

global conditions in international trade by

upgrading their vessels and improving the

capacity of their fleet in a sector that is

playing an increasingly important role in

the domestic economy.

Bank of Greece, the country’s central bank,

pointed out in its 2007 monetary report that

receipts from shipping transport revenues have

managed to continue increasing despite a drop in

international freight rates.

‘It is important that in 2007 the increase in rev-

enues from sea transport is expected to continue,

even if at a slower rate, mainly due to the increase

in the transport capacity of Greek-owned ships,’

the report highlighted.

‘This development is attributed to the 19.6 per-

cent increase in the deadweight capacity of Greek-

owned ships and the quality upgrade of vessels due

to a reduction in the average age.’

Until recently, a large problem of the Greek

fleet was its increasing age, mainly due to the

business strategy of Greek shipowners, who pre-

ferred highly leveraged inexpensive old ships that

could be operated at low cost. However, this situ-

ation has reversed in recent years mainly as a

result of new environmental legislation, especially

concerning oil transportation, and heightened

Shipowners sail into changingglobal market conditions

Greek shipowners are taking steps toward the improvement of their fleet quality andcapacity. The sector is playing an increasing role in the domestic economy,contributing more than 13 billion euros in sea transport receipts.

By Stelios Bouras

12

Themes

world competition in this segment. In addition,

strong competition between Chinese, South Korean

and Japanese shipyards has led to a significant

decrease in shipbuilding costs.

Greek shipowners have been especially active

in shipbuilding operations recently.

Earlier this year, official data showed that

orders for new vessels of Greek interests stood at

612 ships of total capacity 47.9 million dead-

weight tons (dwt), up an incredible 86 percent on

2006 figures. Most of the 612 vessels are expect-

ed to sail under the Greek flag, 340 of them

tankers, representing 19.8 percent of total global

newbuilt vessel capacity.

Data show that the average age of ships is con-

stantly improving — i.e. dropping — with the age of

foreign-flagged Greek-owned vessels in 2006 falling

to 14.3 years from 15.3 years in 2005. With regard

to Greek-flagged ships, the average age dropped to

11.1 years from 11.7 years in 2005.

The Greek commercial fleet’s capacity expanded

by 4,014,042 register tons during the first five

months of this year compared to December 2006,

according to data put together by the National Statis-

tics Service (NSS).

In May, the Greek fleet numbered 2,025 vessels,

with a total capacity of 35,609,983 register tons

against 31,595,941 in December 2006. NSS data

also show that of the 2,025 ships, 630 are dry-bulk

carriers and 911 are passenger carriers and other

vessels. This growth is attributed to the measures the

Merchant Marine Ministry recently took to boost the

competitiveness of the Greek register.

On a global scale, the Greek-owned fleet remains

the largest in the world, and this year witnessed a

reversal in the trend of the last few years, of the slow

decrease of its percentage in the world fleet.

Robust growthShipping is one of the most vibrant sectors of the

Greek economy, contributing substantially to the

economy’s growth.

It is Greece’s only sector which has a leading

position in the international market in what is con-

sidered to be a highly competitive business.

Greece’s improved ties with countries such as

China and Russia have helped contribute to growth

in the sector as they are also nations that require

the sea transport services of Greek shipowners.

Union of Greek Shipowners (UGS) President

Nikos Efthymiou recently described the industry’s

current trading environment as enjoying ‘an

unprecedented climate of euphoria’ and called for

further investments in staff training to help main-

tain the ‘positive momentum in the future.

In this competitive market, Greek shipowners

control 16 percent of the world’s seagoing fleet and

21.5 percent of the world’s tanker and dry-cargo

fleet.

As a result of its large market share, the sector

generates more than 4.5 percent of the country’s

GDP and employs more than 160,000 individuals.

The sector also generates significant foreign

exchange, sufficient to cover 30.2 percent of the

country’s trade deficit in 2005, compared with net

tourism receipts and EU net transfers that reached

26.7 percent and 11.6 percent respectively of the

trade deficit.

Bank of Greece data show that revenues from

ship transport services in 2006 reached 13.2 bil-

lion euros, up 2.53 percent from the previous year,

when the figure stood at 12.9 billion euros.

Revenue growth rates have been deteriorating,

as shipping transport revenues grew by annual

amounts of 38.4 percent and 4.42 percent in

2004 and 2005 respectively.

‘Given that the largest part of revenues come

from the provision of sea transport to meet the needs

of global transport, net earnings from Greek trans-

port services, which are almost exclusively in ship-

ping, represent three-quarters of net revenues from

transport services in the EU,’ the central bank said.

The number of shipping companies based and

active in Greece has grown by 4.7 percent in 2007

compared with last year, reaching 725 from 693 in

2006, according to recent research, putting an end

to the decline that started in 1998.

Back then there were 926 companies in

Greece, but they declined to just 690 in 2005 due

to the lack of competitiveness at small shipping

firms who usually manage older vessels.

‘The Merchant Marine Ministry measures in

2006 aimed at increasing the competitiveness of

the national register had a positive impact, stop-

ping the flight of ships from the Greek flag, while

their mass repatriation has also begun,’ according

to UGS sources.

‘This is why most of the 612 vessels ordered

will raise the Greek flag.’

Small shipping companies — those owning up

to eight vessels –– are proving to be the backbone

of the industry in Greece as they account for 82.3

percent of all Greek shipping companies based in

this country.

One of the qualitative factors reflecting change

in the shipping industry is the changing age of

Greek ships.

The average age of ships was reduced from

15.3 years in 2005 to 14.3 years in 2006, accord-

ing to data included in the 2006-2007 annual

report compiled by the Greek Shipowners’ Associa-

tion (EEE).

The report is aimed at providing information on

the fundamentals and prospects of shipping.

In the period from January 2001 to May 2007,

there was a 2.9 percent rise in ship numbers and

an increase of 30.3 percent in total capacity. Dry-

bulkers have increased in number by 0.8 percent

and in capacity by 19.8 percent. Tanker numbers

have increased by 5.9 percent, with their capacity

growing by 40 percent. Passenger carriers and

other ships increased in number by 2.9 percent

and their capacity rose by 21.9 percent.

‘Investment activity in the shipping sector is

expected to slow considerably in the following

years, on the back of accelerating shipbuilding

prices, as most shipyards are already operating at

maximum capacity and the modernization in world

economic growth rate coupled with large accumu-

lations of new tonnage in the same period,’ said an

Athens economist.

Greek flagThe fleet flying the Greek flag grew by 8 percent in

the first few months of the year as the 46 vessels

added to the register raised the total capacity to

33,980,782 registered tons, from 31,595,941

tons on December 31, 2006.

The increase in the number of ships bearing the

Greek flag is the result of positive moves by the

shipping community in response to the Merchant

Marine Ministry’s measures to strengthen the com-

petitiveness of the country’s register.

Since the beginning of 2007, 46 ships with a total capac-

ity of 2,581,088 register tons and an average age of 6.6

years have joined the Greek register.

Of these ships, 21 are new constructions with an average

age of 0.3 years and a capacity of 1,576,734 tons. The new

entries on the register consist of 23 dry-cargo ships, 21 tankers

13

and two chemical product and liquid natural gas (LNG) carriers.

‘We believe that with the measures taken we

will attract more ships to the Greek flag, rendering

it even stronger,’ ministry sources say.

The ministry recently took a significant leap for-

ward by overcoming certain impediments of the past.

The two measures it introduced have clearly begun

bearing fruit to the benefit of the Greek register.

First, it decided to proceed with a more flexible

approach to the composition of crews for oceango-

ing vessels. It ruled that the restriction on the num-

ber of Greeks should be six, including all officers

and crew. Second, the social insurance contribu-

tions of Greek seamen serving as low-level crew

are to be subsidized. However, if a shipping com-

pany decides to have more than six Greek seamen

and they are low-level crew, then the state, as an

incentive, will subsidize the contributions, not only

of seamen but also of shipowners.

Cypriot-based Ocean Tankers Holdings is an

example of a fast-growing company that has multi-

plied its fleet by five times since December last year.

It said recently it has completed the acquisition

of a fleet of eight tankers for $231.5 million as part

of its broader expansion plans.

The delivery of eight double-hull and ice-class A

tankers is expected to be completed by April next

year and will be financed through a loan with ABN

Amro Bank, an upcoming rights issue and a $12

million (8.38-million-euro) loan from major share-

holder Michalis Ioannides.

The acquisition will mean the company has

multiplied its fleet size fivefold since December

2006, raising the total number of its tankers to 16

from three and upping the total capacity to

200,000 tons from 20,000 tons.

‘It is worth noting that the acquisition of the

fleet includes a long-term time charter with oil

company Lucoil for seven years plus three years

with a daily net revenue per ship of $15,300

(10,696 euros),’ the company said.

‘The company’s revenues are expected to reach

$60 million (41.9 million euros) on an annual basis.’

The Cypriot-based shipper is one of the largest companies

in the world that provide double-hull tankers.

The right infrastructureWhether the Greek economy can take full advan-

tage of Greek shipping’s premier position in the

industry depends largely on its taking advantage of

synergies from the development of Southeastern

Europe, including efficient links with rail and road

transport. Currently, the Greek share of freight han-

dled in European ports is 4.6 percent, with 40 per-

cent attributed to trans-shipment, which suggests

a relatively small share of total outward goods.

To achieve economies of scale, the ports of

Piraeus and Thessaloniki must improve their links

with rail and air transportation, with the former

highly underutilized in Greece.

In fact, the freight volume per kilometer of rail

networks is 0.2 million tons in Greece versus an

EU average of 1.8 million tons. The current

restructuring plans for both Greek ports, involving

improved capacity and links to rail and road trans-

port are supported by the European Union’s Third

Community Support Framework. The EU projects

provide an opportunity to improve scale by attract-

ing trade destined for SE Europe, which in suffi-

cient size could make Greece a regional trade hub

for the region.

In particular, the five-year investment plan for

the port of Piraeus (2006-2010) amounts to 215

million euros, of which more than half concerns the

improvement of the production capacity of the con-

tainer terminal by 60 percent.

Economies of scope will follow economies of

scale, attracting business such as shipbroking,

legal services and marine insurance, thus creating

a maritime cluster.

Along with the subsequent higher employment in

shipping-related business, the decline in Greek sea-

men, and officers in particular, could also be

reversed. More specifically, since Greece has long

lost its competitive advantage in low-cost crew, it is

essential to focus on the high-level training of Greek

officers. In fact, over the past couple of decades,

there has been a sharp decline in well-trained sea-

men, particularly officers. As the worldwide shortage

of officers has reached 16,000 and is projected to

reach 46,000 officers by 2010, the potential bene-

fits from investment in seamen’s training are clear.

‘Greek shipping needs suitably trained seamen.

Apart from offering their services at sea, they can

continue to work in the business by working from the

land,’ said Efthymiou.

‘Despite recent attempts to upgrade training in

Greece, more needs to be done in order to secure the

right number of competent staff members being cre-

ated with the right level of education that can meet

the needs and opportunities of modern fleets.’

Data show that shipping is by far the largest

employer from the traditional maritime sectors, mak-

ing up about 16 percent of the total cluster of

employment with nearly 42,000 jobs on the sea and

shore.

Meanwhile, coastal tourism generates more

employment than all the other parts of the maritime

sector put together.

The European Commission is also taking initia-

tives in a bid to increase the transportation of goods

by sea rather than by road. Last week it announced

sweeping changes in sea cargo transport in an

attempt to introduce the free movement of goods to

the sector that already exists in land transport.

In the European Union’s large domestic market,

people and goods can move (more or less) freely;

however, there still remains one area of trade in

Europe that has still to open up — ports.

Cargoes transported by sea between European

ports are still subject to all the customs, police,

health and veterinary checks that apply to goods

transported to non-EU states.

The European Commission presented a plan for

the cessation of these controls as Transport Commis-

sioner Jacques Barrot pointed out that progress in

technology allows for closer monitoring of ships and

their journeys.

The Commission will submit related proposals for

approval next year.

There are hopes that a quick approval by govern-

ments will pave the way for the maximization of sea

transport within the EU to the benefit of the econo-

my and the environment, which will be less burdened

by the trucks that currently cross Europe daily.

The role the Greek shipping sector plays in the

economy is large and appears to be continuously grow-

ing. It is the only market in which Greece can make a

decisive impact on the industry on a global scale.

Signs, however, that Greek ship companies are rein-

vesting their funds in acquiring new vessels is a posi-

tive development as the economic gains from these

operations are being spread into other industries.

14

An effective partner in project financeAn effective partner in project finance

NBG GROUP

National Bank of Greece heads the strongest

financial group in the country and boasts a

dynamic profile internationally, particularly in

Southeastern Europe and the Eastern Mediterranean.

Today, after recent acquisitions, the Group is present

in 12 countries and owns eight banks and 65 companies

in the financial services sector.

The retail network comprises 561

branches in Greece and 939 over-

seas, and constitutes the largest

Greek network for the distribution

of financial products international-

ly. NBG was the only Greek firm

included in the FT Global 500 (list

of the 500 largest firms in the

world), recently published in the

Financial Times.

NBG Group provides a full

range of financial products and

services to corporate clients, including corporate lending,

investment banking services, insurance, asset manage-

ment, brokerage, leasing and factoring. In addition, the

Group has been mandated as arranger and underwriter

for some high-profile infrastructure projects in Greece

and abroad.

The Group currently maintains a leading position in

project finance and Public-Private Partnerships among

Greek financial institutions. NBG is in 25th position in

the ‘Global Advisory Mandates won in 2006’ League

Table and in 23rd position in the

‘Europe, Middle East & Africa

(EMEA) Advisory Mandates won in

2005’ League Table according to

the Project Finance International

Magazine.

The Bank’s services in this

field are provided by a team of

experienced and highly qualified

professionals who have actively

participated in the evolution of

Public-Private Partnership / Pri-

vate Finance Initiative (PPP/PFI)

practice in Greece. The involvement of NBG Group in

project finance dates back to 1994, when NBG was

assigned to advise the Ministry of National Economy on

the evaluation of the offers that had been submitted for

The Group currentlymaintains a leadingposition in projectfinance and public-

private partnershipsamong Greek financial

institutions.

15

Contact: C. Stavridis ñ tel + 30-210.8897.060 ñ e-mail: stavridis.eteba@nbg.gr ñ fax + 30-210.8897.100 ñ www.nbg.gr

the design, financing, construction and operation of

the new International Airport in Spata.

The NBG team continued successfully advising

the ministry during the negotiations, the signing of

the concession agreement, the financial close and

finally until the commencement of the airport’s oper-

ation in March 2001.

To date, three more large infrastructure projects

have already been completed on a BOT basis in

Greece, namely the Rio-Antirrio Bridge, the Elefsina-

Stavros-Spata Airport Highway & Western

Hymettus Peripheral Highways (ESSI Highway

or Athens Ring Road) and the Thessaloniki

Submerged Tunnel. In all these projects, the

NBG team has provided its advisory expertise

to the Ministry of Environment, Physical Plan-

ning and Public Works throughout the whole

process, from the invitation for tenders and the

signing of the concession agreements, to their

implementation and the operation of the proj-

ects. Currently, the NBG team is advising the

Greek state on the Greek Highways concession

Project (six Concession schemes), which is one

of the largest highway projects in Europe, to be

implemented on a concession basis, with a

total cost exceeding 8 billion euros. Namely

these schemes are:

ñ Northwestern Axis (Ionia Odos) & PATHE: Athens

- Maliakos / Schimatari - Halkis

ñ PATHE: Maliakos - Kleidi

ñ PATHE: Athens - Corinth - Patras & Southwestern

Axis: Patras - Pyrgos - Tsakona

ñ Corinth - Tripolis - Kalamata

ñ Central Greece Highway

ñ Urban Projects in Attica Region

Moreover, NBG has contributed via its experience

and know-how to the evolution of the new legal

framework for Public-Private Partnerships in Greece

(Act 3389/2005). The new law is expected to facili-

tate significantly the process for the implementation

of projects on a PPP basis and maximize efficiency,

thus strengthening the incentives of all parties

involved. NBG has been appointed jointly with Grant

Thornton as Financial Adviser, along with its legal

and technical partners, to the first two projects that

are putting the law into practice after its enactment

last year and involve the design, construction, finance

and operation of 27 schools in the Attica district and

six buildings of the University of the Peloponnese.

The integrated services offered by the Project

Finance team include:

ñ Formulation of preliminary studies and economic

models;

ñ Review and assessment of the bankability of the

project;

ñ Preparation of tender documents and planning of

project implementation;

ñ Assistance in the preparation of offers for submis-

sion in tenders;

ñ Arrangement of financing;

ñ Negotiation of the economic terms included in

concession agreements and other legal docu-

ments;

ñ Supervision and coordination of the financial clos-

ing;

ñ Support of the contracting authority during the

implementation of the project.

NBG takes a complete view in project finance,

providing clients with well-integrated services both

in project advice and financing. Along with our

advisory services, we provide specialized financing

solutions for PPP/PFI projects at the stage of

structuring a financial deal as well as at the

stage of arranging, participating or manag-

ing medium- to long-term syndicated loans.

This specialized package of products is sup-

plemented by the full spectrum of an inter-

national bank, offering our corporate clients

not only standard products, but also capital

and international banking services. NBG’s

key focus areas regarding involvement in

Project Financing are Infrastructure Pro-

jects, as well as Energy Projects and pri-

mary market of industry projects. The Bank

has participated in the financing of all the

projects that have been implemented in

Greece on a PPP basis, as well as many

other important projects in Greece and abroad

(Romania, Turkey, Kuwait, Germany, the USA and

the United Kingdom). Internationally, the financing

services are facilitated by NBG’s dense network of

units and branches in foreign countries, mainly in

Southeastern Europe.

NBG Group, capitalizing on its unique know-

how, efficiency and financial strength, will seek to

maintain its position as a partner of choice for PPP

and PFI projects, and will further assist in creating

a context for steady growth in this field in Greece

and abroad, especially in the Southeastern Europe

region.

NBG Group, capitalizing on its uniqueknow-how, expertise and efficiency, willseek to maintain its position as a partner

of choice for PPP and PFI projects, andwill further assist in creating a context forsteady growth in this field in Greece and

abroad, especially in the SoutheasternEurope region.

PUBLIB

usinessOnM

edia

16

Themes

GDP revision: Eurostat, the European Union’s

statistical body, recently approved the revi-

sion of Greece’s GDP, up by 9.6 percent

using 2000 as the base year. This means

that 2007 nominal GDP will now reach 230

billion euros from the initial 209.3 billion, confirming

Greece’s dynamic 4.1 percent 11-year growth trend.

It should be noted that improved, more accurate

economic surveys were behind the GDP revision and

not the inclusion of Greece’s rather substantial shad-

ow economy. Previous data, covering business activ-

ity, employment, the number of economic units, prof-

it margins as well as numerous other variables, were

based on older, outdated 1988 economic surveys

and methodologies which were incapable of accu-

rately measuring current economic activity. Recorded

GDP could be even higher with the inclusion of the

unofficial or shadow economy which arises from the

efforts of various economic entities and individuals in

Greece to a) avoid taxes and social insurance contri-

butions, b) sidestep strict (on paper) laws on housing

planning, development and land use and c) take

advantage of profitable shadow market opportunities

provided by the state monopolies which remain in

the Greek education, health and social security sec-

tors. The OECD has estimated the size of the shadow

economy at 28 percent of GDP between 2002-03 —

the highest among all the OECD countries. Moreover,

there are strong indications (e.g. a rate of growth of

net current budget revenues during the 2002-07

period, which is 2.7 percentage points lower than the

rate of growth of nominal GDP) that in the last five

years the shadow economy has grown at a rate in

excess of the official GDP growth rate.

Current developments: The Greek economy con-

tinues to maintain its growth momentum, with GDP

rising 4.4 percent year-on-year in H107, compared

with the 4.2 percent y-o-y growth recorded in H106

and 4.3 percent full-year growth in 2006. The main

growth drivers remain total investment and exports of

goods and services, with the former growing by 10.4

percent y-o-y (13.3 percent H106) and the latter by

The Greek economy at the end of2007: Developments and prospects

Private consumption and investments are seen keeping the GDP expansion rate in 2007above the 4 percent mark, but international competitiveness is eroding as wage growthbeats inflation rates and productivity increases.

Demetrios MaroulisManager, Economic Research

Division, Alpha Bankwww.alpha.gr

17

9.2 percent (2.6 percent H106). Consumption

growth remains healthy at 2.9 percent y-o-y (3.6

percent H106) and is expected to remain above this

rate in the coming quarters. In fact, government con-

sumption is expected to accelerate in H207 due to

the additional expenditure which arose following this

past summer’s devastating forest fires. On the other

hand, the growth of imports remains high at 9.8 per-

cent y-o-y in H107, all the more concerning given the

already substantial increase of 9.3 percent y-o-y in

H106, negating all positive benefits conferred by the

robust growth in exports and ultimately subtracting

1.2pps from Greece’s headline GDP growth in first

half of 2007 (-1.98 pps in 2006).

Growth prospects: On the basis of the above

developments and economic indicators published

before the end of October 2007, we expect GDP

growth to once again exceed 4.0 percent in 2007

and 3.8 percent in 2008, following a 4.3 percent

growth rate in 2006. Private consumption is expect-

ed to maintain the 3.0 percent growth rate, support-

ed by the sustained high growth of both consumer

lending (+24.1 percent at end-July 2007) and dis-

posable incomes (expected to grow at 7.4 percent

and 7.3 percent in nominal terms in 2007 and

2008). On the investment front, the following devel-

opments point to a high growth rate in the current

and the following years: a) public investment which

is set to remain one of the main drivers of growth in

2007-08 as the government accelerates absorption

of EU funds in the final two years of the Community

Support Framework III implementation period; b)

numerous key infrastructure projects (budgeted at

3.6 billion euros) which have already been awarded

to consortia of construction companies via public-pri-

vate partnership arrangements (PPPs); c) the posi-

tive business investment outlook which remains sup-

ported by the healthy increase in profits of both list-

ed and non-listed firms, as well as by the good per-

formance of the Greek stock exchange enabling list-

ed firms to improve their capital base. Business

investment also remains supported by grants

received under the investment incentives law. Fur-

thermore, in the housing sector d) is the negative

growth in the volume of building permits issued in

January-July 2007 which is expected to bring about

the deceleration of residential investment growth to

around 2.0 percent in 2007 and 0.0 percent in

2008, following the 32 percent surge in 2006. In

fact, residential investment remains supported,

notwithstanding some important setbacks in some

short time periods affected by government policies,

by the ever-present high demand for housing due to

the continued high growth of mortgage lending (at

relatively low interest rates) and the high number of

building permits issued in both 2005 and 2006.

Finally, robust export growth is set to continue in

2007 and the following years based primarily on the

continued internationalization of Greek firms, which

have increased their size and domestic production

capacity in tandem with expansion into neighboring

Southeastern Europe. Moreover, the rapid develop-

ment of public infrastructure in Greece and South-

eastern Europe in combination with favorable

demand conditions for tourism and other products

prevailing in Greece’s main exporting markets will

provide a boost for Greek exports.

Impediments to growth: The high rate of GDP

growth in Greece is based solely on the high growth

of domestic demand, due itself to rapid wage growth

(far in excess of both inflation and productivity

growth) resulting in the continued erosion of Greece’s

international competitiveness. This is most clearly

evident in the growth rate of domestic unit labor

costs (ULC) which remain substantially above the

rate recorded by Greece’s main competitors. Crucial-

ly, an opportunity has been missed which could have

seen the high rate of GDP growth facilitating the nec-

essary fiscal adjustment via sizable reductions in the

country’s general government debt/GDP ratio, which

even after the GDP revision, remains high at 96 per-

cent of GDP. Finally, growth in domestic demand has

also been based on the continuous deterioration of

the financial position of the main social security

funds in Greece, with incentives for increased pen-

sion savings almost non-existent, leading to the

explosive increase of the Greek state’s future implic-

it pension liabilities.

These developments underlie Greece’s relatively

low credit rating and remain the single largest com-

bined threat to the country’s continued economic

expansion in the coming years. Currently, they have

the combined effect of driving the growth of imports

of goods and services even higher, while acting as a

constraint on further growth of exports, which

accounts for the rising Greek current account deficit,

set to reach 11.5 percent of the revised GDP in

2007. In all, this implies a rapid increase in Greece’s

international indebtedness which will in turn lead to

the rapid increase of payments for interest, dividends

and profits to foreigners, contributing further to the

worsening of the current account deficit.

Therefore, while prospects for Greece’s future eco-

nomic growth and prosperity remain bright, they are

fraught with obstacles which require timely action and

focused policy aimed at further fiscal adjustment,

reform of the social security system and improvement

of the country’s international indebtedness.

Themes

Δhe governing conservative party, New

Democracy (ND), won Greece’s general

elections on September 16 with 41.83 per-

cent of the vote (152 seats vs 165 previ-

ously), followed by the socialist PASOK

party with 38.1 percent (102 vs 117), communist

party KKE, 8.15 percent (22 vs 12), left-wing

SYRIZA, 5.04 percent (14 vs 6), and right-wing

LAOS, 3.80 percent (10 seats vs no representation

previously).

Based on pre-election references made primari-

ly by the minister of finance, Giorgos Alogoskoufis,

ND’s re-election will likely signal further privatiza-

tions in certain companies majority-controlled by

the state. Moreover, restructuring potential has

been cited explicitly for companies like the Public

Power Corporation (PPC).

Below we identify likely sector-specific reper-

cussions:

Financials (Postal Savings Bank, ATEbank) Two

key developments had been put on the back burn-

er, to be looked into after the elections. Namely the

cases of Postal Savings Bank and Agricultural Bank

and the further divestment of state holdings. The

plan calls for further divestment up to the point

where the state will own 51 percent of ATEbank;

however, we do not think that will bring any sig-

nificant changes. As for PSB, prior to the elections,

it was the government's intent not to sell its stake

to another Greek banking institution and that it

would rather sell it to a foreign strategic investor.

Telecoms (OTE, Cosmote) The state will proceed

with reducing its current 28 percent stake in the

medium rather than short term, as market condi-

tions have not been materially altered (i.e. a pre-

ferred mainstream operator has yet to appear as a

strategic investor). In our opinion there will be no

impact on the current management team in the

short term.

The new structure in the top management of

Cosmote may denote a transitory period for Cos-

mote’s top post given the diverging views on strate-

gic issues for the OTE Group. The move may bring

closer a potential Cosmote minority buyout for OTE.

Electricity (PPC) The CEO remains in place, while

changes will be expedited and an aggressive busi-

ness plan is likely to be implemented. During the

past four months, the government has firmly stated,

through both the minister of national economy and

the minister of development, that substantial issues

of critical importance to PPC will be firmly

addressed. Such critical issues include the defini-

tion and the manner in which the PSO reimburse-

ment will be dispersed (to PPC), the commence-

ment of the increased (3,200 MW) replacement

plant, a future placement and the restructuring that

PPC is in need of, although no further comments

have been made on this particular issue. We con-

tinue to look forward to the upcoming October busi-

ness plan but following the elections outcome, in

our view, uncertainty has paved the way for more

visibility and could turn into an opportunity. A fur-

ther reduction in the state’s stake is very likely.

Gaming (OPAP) OPAP’s management and the new

government’s gaming policy may change. In our

opinion, OPAP’s operating performance during the

next one or two years will be decoupled from a

hypothetical top management change. A change in

gaming policies reflected in the forthcoming busi-

ness plan of OPAP may trigger risks and opportuni-

ties for the medium term.

Industrials (Metka, Endesa Hellas) A rather posi-

tive development for Metka, like PPC, is expected

to accelerate the implementation of the 3,200 MW

replacement program of a big part of its obsolete

lignite plants with new combined cycle gas turbine

(CCGT) ones. In this case, Metka can take advan-

tage of its long-term relationship with PPC through

the assignment of large-scale energy projects in the

next two to three years. Positive catalysts can be

viewed for Endesa Hellas too, as the new govern-

ment can proceed faster with the full liberalization

of the domestic energy market.

Water utilities (EYDAP/EYATH) Unlikely manage-

ment changes and strong potential stemming from a

further state stake reduction, though there is slim

likelihood that such a development could occur any-

time soon. There is substantial room for operational

improvements through the continuation of headcount

reduction by attrition rate and no hiring and expedit-

ing the collection of owed receivables. In EYATH's

case, in particular, a closer integration with French

Suez and the secured annual tariff increases above

inflation would definitely benefit the company.

Ports (OLP/OLTH) The reshuffling of the board of direc-

tors with three new non-executive members, likely to be

appointed in the upcoming EGM early November, will

most likely accelerate an ambitious 40-million-euro

investment program for a 30 percent increase in con-

tainer capacity, yet we do not expect any change in the

existing CEO position. State stake reduction is rather

unlikely in the next 12-18 months before operational

efficiencies and new terminal capacity are materialized.

Investors waiting for steps in privatizations after the elections

The economic impact of the recent national elections is likely to have repercussions on state-controlled companies such as Postal Savings Bank, OTE telecom, the Public PowerCorporation and state lottery and gaming firm OPAP, among others.

Research

18

19

In comparison with other eurozone countries,

Greece presents a peculiarity: Its public sector

is broader and is involved in a wider range of

activities. This continues to be the case

despite the efforts during the past three years

to curtail the public sector. The large participation

of the state in the production process is related to

low productivity in Greece, now standing at about

70 percent of the eurozone average. This is due not

only to the low productivity of public enterprises

but also to the distortions and constraints imposed

on private entrepreneurial activities. These distor-

tions raise the cost of doing business in Greece

either directly — through financing and taxation —

or indirectly — through the administrative burden

that is created, red tape and corruption.

On the other hand, it is important to consider

whether the state is successful in its social role; a

role which cannot be substituted by the private

sector. In other words, is the welfare state effi-

cient? Does it redistribute income and does it

reduce poverty? Unfortunately the answer is that

the state has not accomplished its welfare-related

goals. Specifically, apart from social expenditures

(which account for almost one-third of GDP), it has

not been successful in reducing income inequality,

nor has it combated poverty effectively. Greece still

has the second-highest inequality index among EU-

15 countries (after Portugal), while one-fifth of its

population lives below the poverty line.

What is even more interesting, though, is the

fact that despite quite high social contributions,

the reduction of the rate of poverty as a result of

social transfers amounts only to three percentage

points (from 23 percent of the population to 20

percent). This equals to lowering the poverty rate

by 13 percent, while in other countries, such as

Denmark, for example, the poverty rate has been

lowered by 61 percent. But even ignoring the case

of Denmark — think of it as an outlier — the aver-

age drop of the poverty rate in EU-25 is 38 per-

cent. This fact alone highlights the inefficiency of

our mechanism for social transfers.

The problem is that until now emphasis was put

on general benefits which did not produce results in

combating poverty or in lowering inequalities. If, for

example, benefits are given without discrimination

to wide categories of the population, the line of

poverty is simply raised, leaving the same people

below it. To tackle this, we must have better-tar-

geted measures to those who are really in need.

Taxation is a way to strengthen the social role

of the state, especially policies aimed at combating

tax evasion. In a country like Greece, where there

is extensive tax evasion, the structure of direct tax-

ation can have the opposite results to the redistri-

bution of income between law-abiding and non-

complying taxpayers. Nonetheless, if someone had

to choose between taxation and social transfers to

achieve income redistribution, the most effective

choice seems obvious: The policy mix should put

emphasis on transfers. According to a recent study

on a group of developed countries, transfers are

more effective than taxes as they have multiple

results on reducing income inequality (in some

cases 11 times larger effect, as was the case in

France).

The government’s policy aims at social justice in

tandem with economic efficiency. The fruits of

growth should be broadly distributed and, at the

same time, the taxpayer’s every cent should be

spent wisely. The support offered to low-income

pensioners through raises to the pension fund for

retired farmers (OGA) and to the allowance to low

pension receivers (EKAS) eases somehow the eco-

nomic burden of those who are most in need. The

same can be said for the establishment of the Social

Cohesion Fund, which aims to reduce poverty levels

with better-targeted measures and more effective

social transfers. Finally, the ongoing fight against

tax evasion is creating more revenues that are pro-

viding funding for even more social expenditures.

The state’s social role in Greece

Government policy aims at social justice in tandem with economic efficiency. Supportoffered to low-income pensioners through the pension fund for retired farmers (OGA) and tothe allowance to low pension receivers (EKAS) eases economic burdens while the same canbe said for the establishment of the Social Cohesion Fund.

Plutarchos SakellarisChairman of the Council of

Economic Advisers

Professor at Athens University

of Economics and Business

20

Greece’s fast-growing economy has seen rapid changesin recent years, with structural reforms helping to spurgrowth and close economic gaps with our EuropeanUnion peers. Cutbacks in public spending and moves tostamp out tax evasion have helped tighten fiscal policywhile moves such as cutting corporate tax rates and thereduction in red tape have helped make the businessenvironment more friendly.

Results have started to materialize, with Greece’sbudget deficit expected to be cut down to 2.5 percentin 2007, below the 3 percent limit imposed by the Euro-pean Union, and the stubbornly high unemploymentrate is starting to retreat.

Prime Minister Costas Karamanlis is focusing onchanges in the fields of economy and development,energy policy, tourism, the environment, public worksand economic diplomacy — developments that willhelp the country make its mark in a fast-growing andhighly competitive part of Europe.

New programs regarding public-private partnershipsare expected to bolster investment activity by boostingconstruction projects such as new schools and prisons.

Economic priorities take shape

21

The global economy continues to grow

strongly, although downside risks have

clearly increased. The recent financial mar-

ket turbulence that originated in the US

credit market potentially could slow the

pace of the global expansion. Financial market

conditions have improved since mid-August but a

full recovery will require time. The widening of

credit spreads has a positive aspect, insofar as it

better reflects underlying risks. However, it creates

downside risks to near-term growth. Rising oil

prices, inflation concerns and trade protectionism

also constitute key risks to the global outlook. Cli-

mate change and clean energy needs should also

be taken into consideration.

The speed at which the recent credit crunch

spread from the US to Europe and other parts of

the world provides a powerful illustration of the

systemic risks associated with financial globaliza-

tion. Enhancing transparency in financial markets

is key to avoiding unexpected events that create

uncertainty and impair market liquidity. The recent

turbulence calls for improvements in the practices

of market participants regarding the disclosure of

information on exposure to risks. There is also a

need to strengthen cross-border regulation and

supervision. Given its global membership and

financial stability mandate, the Fund has a key role

to play in identifying spillover risks and working

with national regulators and other relevant bodies

to help avoid or contain them.

Quota & voice reformReform of the Bretton Woods institutions is pro-

gressing. The ad hoc quota increases agreed last

year are only a first step toward achieving a redistri-

bution of quotas in favor of the most dynamic

economies and the low-income countries. It is

imperative that we reach agreement and complete

the quota and voice reform by the fall 2008 dead-

line. The new formula must be simple and transpar-

ent, and give a primary role to GDP at market rates.

A compression factor would clearly help toward a

more equitable redistribution of voting power. We

look forward to further progress in enhancing the

credibility and effectiveness of the Fund.

World BankThese annual meetings take place at a time of

increased financial flows to developing countries.

The World Bank Group has retained a key role in

financing the least developed countries, where pri-

vate capital inflows have remained limited. ODA

(Official Development Assistance) and IDA (Inter-

national Development Association) in particular

have a prominent role to play in sub-Saharan

Africa. In this connection, we support the pledge of

the World Bank Group to allocate an amount of 3.5

billion dollars from its earnings to IDA15. We sup-

port the IFC (International Finance Corporation)’s

commitment to increase its engagement in IDA

countries.

Greece is actively participating in the IDA 15th

replenishment round with a view to increasing its

IDA share.

Greece’s economic performanceGreece plays a key role in the development of

Southeast Europe through trade and direct invest-

ment. Southeast Europe is becoming one of the

fastest-growing regions in Europe and Greece is

committed to facilitate the integration of these

countries in the global economy and the European

Union.

Greece’s growth performance has been quite

strong over the past three years, exceeding the

Euro-area’s average by a significant margin.

Growth has been underpinned by private invest-

ment and exports, while tourism and shipping serv-

ices also are a contributing factor. GDP growth

reached 4.3 percent in 2006 and is expected to be

sustained around 4 percent in 2007-08. The Greek

economy can do even better in the medium term,

as structural reforms are being pursued to make

the economy more competitive and to tackle the

perennial weaknesses of the public sector.

Fiscal consolidation has advanced significantly

in the past three years, as the general government

deficit was slashed below the 3 percent EMU

threshold from 8 percent in 2004. The general

government deficit is estimated to reach a 10-year

low of 2.5 percent of GDP in 2007. Greece’s

adjustment record demonstrates that fiscal consol-

idation is compatible with sustained growth if

accompanied by supply-side reforms that help redi-

rect resources toward private investment. Looking

forward, the Greek government remains committed

to continuing structural reforms, including the pen-

sion reform, while pursuing fiscal consolidation

efforts to achieve balanced budgets by 2010.

Greece maintains strong growth;downside risks abroad grow

In his speech at the 2007 International Monetary Fund annual meeting in Washington DC,Economy and Finance Minister Giorgos Alogoskoufis spoke about the Greek economy’s stronggrowth prospects, on the back of rising private investments and exports, and the country’s rolein the fast-growing region of Southeastern Europe. He also highlighted the government’scommitment to structural reforms aimed at helping boost the economy’s competitiveness.

Giorgos Alogoskoufis

Minister of Economy and Finance

Speech at the 2007 World Bank - IMF AnnualMeetings in Washington DC

22

The 2008 draft budget at a glanceThe 2008 draft budget at a glance

HIGHLIGHTS OF THE 2008 BUDGET

ñ Greece’s first budget drafted since exiting from the excessive deficit pro-

cedure.

ñ Launche of the second phase of fiscal consolidation and economic

reforms for sustainable growth.

ñ Continuation of the implemention of the new economic model for

growth, employment and social cohesion, initiated in March 2004.

MAIN ELEMENTS OF FISCAL CONSOLIDATION

ñ Downsizing the public sector.

ñ Containing public expenditure.

ñ Tackling tax evasion.

ñ Reducing public debt.

PRIMARY OBJECTIVES

ñ Further deficit reduction aiming at a balanced budget by 2010.

ñ Further reduction of unemployment.

ñ Enhancement of social cohesion.

ñ High economic growth.

Cover

OBJECTIVES OF THE 2ND PHASE

OF FISCAL CONSOLIDATION & REFORMS PROGRAM

1. Achieve a balanced budget by 2010

ñ By tackling tax evasion and illegal activity related to fuel distribution.

ñ By broadening the tax base.

ñ By improving the accounts of state-owned enterprises, social security

and the National Health System.

2. Reform budget procedures

ñ By integrating all extra-budgetary accounts to the budget.

ñ By intensifying fiscal audits.

ñ By completing and broadening the implementation of the legal frame-

work for the operation of state-owned enterprises.

4. Reinforce the social welfare system

ñ By establishing a minimum national pension by 2009.

ñ By setting up the National Fund for Social Cohesion to support poor

households.

ñ By supporting low-income pensioners.

5. Boost regional development

ñ By successfully completing the absorption of the 3rd Community Sup-

port Framework and the optimal use of funds from the National Strate-

gic Reference Framework 2007-2013.

ñ Through the Investment Incentives Law and public-private partnerships.

6. Reform the pension system

ñ Through broad social and political dialogue.

3. Complete the final phase of the tax reform

ñ By reducing the tax rates for individuals with mid-level incomes to 25%

by 2009 from 30% and 40% in 2006.

ñ By further tackling tax evasion.

ñ By abolishing or simplifying certain property taxes such as those for the

first residence and inheritance. The aim is for citizens to pay a small

duty for their real estate holdings (excluding the first residence), similar

to the regime in most other developed countries around the world.

7. Further implementation of the new growth model

ñ By promoting the outward orientation of the economy.

ñ Through privatizations, the investment incentives law, the digital strate-

gy and public-private partnerships.

23

PRIORITIES OF THE REFORMS PROGRAM

ñ Tax cuts for enterprises and households.

ñ Investment incentives.

ñ Community Support Frameworks (EU funds).

ñ Outward orientation of the economy.

ñ Public-private partnerships for infrastructure projects.

ñ New privatizations agenda.

ñ Strategy for Digital Greece.

ECONOMIC POLICY RESULTS

ñ Achieved fiscal consolidation:

— The deficit of the general government was rapidly reduced from 8%

of GDP in 2004 to less than 3% in 2006.

— The debt of the general government was reduced by 6.6 percentage

points of GDP in the period 2004-2007.

ñ Maintained a rate of growth above that of other eurozone member

states, reaching 3.7% in 2005, 4.3% in 2006 and 4.4% during the first

half of 2007. Growth is based on higher private investment and exports.

ñ Reduced the unemployment rate from 11.3% in the first quarter of

2004 to 8.1% in the second quarter of 2007.

ñ Improved Greece’s competitiveness.

ECONOMIC POLICY & FORECASTS FOR 2008

Further deficit reduction

ñ The deficit is expected to be reduced further from 2.5% of GDP in 2007

to 1.7% in 2008.

Total expenditure restriction

ñ State budget expenditure is expected to be restricted to 30.1% of GDP

in 2008 from 30.4% in 2007 while, at the same time, public invest-

ment will increase.

Debt reduction

ñ Public debt is expected to be reduced by 3 percentage points of GDP

and fall below 100% of GDP for the first time since 1992.

High growth rate

ñ As also specified by the Stability and Growth Program, the growth rate

for 2008 is expected to be 4%.

ñ Private investment and exports will continue to be the locomotives of

economic growth, accounting for more than 60% of GDP growth.

Higher employment, lower unemployment

ñ Employment is expected to increase by 1.9%, leading to further reduc-

tion in unemployment of 7.4% (down from 8.3% in 2007).

More privatizations

ñ Revenues from privatizations are estimated to reach 1.6 billion euros.

Private consumption increase

ñ Private consumption is expected to increase at a rate of 3.5%.

Inflation reduction

ñ Inflation is projected to slightly fall to 2.6% (down from 2.7% in 2007).

Social spending increase

ñ The restriction of primary expenditure is expected to allow the increase

of social spending by 850 million euros, i.e. by 0.4% of GDP, which will

be allocated to:

— an increase of pensions of retired farmers by 19%,

— an increase of the allowance to low pension receivers by 18%,

— an increase of the unemployment benefit by 10%.

ñ The Social Cohesion Fund has been established in an effort to reduce

poverty levels with better targeted measures.

Tax revenues increase

ñ Tax revenues are expected to increase at a rate of 12.3%, reaching

24.4% of GDP (from 23.2% of GDP in 2007) while corporate and per-

sonal income tax rates will be reduced.

ñ The increase of tax revenues is attributed to:

— Maintaining high growth rates.

— Tackling tax evasion by:

intensifying tax audits, cross-checking and customs control,

restructuring taxation of heating oil to avoid illegal activity,

providing taxpayers with incentives to ask for receipts and fulfill

their tax obligations.

— Broadening the tax base by:

tackling property tax evasion through the introduction of a single

real estate tax.

24

Cover

Change and speed are character-

istics of our era. Our world is

developing technologically, pro-

ducing innovations, developing

at an extraordinary pace, chal-

lenging the status quo. We have to sieze

the moment since missed opportunities

cannot be brought back.

For us today, our major challenge is

to take advantage of the opportunities

available globally by creating incentives

capable of maximising the creative

forces of this country and exploiting our

geo political position.

In this direction, the energy sector

remains a key priority. The boosting of

this sector in the recent years reflects

our stead fast commitment to become

the energy hub of S.E.Europe.

In this context our objectives are:

- Securing energy supply,

- Investing in infrastructure and pro-

duction capability and

- Increased concern for the environ-

ment.

Our energy policy is built around three

axes:

The first axis has to do with the Ener-

gy Interconnections to the international

networks of transport of electricity, oil

and natural gas, so that the country is

rendered an international transit energy

centre and its geostrategic role is rein-

forced. We are now making significant

advances regarding the various agree-

ments signed in the last two years for the

construction of major international ener-

gy projects such as the Burgas-Alexan-

droupolis pipeline, the ITGI natural gas

pipeline of which, the Greek-Turkish

pipeline will be inaugurated shortly, the

Greek-Italian natural gas pipeline cur-

rently at the phase of technical study.

Furthermore, on June 27 2007 the

Prime-Minister Mr Kostas Karamanlis,

announced the participation of Greece in

the construction of the projected South

Stream natural gas pipeline that will

connect Russia with Europe via Greece

and which will involve it is foreseen,

Russia, Bulgaria and Italy . Moreover,

we are promoting the interconnection of

electricity networks between Greece and

Turkey that will be completed shortly as

well as the upgrading of the electricity

interconnections with other Balkan

countries. The energy interconnections

in question enhance the safety of energy

supply in Greece, rendering it an energy

hub in Southeast Europe.

It is a given that the modernisation of

the national system of interconnections

and transportation of electricity, (which

also includes the interconnection of

islands with the continental system),

contributes to the safety of energy sup-

ply. At the same time, we aim to satisfy

the energy needs even further by

increasing the contribution of Renew-

able Energy Sources (RES) in our nation-

al energy balance. Simultaneously, we

are intensifying the efforts so as to

ensure the domestic safety of supply

through new investments in electricity

production from the Public Power Cor-

poration (PPC), which will be replacing

old units with new ones of equivalent

total power but of higher output, as well

as from other investors.

The second axis is saving energy and

promoting environment-friendly energy

sources (RES), the so-called green ener-

gy. The public consultation for the RES

Special Land-planning has already been

completed and will be finalised shortly.

We expect their rapid development due

to the financial incentives that have

been provided with laws and develop-

ment programs, as well as with the con-

struction of essential electricity networks

of transportation.

The third axis is the liberalization of

the energy market. In this context, the

national regulatory bodies for the elec-

tricity and natural gas systems are being

updated according to the EU norms

which will contribute to the creation of

an environment attractive for private

investments. Above all our objective is to

create the necessary conditions in order

for our consumers to benefit from an

improved quality of service. Our primary

objective is for consumers to benefit

from the liberalization of the electricity

and natural gas markets.

Whereas the consumption of energy

used to be an important indicator of

prosperity today the need to protect our

environment has led to the revision of

this of this factor. In accordance with the

objectives of the EU Energy Policy, we

are implementing energy saving meas-

ures. We want buildings that conserve

energy and methods that produce envi-

ronment-friendly energy. The energy

resources do not belong to us. They

belong to the future generations.

In the sector of Trade, we are adopt-

ing new regulations which simplify the

incorporation and operation procedures

for Societes Anonymes as well as all

types of commercial companies. We are

in the process of completing the nation-

al Companies Registry so that we can

facilitate the procedures further while

reducing red tape. We are unifying and

encoding the ratifications, which are

incorporated in the Market Code, revis-

ing the method by which fines and

penalties are imposed by different state

institutions, while we are intensifying the

efforts for tackling illegal trade.

At the same time, in the sector of

Industry, we are adopting new regula-

tions which simplify the incorporation

and operation procedures for industrial

enterprises in combination with the new

Land-planning. This will resolve long-

lasting problems such as environmental

and urban planning issues with regard to

the manufacturing sector. We are pro-

moting programmes that will support

enterprises mainly by capitalizing on our

national human capital and creating

new infrastructure. We are taking spe-

cial care to ensure that new tax meas-

ures and additional incentives will

encourage and support entrepreneurship

in Greece.

Innovation, research and new tech-

nologies are of strategic importance. The

transition to the knowledge society aims

at infusing research, technology and

innovation into the production process,

thus boosting growth and competitive-

ness in the Greek economy and society.

Our goal is to link the research system

with industry increasing competitive-

ness.

Our policies reflect our commitment

to transform Greece into a leading EU

and regional player. We are determined

to maximize our national potential and

to exploit our geo-strategic position,

located as we are at the crossroads

between Europe, Africa and Asia, laying

the foundations for our future genera-

tions.

Energy stays high on priority list asGreece takes position on power map

Policies focus on better connecting Greece with international energy networks, saving energyand promoting environmentally friendly power along with improving the regulatoryframework regarding investments in the sector.

Christos FoliasMinister of Development www.ypan.gr

25

∞fter spending 13 years in the

European Parliament, where I

had the opportunity to see how

problems similar to the ones

we face in Greece were

addressed in different and innovative

ways, I am now part of the Greek gov-

ernment. For me this is both a great

honor and a significant yet rewarding

challenge. Simply pointing out the

problems faced by Greek citizens is not

enough anymore; I now have to con-

tribute to a better Greece with targeted

solutions to specific problems. And that

is what I aim to do.

The Ministry of Transport and Com-

munications is one of the most vital min-

istries to the livelihood of the Greek pop-

ulation. It is directly related to the quali-

ty of our everyday lives, to the environ-

ment, to the use of new technologies for

the benefit of the people and the welfare

of the country as a whole. Taking all this

into consideration, I have set six priori-

ties for my tenure as minister. All of

these goals are centered on the well-

being of each citizen. The first one is to

turn Greece into a transport hub for the

whole region of Southeastern Europe.

The European Union will assist Greece

in achieving this goal by supporting the

upgrade and expansion of the Greek rail-

way network.

The second and third goals are relat-

ed, on the one hand, to urban transport

and, on the other, to the need to support

rail transport for people and goods. As

for urban transport, the aim is to have

fewer cars in the cities by convincing

people to use buses and the rail net-

works. In order to achieve this, we need

to provide better services, that is to say,

quicker and more comfortable means of

public transport. I have worked abroad

for a long time and every day I used pub-

lic transport to go to work, just as the

majority of Europeans do. I believe that

Greeks can do so as well and can leave

their cars behind, provided that they

have a better alternative. This is an easy

way to improve the quality of our every-

day lives. At the same time, it is of vital

importance to support and upgrade the

railway system all over Greece. Rail

transport is one of the most comfortable

and environmentally friendly ways to

travel. We need to follow the example of

the majority of European Union member

states and place the railways at the cen-

ter of our attention. That way people will

be able to travel more safely and quick-

ly and, most importantly, by environ-

mentally friendly means. Here again the

economic contribution of the EU will be

of vital importance.

My fourth and fifth goals are linked

to the civil service sector and to those

organizations that suffer from severe

public debts. On the one hand, we need

to focus on ways to increase the effi-

ciency and improve the finances of all

the organizations supervised by the Min-

istry of Transport and Communications.

On the other, we need to find a viable

solution specifically for the problems fac-

ing Olympic Airlines. Without ignoring

the fact that all the organizations super-

vised by the ministry have an important

social role to play in providing affordable

services to the people, we need to focus

on making them more economically

viable. There is already a law in place,

introduced in the first years of the New

Democracy government, concerning the

operation of all public organizations. We

need to ensure this law is enforced with-

out further delay. According to this law,

every public organization will have to set

a specific business plan and guiding

rules by which it will operate. If we do

not enforce these rules now, public

money will continue being spent at the

expense of efficiency and effectiveness.

This is something the New Democracy

government and I personally will not tol-

erate any longer.

As for Olympic Airlines, we need to

be realistic. This organization, which is

the only public civil aviation organization

in Europe, has severe debt problems.

Our goal is to save Olympic Airlines. But

in order to save the company we need to

privatize it. All our efforts are focused in

that direction. Currently a final round of

negotiations is being carried out with the

European Commission regarding the

money the company owes to the Greek

civil sector and vice versa. These negoti-

ations have been tough, but we are

doing the best we can to come to an

equitable solution for everyone. Above

all, the rights and well-being of the peo-

ple working for Olympic Airlines will be

safeguarded whatever the outcome of

the negotiations.

The final goal I have set is related to

the field of telecommunications.

Telecommunications and more general-

ly new technologies have gained

momentum across the EU and else-

where. Although it has made significant

progress in recent years, Greece is still

far behind its European counterparts in

the field of new technologies. I strongly

believe that this field, together with

shipping and quality tourism, can be the

three pillars that will support a ‘smart’

development for our country. Telecom-

munications is a significant sector in the

global economy, which, if we as a

nation can create our own niche, has

the potential to create many quality jobs

for the people of Greece. Therefore, it is

to our own benefit to make full use of

the opportunities lying ahead. More

specifically, we have set the following

targets: All citizens, the state and busi-

nesses should have quick and reliable

internet services in the near future. All

customer services have to be improved.

Remote areas need to have full access

to new technologies. This last point is of

particular importance, since with new

technologies everyone, regardless of

where he or she lives, can partake in a

number of activities ranging from

telecommerce to telemedicine and tele-

education. At the same time, new tech-

nologies can significantly enhance tradi-

tional occupations and can contribute to

a better quality of life for all.

These goals are not simply words

and empty promises; it is my commit-

ment to the Greek people. I know very

well that at the end of my time in office

I will not be judged by what I said or

who I was seen with, but by my

actions. And at the end of my tenure I

would like to be able to look every sin-

gle Greek in the eye and say to them

that everything I promised four years

before has become a reality.

Toward a better future in transport and communications

The Transport Ministry aims to turn Greece into a transport center for Southeastern Europe,to reduce the number of cars on the roads and to boost efficiency. New technologies willgive the telecommunications sector a new boost.

Kostas HatzidakisMinister of Transport

and Communicationswww.yme.gr

26

Cover

During its first term in power, the govern-

ment of Prime Minister Costas Karamanlis

adopted a forward-looking strategy in

order for the Greek economy to grow

beyond its borders, above everyone’s

expectations, and for the good of the society as a

whole: extroverted growth and domestic reforms.

The impressive recent economic figures as well as

the positive outcome of the latest national election

have empowered the New Democracy party to put

fresh emphasis on social policies for those in

greater need and to take bold reformative initia-

tives. With all these promising developments tak-

ing place on the domestic front and the country

assuming an increasingly important role in the

region of the Eastern Mediterranean, there is no

way for Greece but forward.

A brief look at the figures makes it clear that

the government’s economic policies have borne

much fruit: a brisk GDP growth rate of 4.3 percent

in 2006 and 4.4 percent in the first half of 2007,

a budget deficit down to 2.5 percent of GDP from

7.8 percent in early 2004, and an unemployment

rate reduced from 11.3 percent in early 2004 to

8.9 percent in 2006 and 7.8 percent in July 2007,

creating 250,000 new jobs, 80 percent of which

are in the private sector.

Given these remarkable developments, the

newly re-elected government prioritizes helping

those in greater need, both in everyday as well as

in extreme circumstances. Specifically, the govern-

ment recently presented the Draft Law for the

National Fund meant to advance social cohesion

by helping those living below the poverty line. In

addition, taxes for low-income citizens have

already been reduced while a minimum national

pension and a fund for unemployed middle-aged

employees in problematic areas are being estab-

lished.

In terms of extreme circumstances, the best

example can be drawn from the immediate meas-

ures that the state took for the compensation of the

people and the reconstruction of the areas affected

by the recent forest fires (Peloponnese, August

2007). In addition to the funds coming from the

European Union for that specific cause, the Greek

economy will also finance the rebuilding work. Fur-

thermore, the government oversaw a great effort to

collect funds from Greeks both at home and from

around the world. In an outpouring of fellowship

and unity, we came together with a stronger sense

of patriotism, gathering more than $200 millon.

Starting in the next few weeks, the greatest part of

this amount will go toward the reconstruction of

homes.

Empowered by the vote of confidence of the

Greek people, the newly formed cabinet has

already taken important steps to correct, for exam-

ple, long-term and deep-rooted wrongs in bureau-

cratic policies. In fact, the pilot program was

implemented during the recent forest fires. Specif-

ically, with a fast and efficient process put in

Reforms in Greece: Full speed ahead

The government intends to push ahead with economic reforms and changes to its socialpolicy after positive results emerged during its first term in office. Prime Minister CostasKaramanlis is adopting a forward-looking strategy in order for the Greek economy to growbeyond the country’s borders.

Panos LeivadasGeneral Secretary of Information

27

place, all affected citizens were able to get com-

pensation in the days following the devastating

fires.

The government now aspires to implement such

a policy of minimum bureaucracy on all levels of

the state’s transactions with citizens. It is a new

philosophy of not seeing every citizen as a poten-

tial law-breaker but trusting them unless otherwise

proven and giving them the opportunity to maxi-

mize their potential as they see most fit. By the

same token, of course, it is the philosophy of a

state that closely and strictly inspects and super-

vises all processes, implementing its laws in an

uncompromising and non-negotiable way.

At the same time, the government puts the

same emphasis as before on the Greek economy’s

extroverted growth. After all, there is no doubt that

in today’s competitive international environment, a

market of just 10 million people cannot fulfill its

potential in isolation; it thus needs to open up and

engage others in its own path of growth. Greece

continues to do exactly that by capitalizing on the

fortunate coincidence that our neighbors, who

were once a cleavage between us and Europe, have

now become close partners who want to follow in

our path of democracy, economic development and

active participation in the Euro-Atlantic organiza-

tions.

In the last couple of years especially, Greece

has been looking outward to maximize on its com-

parative advantages. Our role in the global energy

market has been redefined, thanks to important

agreements on the Burgas-Alexandroupolis oil

pipeline, the natural gas pipeline from Turkey and

all the way to Italy, or the new South Stream gas

pipeline. Equally impressive are the developments

in the shipping industry. With the Greek-owned

fleet being the largest in the world and approxi-

mately 300 new ships currently under construc-

tion, Greece is transferring increasing quantities of

commercial goods and oil globally. At the same

time, the country is becoming an important distri-

bution hub; the 3-billion-euro Protocol with the

European Investment Bank to upgrade our ports as

well as projects to implement security systems in

12 ports through public-private partnerships are

but a few of the promising developments that are

transforming our ports.

Last, Greece is a credible financial and busi-

ness center in its neighborhood, holding the posi-

tion of the leading foreign investor in Albania and

the Former Yugoslav Republic of Macedonia

(FYROM) and ranking among the first three in Bul-

garia, Romania and Serbia. With more than 3,600

Greek companies in the region and Greek invest-

ments exceeding 12 billion euros so far, we are the

base for reaching out to a market of 160 million

consumers across Southeastern Europe.

In addition, our banking sector, with more than

1,000 branches now operating in the region, holds

16 percent of the region’s banking market share

and has invested millions of euros to acquire and

build networks in a number of countries. At the

same time, Greek banks are progressively pene-

trating promising markets such as those of Turkey

and Egypt.

In conclusion, the government of Costas Kara-

manlis is moving ahead with reforms and initiatives

at a faster pace and with greater determination.

Our international partners have once again taken

notice, counting on Greece not only to be a para-

digm of strong economic growth but also to assume

a shaping role in the Eastern Mediterranean by pro-

moting peace and stability as well as actively shap-

ing EU foreign policy in an increasingly important

region.

28

Cover

The formation of a new government following

elections on September 16 provides the oppor-

tunity for the adoption of an economic policy

that takes into consideration the medium-term

needs of the Greek economy, that foresees and

plans, reducing to an absolute minimum those inter-

ventions which are strongly influenced by combinations

of economic and political circumstances. The fresh

popular mandate creates the conditions for the exercise

of a policy with greater freedom of movement without

undue political cost, not only for the government but

also the opposition. This will facilitate efforts to achieve

the social and political consensus that is absolutely

necessary for advancing key reforms, particularly those

relating to the social security system, the state and edu-

cation.

At present, there are two very important factors

which facilitate the advancement of significant reforms

in these key sectors. The first is a new collective per-

ception, according to which the time is now ripe for

resolving the major problems facing Greek society.

Society is ready to accept the changes. The second fac-

tor is the convergence of the positions of the govern-

ment and the main opposition, not only regarding their

estimation of the urgent nature of the changes, but also

the main directions which they propose. Despite this,

experience from recent years shows a clear timidity on

the part of governments to undertake initiatives since

the possible political cost entailed is usually overesti-

mated, i.e. the will of society for the advancement of

overdue changes is underestimated. The election of a

new government provides an opportunity for a new eco-

nomic policy that distances itself from the stereotypes

of the past and responds to society’s desire for reforms.

The new economic policy must set medium-term

goals and develop separate interventions with appropri-

ate planning and the assigning of priorities. The primary

goal, on which almost the entire political world agrees,

is of course faster economic growth that will bring

about a reduction of unemployment and a more effi-

cient state, not only in the various fields of administra-

tion but also in social policy. In order to achieve this

goal, as already noted above, what is needed is a shift

in emphasis to supply, i.e. a strengthening of the Greek

economy’s capacity to produce competitive goods. This

in turn means the bolstering of competitiveness and

entrepreneurship, with a drastic reduction of structural

weaknesses which to date have had a negative impact.

PrioritiesFiscal adjustment: On the issue of fiscal adjustment, it

should be noted that despite the important progress

made in recent years, the challenges continue to be for-

midable, as the situation regarding the country’s public

finances remains fragile. The major economic problems

created by the aging population and a possible future

slowdown in economic activity will increase the pres-

sures even further. For this reason, the country must

A new economic policy takes shape

The election of a new government provides an opportunity for a new economic policy thatdistances itself from the stereotypes of the past and responds to society’s desire for reforms.

Extract of quarterly bulletin preparedby the Foundation for Economic andIndustrial Research (IOBE) releasedin September 2007.www.iobe.gr

29

press ahead in a timely fashion with those structural

changes which will ensure the fiscal rehabilitation of

the economy so that it will be able to undertake with-

out particular problems the funding of its greater needs

in the future.

Given that the ratio of public debt to GDP is very

worrying and the estimated future pressures on spend-

ing for pensions and health are among the highest in

the OECD region, it is absolutely imperative for fiscal

rehabilitation measures to be taken in good time. And

the undertaking of such measures in the immediate

future is facilitated by the fact that the Greek economy

is registering high rates of economic growth, which

makes adjustment easier. For this reason, too, it would

be expedient to draw up a long-term program on fiscal

developments, which analyzes how — and on the basis

of which priorities —fiscal policy will deal with the

anticipated major imbalances.

Fiscal adjustment must be based on efforts on both

the revenue and expenditure fronts.

1st. The increase of revenues should not be pursued by

increasing tax rates and the tax burden, which is

already high. It will therefore be necessary to broaden

the tax base, by combating tax evasion and incorporat-

ing underground economic activities. Essential prereq-

uisites for achieving this are:

ñ The reform, simplification and codification of tax

legislation, in order to eliminate the existing uncer-

tainties and ambiguities which currently serve to

further stimulate the underground economy and tax

evasion.

ñ The reform of tax administration, with moderniza-

tion of tax collection mechanisms and reduction of

their cost.

ñ The consolidation of a climate of trust and consis-

tency vis-a-vis the tax system with the abolition of

tax amnesties.

2nd. The room for maneuver on the expenditure side is

far greater, particularly regarding the efficiency of pub-

lic spending. The possibilities here are considerable

and, as is clear from international experience, placing

emphasis on efficiency will enable significant improve-

ments to be made in areas such as health, education

and combating poverty. In this respect it is worth not-

ing that expenditures for public administration in

Greece absorb a much higher percentage of general

government spending than in the majority of OECD

countries; yet despite this, the quality of Greek public

administration continues to be unsatisfactory.

The long-term rehabilitation of public finances can-

not be achieved without comprehensive fiscal reform,

which will include:

ñ The preparation of budgets having a timeframe of

more than one year, and which are in line with the

three-year fiscal program that is submitted in the

framework of the Stability and Growth Pact.

ñ Assessment on a long-term basis not only of the

legality but also the expediency and effectiveness of

expenditures.

ñ Complete transparency of all general government

accounts, including the so-called Special Accounts.

The publication of such accounts in the case of the

broader public sector should be on an annual basis.

Publication also of all guarantees provided by the

government.

ñ Instituting of procedures to enable a substantial

comparison each year of the fiscal outcome with the

corresponding budget. Any overruns which have not

been approved by Parliament should automatically

be charged to the following year’s budget of the

respective ministry or organization.

ñ Establishment of procedures for checking local gov-

ernment finances.

Efficient state: The second, related and equally impor-

tant issue concerns the operation of the state and pub-

lic administration. The question of whether we need a

smaller or larger state has become obsolete. What we

do need in present conditions is a more efficient state,

i.e. a state that maximizes the performance of the enor-

mous resources which it manages for the benefit of

society as a whole, a state which will be judged on the

basis of its administrative efficiency and effectiveness.

With this in mind, IOBE in 2006 put forward a

series of specific proposals which are aimed at creating

a more efficient state. These proposals, presented in

detail in the publication ‘IOBE’s Positions on an Effi-

cient State,’ relate to the following:

ñ The streamlining and simplification of existing legis-

lation and the improvement of the quality of laws.

ñ A more effective regulatory/supervisory role on the

part of the state.

ñ The creation of a public administration which is

more efficient in its operation, simpler with regard

to procedures, adopts meritocracy in its manning

and is more effective in implementing policies.

ñ The improvement of the operation of public enter-

prises and utilities (DEKO) as well as of the social

services provided by the state.

Social security system: The need for the reform of the

social security system is now accepted by all. In addi-

tion, the analysis has been completed of the causes

responsible for the crisis in the system and proposals

have been put forward for changes to its parameters.

Moreover, for fiscal reasons alone, it is clear that the

growing burden placed on the state budgets by social

security expenditures cannot be allowed to continue.

Lastly, proposals have been put forward by both the

European Union and the OECD. The time is now ripe

for the reform of the social security system and a solu-

tion is possible.

As has been underlined by all sides, the reform of

the social security system will come about through

social dialogue. This dialogue must be comprehensive,

effective and rapid. However, the dialogue should not

rule out immediate measures which are based on leg-

islation in force and do not require any changes to those

parameters of the system that will be decided through

social dialogue. Such measures which can be imple-

mented include the curbing of contribution evasion, the

integration of migrants into the system and the reduc-

tion of early retirements.

Remedying the fire damage: The economic policy pri-

orities must also include the effort for the reconstruction

and development of those areas stricken by fires in

August. Immediate measures have already been taken,

while reconstruction programs have been announced

for the areas in question. Essential preconditions for the

success of this program are the following:

ñ The detailed recording of the damage caused and

its impact on economic activity and demographic

trends.

ñ Clarity with respect to the goals of the program. The

main objective should not be reversion to the situa-

tion prevailing before the devastation, but the chart-

ing of a new path for more rapid economic, social

and environmental development.

ñ The securing of the resources necessary for achiev-

ing the targets that have been set.

ñ The effectiveness of expenditures made, so as to

ensure the maximum possible benefit for the strick-

en areas and for the Greek economy as a whole.

Under the conditions currently prevailing in Greece, the

choices and priorities of economic policy as described

above are — to a large extent — acknowledged by the

majority of the country’s political forces. The problem is

the effectiveness of economic policy in advancing the

specific means for achieving the various targets.

In order to be more effective, economic policy must

acquire determination, continuity, consistency and

administrative efficiency in order to push forward those

reforms that have been delayed.

By convincingly illustrating the benefits that will

result from these reforms for society as a whole, it may

be possible to overcome possible opposition and secure

the consent of society that will be necessary for the suc-

cess of the reform drive.

30

Markets

For the second consecutive year, the Athens

Exchange (ATHEX), with Bloomberg’s sup-

port, organized the Annual Hellenic Road-

show in London for Greek listed companies,

which again met with great success. The

roadshow is a unique opportunity to promote the

Greek market to the international investment commu-

nity. The reason behind this initiative is the certainty

of the ATHEX management that international expo-

sure will add to the value of Greek listed companies

and Greek entrepreneurship as a whole.

The success of this event was underlined by all

the participants and especially the president of the

Athens Exchange, Spyros Kapralos. But, apart from

his comments about the event, Kapralos also

announced that the Greek stock market could proceed

with a partnership only if it was to the benefit of

shareholders and the Greek capital market in general.

Robert Buckland, managing director of Global

Equity Strategy of Citi Investment Research, who was

the keynote speaker on the first day of the roadshow,

pointed out that markets are currently in a phase of

rising maturation. He stressed that he does not fear

the possibility of recession in the markets, adding that

for the next two years stocks will probably show a

controlled profit.

He underlined that the above objectives will be

achieved sooner or later, and in the case of Greece

possibly to a greater degree. According to Buckland,

the only danger that can stop the bull run in the next

two years is not the credit crisis but inflation. He

stressed that this time inflation is controlled.

The Second Annual Hellenic Roadshow was one

of the rare occasions that many of the participating

companies — especially the smaller ones — get to

interact with international funds and to liaise with

them in one-to-one meetings, during which they

demonstrated their long-term growth strategy. Around

60 percent of the ATHEX’s daily transactions are

made by international funds, so it is important for

Greek stock market officials to introduce the fund

managers to the management of the companies in

which they invest.

Funds that participated at this year’s roadshow

represent more than 3 trillion euros and the number

participating were double that of 2006. Among those

funds were: Fidelity, Capital, Wellington, Fortis, Axa,

HSBC, Morgan Stanley, Citigroup, BNP-Paribas,

Robeco, Goldman Sachs and Centaurus.

Furthermore, it was a unique opportunity for many

of the Greek companies to operate in an international

environment and to mingle with experts of the invest-

ment community.

It is very important for the ATHEX to support list-

ed companies and to assist them in their efforts

toward growth and expansion. It is worth noting that

many of the companies that participated in the first

roadshow have seen their business grow considerably

within the last 12 months. A number of them even

outperformed the ATHEX general index during the

year, thus proving the positive effect of such events on

their development.

Indeed, the number of participating companies

rose to 38 out of 30 last year and the number of

investment funds rose from 92 in 2006 to 138 this

year. Throughout the duration of the roadshow

approximately 650 meetings took place, rising from

500 last year.

Foreign funds eye Greek companies

The Hellenic Roadshow brings Greek companies into contact with foreign fund managersthat conduct around 60 percent of the daily transactions on the Athens bourse. The fundsthat participated at this year’s roadshow represent more than 3 trillion euros.

By Dimitris Pappas

Participating companies

ALPHA BANK

ASPIS BANK SA

ATHENS MEDICAL

ATTICA HOLDINGS SA

BAN∫ OF CYPRUS PUBLIC COMPANY LTD

EFG EUROBANK SA

ELVAL SA - HALKOR SA

FOURLIS HOLDINGS SA

FRIGOGLASS SA

GEK-TERNA SA

POSTAL SAVINGS BANK SA

HELLENIC PETROLEUM SA

HELLENIC TECHNODOMIKI SA

HYGEIA MEDICAL SA

IASO SA

ILEKTRONIKI ATHINON SA

INTRALOT SA

J&P-AVAX SA

LAMDA DEVELOPMENT

LV LAVRENTIADIS GROUP

METKA

MICHANIKI SA

MOTOR OIL SA

NEL LINES SA

NIREUS SA

OPAP SA

PIRAEUS BANK SA

PROTON BANK SA

SARANTIS SA

S&B INDUSTRIAL MINERALS SA

SIDENOR SA - CORINTH PIPEWORKS SA

SPRIDER STORES SA

TITAN CEMENT COMPANY SA

VIOHALCO SA

31

Δhe Athens Stock Exchange (ATHEX) will

shortly launch a new product and service as

part of plans to broaden operations offered to

investors. The Exchange Traded Funds

(ETFs) is a new product which will be issued

by the end of 2007. ETFs are open-ended mutual

funds which are issued by Mutual Fund Management

Companies (AEDAK) and are accepted for trading on

the stock exchange. Just like shares, ETFs can be

traded at any time, during trading hours, by members

and brokerage firms.

An ETF offers investors the benefits of a diversi-

fied portfolio, i.e. the risks involved are reduced by

spreading them across a wide portfolio, while its

main investment objective is to reproduce the per-

formance of a specific index. Seven international

and local issuers have expressed their interest in the

creation of an ETF and in a few days the successful

one will be selected. The issuers are: 1) Alpha Bank

- Alpha Mutual Funds, 2) BNP Paribas - BNP

Paribas Asset Management for its EasyETF platform,

3) EFG Eurobank - Eurobank Mutual Funds, 4) JP

Morgan - JP Morgan Securities, 5) Marfin Egnatia

Bank - Marfin Mutual Funds, 6) National Bank of

Greece - Diethniki Mutual Funds, 7) Societe Gen-

erale Group - Lyxor.

The new service that the ATHEX plans to incor-

porate in its activities is the Alternative Market of the

ATHEX (ENA), a Multilateral Trading Facility (MTF).

Since it is not a regulated market it does not fall

under the obligatory provisions that apply in regulat-

ed markets or impose strict admission and ongoing

requirements. It will operate in accordance with the

ATHEX operating rules.

The Alternative Market is addressed to companies

seeking funding and easier access to the Secondary

Market and investors looking for alternative forms of

investment and who are willing to accept higher risk.

The benefits for the market participants arising

from admission to the ENA are mainly the following:

an alternative method of fund-raising at a competi-

tive cost, quick and easy access to the Secondary

Capital Market, an increase of visibility and enhance-

ment of reputation, an expansion of business in new

products, market valuation of investments.

The benefits for the ATHEX are, firstly, the further

enhancement of its business and an increase in com-

petitiveness for the benefit of all market participants

and, secondly, the decrease of operating costs for the

ATHEX with a corresponding reduction of the said

cost for all capital market participants.

Of course the ATHEX has imposed some prereq-

uisites for admission to trading.

At the time of approval of the shares’ trading, the

shareholders' equity in the company must be at least

1 million euros on a consolidated basis. Also the

company must have published or drawn up annual

financial statements for at least two fiscal years. In

the event of loss-making fiscal years, accumulated

losses must not exceed 50 percent of own equity.

A company must appoint a nominated adviser

both before and after admission, at the time of trad-

ing approval and for two years following such

approval. Nominated advisers are either credit insti-

tutions and investment services firms/brokerage firms

which are authorized to provide underwriting invest-

ment services or financial services/companies/con-

sulting firms with adequate experience and opera-

tional organization.

Finally it should be noted that the ATHEX is

solely responsible for setting out the prerequisites

for admission to trading, the obligations of compa-

nies and advisers as well as for imposing sanctions

for any violation of the operating rules. ENA is

supervised by the Hellenic Capital Market Commis-

sion on issues concerning market abuse, public

offers and the issue of a prospectus, in cases its

issuance is mandatory.

New prospects for ATHEX

The Athens Stock Exchange is about to expand its range of products and services with theintroduction of Exchange Traded Funds, which are open-ended mutual funds helpinginvestors diversify their portfolio.

32

Greek banks have been enjoying a growing

market for credit products; however compe-

tition in the sector has been intensifying,

with the appearance of new players and

some existing banks becoming more com-

petitive. This is reflected in net interest margins com-

pression and in the efforts of the bigger banks to

maintain rather than increase their market shares.

On the other hand, the degree of concentration is still

high with the five largest banks controlling about 70

percent of total loans and more than 60 percent of

deposits. Furthermore, Greek banks are continuing to

expand their operations in the promising markets of

Southeastern Europe.

In recent years outstanding loans in Greece have

been growing at a significantly higher rate than GDP.

As a result, the loans/GDP ratio has been moving

higher and has reached a level estimated to be slight-

ly over 90 percent. The EU average stands at over

120 percent.

The latest data released by the Bank of Greece

regarding loans and deposits in the private sector

include the month of July. Overall, credit exhibited

healthy growth rates both in the retail segment and

in the corporate segment. Overall credit to the private

sector rose by 19.7 percent in July, reaching a total

of 199.8 billion euros.

Greek households are raising their debt levels at

a rate of 23.1 percent year-on-year. Unsecured lend-

ing is the strongest growth area, exhibiting growth

rates of 28.9 percent, while the lowest growth seg-

ment are the outstanding credit card balances that

are growing at rate close to GDP, i.e. 4.4 percent.

Outstanding balances in mortgages (including securi-

tizations) grew by 23.8 percent y-o-y, reaching 64.4

billion euros.

Corporate loans exhibited a 16.7 percent y-o-y

increase to 103.3 billion euros (including securitiza-

tions of 2.7 billion and bond loans of 16.4 billion).

We should however mention that there was a slight

acceleration of the growth rate in the months of May

and June. Despite the declining trend of overall cred-

it growth rates, after the hyper-growth experienced at

the beginning of this decade, Greek households and

corporations’ demand has kept the rates at relatively

high levels.

Deposits growth rates had been declining leading

up to the end of 2006. So far this year we have seen

the growth rates in the balance of deposits acceler-

ating and reaching 14.4 percent with the balance

standing at a total of 188.1 billion euros.

In order to get a better feel of the domestic bank-

ing sector, we compare loans and deposits growth in

H1 2007 extracted from the Greek banks’ stand-

alone balance sheets as an indication of their activi-

ty in the domestic market and compare it to the

growth market growth rates extracted from ECB data.

Looking at total loans figures we see that the mar-

ket growing at a 13 percent year-to-date, with most

of the big traditional banks growing at a slower pace.

Banks Piraeus, Marfin Popular and Postal Savings

had the highest growth rates during the first half of

2007, with 19, 32 and 15 percent respectively.

In terms of market share, the three largest banks —

National Bank of Greece (NBG), Alpha Bank and EFG

Eurobank — have lost a few basis points from their

market share figures, as is the case for Emporiki Bank

and ATEbank. On the other hand, the largest benefici-

ary is Piraeus Bank, which has gained almost 100 bps

during this period on the back of a very strong presence

in the corporate segment and mostly to SMEs.

Deposits have, according to the European Central

Bank, grown at 9 percent in H1 2007. Once more,

most of the larger banks grew at a slower pace.

Piraeus, EFG Eurobank and Marfin Popular grew

more than the market as a result of aggressive/differ-

entiating product offering.

In the domestic deposit market share EFG

Eurobank and Piraeus have gained approximately

100 bps each at the expense of NBG and Alpha

Bank. Of the smaller banks, Marfin Popular is the

only one gaining market share.

Greek banks have been exploring opportunities in

neighboring countries since the early 1990s. Before

that any foreign operations were limited to countries

and cities with a significant diaspora presence.

Ever since Alpha Bank launched its first opera-

tions in Romania in 1994, many have followed and

the new millennia has found Greek banks — espe-

cially the four largest — with operations in more than

one country in Southeastern Europe as well as in

Turkey and Egypt. The banks are a part of these fast-

growing economies and are contributors to the

growth of these countries.

In some cases these are markets with large pop-

ulations and they are all under-banked and under-

leveraged when compared to their Western counter-

parts, meaning they represent attractive growth

opportunities. Such is the environment where Greek

banks have either already established or are on their

way to establishing critical mass.

Most banks have provided business plans stretch-

ing up to 2009 or 2010. Many have revised them

upward and others are in the process of revising

them a second time.

The growth that Greek banks are experiencing

has obviously been reflected in their market prices as

well. The ATHEX banks index has outperformed the

General Index year-to-date by over 100 bps.

We remain positive on the sector, as any decline

in the domestic growth in demand for credit could be

offset by their established presence in the fast-grow-

ing economies of Southeastern Europe and the

Eastern Mediterranean.

Markets

Research

Securities

BANKING SECTOR

33

Piraeus Bank was founded in 1916 and became a private bank in

December 1991 after a long period of state ownership and manage-

ment (1975-1991). Today the bank is ranked fourth in terms of market

capitalization having demonstrated a period of very rapid growth

through M&As and organic growth. The most significant acquisitions

were those of Macedonia Thrace Bank, Xiosbank and ETBA Bank.

Moreover, the bank acquired a number of foreign branches in Greece,

such as Chase Manhattan, Credit Lyonnais and National Westminster.

Currently, Piraeus operates as a universal bank with a clear focus on

high margin segments such as SMEs and retail banking. At the same

time, especially after 2000, strategic efforts toward international expan-

sion have been ongoing, which has resulted in a significant presence of

the bank in eight countries outside Greece with 356 branches and 6.2

billion euros in assets. President and CEO Michalis Sallas has been in

charge of the bank since 1991 being very successful up to date and

respected even by his competitors. There is also a team of longstanding

senior managers with a very active role in the bank’s operations as well

as in transferring its corporate culture. The way the management react-

ed during the recent takeover attempt by the Marfin Group was evidence

of its effectiveness and high quality. At the end of June 2007, the

Piraeus Bank Group had a network of 574 branches (304 in Greece and

270 abroad — excluding an acquisition in Ukraine which was com-

pleted in September), 10,227 employees and its equity capital stood at

1.9 billion euros. Clients' deposits, repos and retail bonds issued came

to 20.7 billion euros, gross loans reached 25.5 billion and total assets

were 37.3 billion. The company reported 372 million euros’ net profit

for H107 including 150 million euros in one-off gains from the sale of

its stake in Bank of Cyprus.

Greek market

Domestically, Piraeus Bank has been one of the biggest success stories

in the sector. Still, having a young branch network (one out of three

branches have been in operation for less than five years) the bank pres-

ents one of the highest growth rates in terms of business growth and

profitability. In terms of market share, Piraeus has a 13.1 percent in

loans and 12.2 percent deposits and repos, and ranks fourth in both

categories behind NBG, EFG and Alpha. Fast procedures and flexible

product offering, expertise in SMEs, investing in new technologies and

young and friendly IT personnel are among the factors that make

Piraeus a distinct case in the banking sector and resulting also in mar-

ket share gains in a very competitive environment. In line with its strat-

egy, the creation of the successful Winbank — an e-banking platform

which has won several awards — has been contributing to the bank’s

image as a modern and sophisticated organization as well to its busi-

ness growth. An effort to expand to other sectors beyond traditional

banking, such as bancassurance products and wealth management, is

also under way. In June the bank acquired a 30 percent stake in

Europaiki Pisti, a medium-sized Greek insurance company, and few

days ago it signed an exclusive agreement with the ING Group, follow-

ing a five-year strategic alliance. The latter agreement calls for the dis-

tribution of ING’s bancassurance products domestically by the bank and

the sale of Piraeus retail products through the insurer’s network, where-

as the partnership with Europaiki Pisti works is complementary as the

bank can sell its insurance products through its international network.

International market

Piraeus Bank is also very active in the broader region outside

Greece, with a presence currently in eight countries after the com-

pletion of the acquisition of the Ukrainian International Commerce

Bank, while Cyprus operations are also expected to start in January

2008. Excluding Ukraine, total assets abroad stand at 6.2 billion

euros, total loans at 4.3 billion, or 17 percent of group loans, and

total deposits at 2.9 billion, or 14 percent of group deposits. Inter-

national operations contribute about 12 percent of the group’s net

profit, which is expected to increase in the coming years as busi-

ness activity expands and matures. Indicative of how fast business

is growing abroad for the bank is the impressive growth rates

reported in H107 for loans and deposits, which grew by 93 percent

and 44 percent respectively. Piraeus’s first move toward interna-

tional expansion was made quite early in 1996, opening its first

subsidiary in Albania, with the next step in 1999 when the bank

established its presence in London and New York. In 2000 Pater

Bank (renamed Piraeus Bank) in Romania was acquired, while

2005 was one of the most active years since the bank took control

of subsidiaries in Bulgaria, Serbia and Egypt. Currently Bulgaria

and Romania are the countries where the bank has its largest pres-

ence, while Ukraine and Egypt are two of the largest and most

underbanked economies of the region which are expected to grow

very fast, generating significant benefits in the future.

Recent developments

An indication of the bank’s quality comes from the recent successful

completion of a 1.35-billion-euro capital increase, equal to its exist-

ing capital at the time and without having a single major shareholder

to contribute. In July Piraeus announced its intention to proceed with

a capital increase by issuing a total of 67,548,758 new common reg-

istered shares (a ratio of one new to four old shares) at a subscription

price of 20 euros each. Despite the crisis that weighed on global mar-

kets in the last two months, the bank managed to attract 2.4 billion

euros, oversubscribed 1.8 times, which represents a significant suc-

cess. According to the management, approximately 900 million euros

of the incremental capital will be required to support the accelerated

business growth through 2008 while at the same time preserving cap-

ital adequacy levels above 11 percent and Core Tier I ratio above 7.5

percent.

Risks

Growth does not come without risks. Nevertheless it does not seem

that Piraeus has taken excessive risks in its growth effort. Operational

and execution risks are there but given the bank’s recent history they

should not create abnormal concerns. Systematic risks are more

important in this case.

The future

Piraeus’s vision is to be distinguished as a significant regional

player in SE Europe and the Eastern Mediterranean by becoming

the main bank of service for SMEs, being strong in providing solu-

tions to individuals’ banking needs and remaining a preferred

employer and top financial services provider. More specifically, in

Greece the bank is aiming at having a network of 360 branches

by 2010 in an effort to increase market share in all segments of

activity through attracting new relationships and intensifying

cross-selling. Expertise in SMEs and retail banking will aid in this

direction. In its international operations, Piraeus’s primary goal is

to expand business organically or through small acquisitions in

countries where the bank is already present, whereas expansion to

new countries cannot be excluded, especially after the successful

completion of the capital increase. Domestic experience in sever-

al segments is quite valuable in forming an entry strategy in most

of the foreign operation attempts.

Piraeus Bank

w w w . p ko n l i n e . g r

34

Markets

Leading European players take position in Greece

Foreign investment in Greece is on the rise. Last year inflows of foreign direct investment reached 5.4 billion dollars, according to the World Investment

Report, published in the middle of October by UNCTAD, the UN’s division on trade. This development shows that the country is increasingly attracting the

interest of international business. Here are seven examples of foreign investors who are leading players in the European economy and that have invested in

Greek companies with activities in various sectors, ranging from banking to energy and retail.

By Maria Vasileiou

Credit Agricole — Emporiki BankIn December 2000 French bank Credit Agricole announced the acquisition of 6.7 per-

cent of Emporiki Bank. It was a strategic acquisition that led Credit Agricole to fur-

ther increase its stake in the Greek bank to 9 percent in May 2002 by acquiring 2.35

percent owned at the time by the Loans and Consignment Fund (LCF). The terms of

the transaction were those set when Credit Agricole SA purchased its initial holding

in Emporiki in December 2000. At the time, it was agreed that Credit Agricole SA

would have the right of first refusal on the LCF's holding in Emporiki. Six years after

Credit Agricole began cooperating with Emporiki, on July 4, 2006, the French bank

made a cash offer of approximately 2 billion euros for Greece’s fourth-largest banking

institution. A month and a half later Credit Agricole SA’s bid for Emporiki was

declared successful and it secured a 72 percent stake.

Today Emporiki collaborates with Credit Agricole SA in four areas: life insurance,

with the formation of Emporiki Life, a 50-50 joint venture between Emporiki and

French insurer Predica; consumer credit via Credicom, a 50-50 joint venture between

Emporiki and banking institution Sofinco; asset management with a 20 percent hold-

ing by Credit Agricole Asset Management (CAAM) in Hermes, Emporiki’s fund man-

agement arm, and the formation of Emporiki Asset Management, an institutional

investment manager 20 percent-owned by CAAM; and wholesale banking with coop-

erative activities between Credit Agricole Indosuez and Investment Bank (of which CAI

owns 2 percent) in project financing and fixed-income business. Emporiki Bank has

1.5 million customers, 425 branches and a 10 percent market share.

Credit Agricole is the largest banking organization in France, with a presence across

the entire spectrum of banking and finance activities. It is a leader in Europe in terms

of current accounts and retail banking revenues, while it holds the second position in

Europe and the sixth worldwide in terms of shareholders' equity. Credit Agricole SA pur-

sues a strategy of sustainable, profitable growth through a unified approach between the

regional banks and the group's specialist business line subsidiaries.

Credit Agricole SA’s activities are centered on six business lines: French retail

banking, with a 25 percent stake in the Regional Banks and the LCL (Le Credit Lyon-

nais) network, international retail banking, specialized financial services, asset man-

agement, insurance and private banking, and corporate and investment banking.

Credit Agricole is France’s leading retail bank and has a unique competitive advan-

tage: two highly complementary networks (the Regional Banks and LCL). The group

significantly increased its international retail banking presence in 2006. After acqui-

sitions in Egypt, Portugal and Ukraine, it seized opportunities to build on its presence

in Greece and Italy. Credit Agricole SA generated net income of 3.947 billion euros

for the first half of 2007, an increase of 48.7 percent compared with the same peri-

od in 2006. Net income expanded by 17.9 percent, to 1.292 billion euros, despite a

conservative approach to the impacts of the US subprime loan turmoil, thereby con-

firming the great strength of the group's profitable growth model.

Emporiki’s restructuring plan is moving forward as anticipated. Its five-year busi-

ness plan was announced on April 27, 2007, with the aim of transforming the bank

into a modern banking institution and recapturing its natural market share (10.5-11

percent, on average). This process is based on three sources of growth: i) the sus-

tained growth of the Greek economy, ii) the transformation potential of the bank, and

iii) further important developments in SE Europe, where Emporiki will serve as a hub

for Credit Agricole.

Societe Generale — Geniki BankOn March 5, 2004, French bank Societe Generale (SoGen)

became the majority shareholder of Greece’s Geniki Bank, hold-

ing 50.01 percent of Geniki following the acquisition of a block

of shares held by the Army Pension Fund and the completion of

a reserved capital increase on the basis of 6 euros per share.

Societe Generale is one of the largest financial services

groups in the eurozone. The group employs 88,000 people serv-

ing more than 16 million clients worldwide. Its interests revolve

around three key businesses: Retail Banking and Financial Ser-

vices, where SoGen serves more than 15 million retail cus-

tomers worldwide; Asset Management, Private Banking and

Securities Services, where Societe Generale is one of the largest

banks in the eurozone in terms of assets under custody ($1.165

trillion) and under management (284 billion euros, December

2003); and Corporate and Investment Banking, in which it

ranks among the leading banks worldwide in euro capital mar-

kets, derivatives and structured finance. SoGen is included in

the four major socially responsible investment indices. Societe

Generale was established on May 4, 1864, when the authoriza-

tion decree was signed by Napoleon III. The bank's ambitions

were reflected in its original articles of association, when it took

the form — still very unusual at the time — of a limited com-

pany. In 2006 the bank reported 22.4 billion euros net banking

income.

Geniki Bank, a member of the Societe Generale Group,

stands today at a very important juncture. The bank is entering

a new era. Many positive initiatives have been taken and

improvements have been achieved at all levels. The existing

branches are undergoing renovation and by the end of the year

a significant number of new branches will have opened. New

products are being prepared and will soon be launched on the

market.

Geniki’s total assets are estimated at 3.8 billion euros (end

of 2006). It has more than 305,000 customers, 2,303 employ-

ees, 139 branches and 67 off-site ATMs (at end-2006). Total

operating income over the first six months of 2007 came to

84.7 million euros, slightly over (+0.4 pct) the first half of

2006. Costs in the first half of 2007 showed a limited increase

(+4 pct) against the same period last year, at 84.7 million

euros. Operating results before provisions stood at nil in com-

parison with 3 million euros in the first half of 2006. On June

30, 2007 total loans and advances, net of provisions, amount-

ed to 3.1 billion euros and showed an increase of 12.8 percent.

Total customer deposits and repos, amounting to 2.8 billion

euros, showed an increase of 8 percent. As planned, a share

capital increase of 210 million euros was voted upon in June

2007 in order to meet all regulatory and statutory requirements.

35

Iberdrola — C. Rokas SAC. Rokas SA was founded in 1958 by Christos Rokas, its main scope of

business being the construction and installation of lifting and handling

equipment, as well as heavy machinery and steel structures. In 1977, fol-

lowing its conversion into a societe anonyme (SA), or public limited com-

pany, the company built its new modern production unit in the industrial

area of Tripolis and started specializing in more complex steel structures,

supplying equipment to major commercial ports, shipyards and heavy

industries in Greece and abroad. In 1990, the company was listed on the

Athens Stock Exchange (ATHEX). During the period 1991-1992, the com-

pany constructed the first wind farms in Greece for the Public Power Cor-

poration (PPC) and in 1998 it constructed the country’s first private wind

farm. In 2004 Rokas became a member of the Iberdrola Group, which dates

back to the beginning of last century when Hidroelectrica Espanola was set

up to supply the markets of Madrid and Valencia, exploiting the Tajo, Jucar

and Mijares rivers. Today Iberdrola is a world leader in renewable energy

sources, with a considerable international presence in over 30 countries. In

2005 Iberdrola completed the agreement signed with the Rokas Group, the

largest wind energy producer in Greece, acquiring a 49.9 percent stake in

its capital. The company presently holds a leading position in both sectors

of its activity — renewable energy sources and electromechanical equip-

ment. In wind energy especially Rokas has a considerable market share,

with a total installed capacity of 193.3 megawatts. In 2006 the company

reported turnover of 50.188 million euros and gross profit of 22.133 mil-

lion euros.

Last year Iberdrola’s board of directors unanimously approved the 2007-

2009 strategic plan — with projections to 2011 — which continues the

course decided upon and successfully fulfilled in the previous five years and

contemplates the beginning of a new investment cycle, within the frame-

work of which 9 billion euros (+20 percent compared to the previous three-

year period) will go toward the continuation of the company’s commitment

to the basic energy business, both in Spain and overseas. The new strate-

gic plan, the aim of which is to increase profitability through growth, effi-

ciency and internationalization, ratifies the company’s commitment to the

environment and sustainable development. Not in vain does Iberdrola envis-

age extending its world leadership in the sector of renewable energy — it

will reach a power of 10,000 MW in 2011 — and investing in clean elec-

tricity generation technologies. Supply quality is likewise one of its basic

pillars. As a consequence of both its investments and growth of efficiency,

Iberdrola will obtain a net profit at the end of the period of 2.350 billion

euros, a figure that posits an increase of 70 percent (almost 1 billion euros)

with respect to that achieved in the 2005 financial year (1.380 billion

euros). Similarly, 3 billion euros will be paid as dividends. Iberdrola’s

strategic focus again saw positive results in first-half accounts. Despite an

environment of low pool prices (-36 pct) and modest demand for electrici-

ty in Spain (+2.6 pct), performance improved across the board: Sales rose

22.2 percent to 6.718 billion euros), EBITDA was up 25.4 percent to

2.403 billion euros, net operating profit rose 22.3 percent to 1.697 billion

euros and net profit was 34.7 percent higher at 1.101 billion euros. The

figures are testimony to the birth of a world energy leader, with a strategic

focus on an Atlantic platform (Europe - North America - Latin America), and

a cash flow (generated from operations) that surged 45 percent in the first

half to 1.712 billion euros, laying the foundations for future growth at Iber-

drola.

Lafarge — AGET Heracles GroupThe AGET Heracles Group of Companies was established in 1911. But it was-

n’t until 1992 that the company started attracting foreign investment. During

that year 50.5 percent of the company's shares were transferred to CAL-NAT,

a joint venture of Calcestruzzi SpA and National Bank of Greece. Four years

later, in 1996, the clearance procedure for CAL-NAT took place as well as the

distribution of the AGET shares it possessed (50.5 percent of the total) to Con-

cretum (38.5 percent) and National Bank of Greece (12 percent). In 2000

54.48 percent of the company's shares were transferred to the Blue Circle

Industries Group of the UK, which was acquired in 2001 by Lafarge, today

AGET Heracles’ major shareholder.

The Heracles Group is now Greece’s largest cement producer, with a pro-

duction capacity of 9.6 million tons per year. It is also the largest cement exporter

in Europe. Focused on sustainable development, it creates value for all its stake-

holders, contributing to the economy and to the local communities where it oper-

ates. With three cement plants — in Volos (the largest in Europe), Halkis and

Milaki — seven cement terminals, as well as facilities for production and trading

of aggregates and concrete, the group has production activities in 29 prefectures

around Greece and trades all over the Greek mainland and islands.

Lafarge is the world leader in building materials, with top-ranking positions

in all of its businesses: cement, aggregates and concrete and gypsum. With

71,000 employees in over 70 countries, Lafarge posted sales of 17 billion

euros in 2006. Lafarge is committed to pursuing a strategy that puts the cus-

tomer at the top of its priorities list. Lafarge is the only company in the con-

struction materials sector to be listed in 2007’s ‘Global 100: Most Sustainable

Corporations in the World.’ Its growth is based on its sustainable development

policy. Group know-how encompasses industrial efficiency, value creation, pro-

tection of the environment, respect for people and cultures, and preservation

of natural resources and energy. Lafarge offers all construction industry sectors

— from architect to tradesman and from distributor to end-user — a compre-

hensive range of products and solutions for each stage of the building process.

During the period 1990-2001 Lafarge became the world leader in building

materials. In 2001, following the acquisition of Blue Circle, Lafarge became

the world's leading cement producer. Numerous acquisitions and joint ventures

in all four divisions and on every continent, particularly Asia, have continued

to consolidate its world leadership position. In July 2001, Lafarge was intro-

duced onto the New York Stock Exchange (NYSE).

The Heracles Group of Companies announced sales amounting to 331 mil-

lion euros in the first half of 2007, marking a marginal increase of 0.5 percent

year-on-year. Respectively, the company’s sales for the first half of 2007

amounted to 297 million euros — an increase of 1 percent on the correspon-

ding period of 2006. The group’s net profits after taxes for the first half

amounted to 28.2 million euros, compared to 26.8 million euros in the same

period of 2006 — an increase of 5 percent.

In 2006 the group’s sales reached 693.7 million euros, increasing by 13.9

percent in relation to the corresponding period of 2005. Respectively, compa-

ny sales for 2006 amounted to 615.7 million euros, increased by 13.1 per-

cent compared to the same period of 2005. The rise in turnover mainly derived

from the increase in the volume of cement and concrete sales in the domestic

market, as well as in the achievement of higher prices in cement exports. Profit

after taxes for the company showed a decrease by 63.9 percent, at 54.3 mil-

lion euros compared to 150.5 million euros in 2005. Respectively for the

group, profit after taxes decreased by 63.4 percent at 58 million euros in

2006, compared to 158.7 million euros in 2005.

36

Weather Investments — Wind HellasWind is today one of Greece’s largest telecommunications operators, with an

annual turnover of 1.1 billion euros and more than 4 million customers. It was

founded in 1992 as a subsidiary of Telecom Italia and became the technology

leader of the Greek mobile telephony market thanks to its innovative products and

services. In 2005 the company was acquired by APAX Partners and Texas Pacif-

ic Group, two of the biggest international investment funds. In 2006, TIM Hellas

acquired Q-Telecom, the fourth-largest mobile operator in Greece. This acquisition

allowed TIM to further strengthen its market position. the year 2007 is another

milestone in the company’s history. On February 7, Weather Investments SpA,

which controls the international group Orascom Telecom, acquired TIM Hellas.

The sale price included 500 million euros in equity plus 2.9 billion euros in net

debt at the end of 2006. APAX and TPG initially acquired TIM Hellas from Tele-

com Italia in June 2005 for 1.6 billion euros. In January 2006 the consortium

completed the follow-on acquisition of Q-Telecom from Info-Quest SA for 360 mil-

lion euros. During APAX and TPG’s period of ownership, the company was suc-

cessfully turned around and set on a growth trajectory leading to a significant

improvement in all financial and operating key metrics. As part of Weather Invest-

ments Group’s international footprint, TIM continued its successful course in the

Greek market and changed its brand name to Wind.

Weather Investments is a global telecommunication group controlled by

Naguib Sawiris, who ranked 278th among the world's richest people in 2006.

Sawiris made his first foray into the European telecom sector with his group's 12-

billion-euro purchase last year of a controlling stake in Italian mobile and fixed-line

phone operator Wind Telecomunicazioni. He has also bought a stake in Hutchison

Whampoa for 1.3 billion dollars. Today Weather owns Wind Telecomunicazioni

SpA, the third-largest mobile operator and second-largest fixed-line operator in

Italy as well as 50 percent plus one share of Orascom Telecom Holding SAE. Oras-

com Telecom is a leading international telecommunications company operating

GSM networks in seven high-growth markets in the Middle East, Africa and South

Asia. In Greece, through Wind Hellas as well as through the second-largest Greek

fixed-line operator Tellas, the Weather Investments group has a significant pres-

ence in the local market and develops synergies to offer even more competitive

products and services. Weather Investments gained absolute control of Tellas in

the middle of October. Sawiris’s holding company bought the remaining 50 per-

cent minus one share of Tellas by offering 175 million euros to the Greek Public

Power Corporation.

Today Weather owns 100 percent of Wind Telecomunicazioni SpA, with over

15.2 million mobile subscribers and more than 1.14 million direct fixed-line sub-

scribers as of May 2007. Weather also controls and owns 50 percent plus one

share of Orascom Telecom Holding, having a total population under license of

approximately 460 million with an average mobile telephony penetration of

approximately 29 percent as of March 31, 2007. OTH operates GSM networks in

Algeria, Bangladesh, Egypt, Iraq, Pakistan, Tunisia and Zimbabwe. OTH had over

56 million subscribers as of March 2007 and owns 19.3 percent of Hutchison

Telecommunications International, a leading telecommunication services provider

operating in eight countries. OTH is traded on the Cairo and Alexandria Stock

Exchanges and has GDRs traded on the London Stock Exchange.

Delhaize Group — AB Vassilopoulos SASince its acquisition of Trofo, the sixth-largest food retailer in Greece, in Jan-

uary 2001, AB Vassilopoulos has become the second-largest food retailer in

Greece. AB focuses on customers looking for competitive pricing as well as

high-quality products and services. In 1992, the Delhaize Group acquired con-

trol of AB Vassilopoulos. It currently owns 61.3 percent of AB. The Greek oper-

ating company of the Delhaize Group had 7,200 employees as of December

31, 2006, and was operating 148 stores. AB Vassilopoulos SA was estab-

lished in December 1969 by brothers Gerasimos and Charalambos Vas-

silopoulos. In November 1990 it was listed on the main market of the Athens

Stock Exchange. AB reported revenues of 559.5 million euros and a net prof-

it of 13.5 million euros during the first half of 2007.

The Delhaize Group is a food retailer headquartered in Belgium which operates

in seven countries. The group was founded in Belgium in 1867. The principal

activity of the Delhaize Group is the operation of supermarkets in North Amer-

ica, Europe and Southeast Asia. As of December 31, 2006, the Delhaize Group

has had a sales network (which includes directly operated, franchised and affil-

iated stores) of 2,705 stores with employees numbering approximately

142,500. Store formats are primarily supermarkets, which represent 85 per-

cent of the Delhaize Group's sales network. The group's sales network also

includes other store formats, such as neighborhood stores, convenience stores

and specialty stores. In addition to food retailing, which accounts for approxi-

mately 95 percent of the Delhaize Group's sales, the group also engages in

food wholesale to stores in its sales network and in non-food retailing of goods

such as pet products and health and beauty products.

In 2006 the Delhaize Group recorded sales of 19.2 billion euros and net

income of 351.9 million euros. The Delhaize Group's operations are located

primarily in the United States, Belgium and Greece. Its other operations are

located in Romania and Indonesia. Belgium is the historical home market of

the Delhaize Group. Over the years, the group has built a strong market posi-

tion (second in terms of sales), providing its customers with quality products

and services at competitive prices. At the end of 2006, the Delhaize Group's

sales network consisted of 843 stores in Belgium, and the group employed

18,000 people in its Belgian activities.

The Delhaize Group's Belgian sales network consists of several brand names,

depending on the specialty, store size and whether the store is directly operat-

ed, franchised or affiliated (that is, stores to which the group sells wholesale

goods and generates income only from sales made to such stores). Delhaize ‘Le

Lion’ supermarket is the leading banner of the group in Belgium. The other

supermarket banner, AD Delhaize, has been the most important growth vehi-

cle for the Delhaize Group in Belgium for some years now. Proxy Delhaize is a

convenience store operating minimarkets emphasizing fresh products and Del-

haize private label products.

Dixons Group — Kotsovolos SAOn July 4, 2004 Dixons, the high-street electronics and electrical chain

owned by DSG International, took a controlling stake of Greek firm Kotsovo-

los, a leader in mixed electricals retailing in Greece, with the 35.7-million-

euro cash acquisition of a 39 percent stake in the Greek company. The stake

increased Dixons’ holding in the company to 52.3 percent from 13.6 percent

and gave it a controlling interest in Kotsovolos. It also gave Dixons the oppor-

tunity to extend its reach in Greece. Later Dixon’s increased its stake in

Kotsovolos even further, when the Fourlis Group sold a 10 percent minority

participation in the share capital of P. Kotsovolos SA. Greek furniture and

sporting goods retailer Fourlis Holdings sold a 10 percent stake in Kotsovo-

los to the Dixons Group for 22.3 million euros. Fourlis holds another 10 per-

cent stake in Kotsovolos and has the option to sell by September 2008.

The United Kingdom-based company DSG international plc, formerly Dixons

Stores Group plc, is one of the largest consumer electronics retailers in

Europe. The company operates the Dixons, Dixons Tax Free, Currys, Cur-

rys.digital and PC World stores along with many other brands across

Europe. DSGi is also a member of the FTSE 100 Index. The group's main

focus is to specialize in the sale of high-technology consumer electronics

products, audiovisual equipment, PCs, small and large domestic appli-

ances, photographic equipment, communication products and related

financial and after-sales services (e.g. extended service agreements). Other

products and services provided by the group include electrical products,

spares, accessories and repairs, mobile services, online digital photo pro-

cessing, pre-recorded media and even childcare equipment. It also under-

takes business to business (B2B) sales. Its main rival is KESA Electricals

plc, which owns Comet and Darty.

The British group reported 7.929 billion pounds sterling of turnover in

2006, while profit reached 114.1 million pounds. It operates in the UK,

Ireland, Scandinavia, Italy, France, Spain, Hungary and the Czech Repub-

lic. Apart from Greece, where the group has retail interests, it undertakes

property development in Belgium, Luxembourg, France and Germany.

37

Greece managed to ride a wave of growth in

global foreign direct investment (FDI)

flows in 2006 relatively successfully, and

saw both the inflow and outflow of FDI

soar to record highs, at least compared to

the years since 1990. Moreover, during 2006

Greece improved its relative position both as a

recipient of FDI and as an investor abroad,

although it continued to perform way beneath its

potential, especially as an FDI destination.

These are some of the conclusions in the 300-

page 2007 World Investment Report (WIR07),

which is compiled annually by the United Nations

Conference on Trade and Commerce (UNCTAD).

This year the report was presented in the library of

the American College of Greece, in Aghia Paraske-

vi, northern Athens.

Greece climbed to a respectable 42nd position

as a provider of FDI in 2006 (compared to 57th

place in 2005), with outflows of $4.167 billion

(compared to $1.451 billion in 2005). On the

other hand, it ranked 114th among 141 countries

with inflows of $5.363 billion in FDI (compared to

126th with $607 million in 2005). More telling of

the country’s performance, however, is the fact

that UNCTAD estimates Greece’s actual inflow

potential at 36th among all the countries UNCTAD

surveys.

According to economists, the difference in rank-

ing regarding outflows and inflows reflects to a cer-

tain extend the obstacles that discourage invest-

ment in the Greek economy. A country’s potential

is calculated on the basis of several indices, such

as GDP per capita, the growth rate of the economy

as a whole, exports as a percentage of GDP, the

ratios of fixed-line and wireless telephony connec-

tions as well as that of college graduates in the

population, energy use for commercial activities,

and the country’s risk investment assessment.

A significant part of the FDI inflows was due to

mergers and acquisitions (M&A) activity. The

largest such transaction in 2006 was the acquisi-

tion of Emporiki Bank by the French giant Credit

Agricole, worth $2.7 billion. According to

UNCTAD, this deal is one of the 172 so-called

mega-deals, involving more than $1 billion, that

took place worldwide in 2006.

Experts expect that Greece will not be able to

sustain this growth in FDI inflows in the immediate

future.

A large share of the FDI outflows went to coun-

tries in Southeastern Europe, where Greek compa-

nies more than doubled their sales to $821 million

in 2006 from $362 million in 2005, making Greek

multinationals in the aggregate the ninth-highest

grossing group in the area (Austria leads the pack

with $5.6 billion).

Overall FDI flows increased for the third con-

secutive year in 2006, reaching $1.3 billion, an

increase of 38 percent, said Professor Marina

Papanastasiou of the American College of Greece

Graduate School and the Copenhagen Business

School, who presented the WIR06 in Greece.

The top recipient of FDI was the United States,

with the United Kingdom and France in second

and third place respectively. China ranked first

Perennial underperformer showsgrowth in foreign investments

Foreign direct investments in Greece displayed large growth in 2006 but the countrycontinues to fall short of its potential to draw foreign players. Outflows, on the other hand,remain strong as Greek companies invest heavily in the wider region.

Harilaos H. DaskalothanassisDirector of media relations at the

American College of Greece.www.acg.edu

Markets

38

among developing countries, and Russia was the

largest recipient among the so-called transition

economies.

Among regions, Asia attracted the most invest-

ment, with West Asia (including Turkey and the Gulf

countries) performing best with a tenfold increase in

inflows since 2002, according to the summary pro-

vided by Supachai Panitchpakdi, the secretary-gener-

al of UNCTAD. Turkey in fact performed best among

West Asian countries, and attracted $20.12 billion in

FDI inflows in 2006 — twice what it did in 2005, and

more that 25 times its average during the decade

1990-2000 ($791 million annually). Turkey’s surge

reflects the approval of international investors of the

stabilization of the Turkish economy under the moder-

ate Islamist governments of Prime Minister Recep

Tayyip Erdogan.

Resource-rich Africa performed remarkably well by

historical standards, attracting $36 billion in FDI,

double its performance in 2004.

The UNCTAD study registered the broad recovery

in mergers and acquisitions activity that took place in

2006, with global M&As reaching their best level

since the banner year 2000.

UNCTAD predicts FDI activity to continue growing

in 2007, albeit at a slower pace. According to Pan-

itchpakdi, his organization’s surveys show that FDI

activity is likely to grow in the years 2008 and 2009.

This outlook is uncertain, however, due to signs of

global financial instability and the frenzied rise in the

cost of energy.

In the discussion that followed the presentation,

Dr Anna Triantafyllou, a professor at the American

College of Greece and a financial columnist, urged

countries ‘not to be passive recipients of FDI’ but to

set up the appropriate regulatory frameworks that will

prevent exploitative practices and will ensure sustain-

able development.

$100-a-barrel oil?This year’s WIR paid particular attention to the so-

called extractive industries, a broad sector that

involves raw materials and energy. Much of the FDI

that was directed to developing countries and the so-

called transition economies, like the Russian Federa-

tion, went to mining and drilling. With oil prices hav-

ing approached $90 per barrel in recent weeks, much

of the discussion at the presentation revolved around

oil.

Energy expert and former Finance Minister

Andreas Andrianopoulos remarked that unlike previ-

ous oil price surges, the current one is demand-driven

and therefore more sustainable and less damaging to

global economic growth. Andrianopoulos, who in the

past served as Eleftherios Venizelos professor at the

American College of Greece, explained that a shortage

of refining capacity conspires with rapidly growing

demand from Asia to push oil even higher, and said

that it should not surprise anyone if oil topped $100

per barrel in the near future.

Cross-border merger and acquisition overview, 1990-2006 (millions of dollars)

Sales Purchases

1990-2000 2004 2005 2006 1990-2000 2004 2005 2006

(Annual average) (Annual average)

Greece 119 1,455 1,295 6,490 37 74 408 6,590

Memorandum

Turkey 85 132 13,395 15,303 15 108 8 806 584

United Kingdom 17,980 58,107 171,689 150,527 20,447 47,307 90,535 91,717

European Union 53,668 178,772 429,146 432,144 59,437 164,677 386,757 426,656

Europe 56,362 185,809 445,126 451,288 66,085 176,095 413,405 483,637

Developed economies 105,003 317,431 604,882 727,955 108,743 341,682 627,064 752,482

World 117,889 380,598 716,302 880,457 117,889 380,598 718,302 880,457

Source: UNCTAD, World Investment Report 2007: www.unctad.org/wir or www.unctad.org/fdistatistics

For details, see ‘definitions and sources’ in annex B and annex tables B. 4 and 6 in WIR07

Country rankings by Inward FDI Performance Index,

Inward FDI Potential Index and Outward FDI Performance Index, 2004-2006a

Inward FDI Performance Index Inward FDI Potential Index Outward FDI Performance Index

Economy 2005 2006 Economy 2004 2005 Economy 2005 2006

Benin 103 109 New Zealand 30 31 Trinidad and Tobago 33 37

Algeria 113 110 Bahrain 32 32 South Africa 58 38

Malawi 116 111 Slovenia 31 33 United States 37 39

Denmark 123 112 Estonia 34 34 Lithuania 38 40

India 121 113 Malaysia 35 35 Indonesia 42 41

Greece 126 114 Greece 36 36 Greece 57 42

Australia 129 115 Kuwait 41 37 Japan 44 43

Paraguay 120 116 Czech Republic 39 38 Poland 54 44

United States 118 117 Lithuania 38 39 Venezuela 39 45

Uzbekistan 114 118 Libyan Arab Jamahir 43 40 Jamaica 36 46

Taiwan 132 119 Hungary 37 41 Latvia 46 47

Source: UNCTAD, World Investment Report 2007: www.unctad.org/wir or www.unctad.org/fdistatistics

For details, see annex table A.I.6. in WIR07.

Note: Ranking is that of the latest year available. Covering 141 economies. The potential index is based on 12 economic and policy variables.

a. Three-year moving averages, using data for the three previous years, including the year in question.

39

Since March 2006, upon the establishment

of the PPP Interministerial Committee,

under the provisions of Law 3389/2005 for

the implementation of public-private part-

nerships (PPPs) in Greece, 24 projects

have been approved with a total budget of 3.1 bil-

lion euros.

The approval of these projects has been based

on patterns set in other European countries which

have successfully implemented PPP projects for

years. The approved projects fall into different sec-

tors of the economy, and more specifically into the

sectors of education, health, port infrastructure,

waste and sewage management, accommodation

of public authorities and tourism.

It is a fact that the up-to-date progress of the

implementation of PPPs in Greece is mainly a result

of the consistency between words and actions that

has constantly been demonstrated since the ratifi-

cation of the underlying legal framework.

The main target of the PPP unit was to create

a new market of projects and services which would

significantly contribute to the development of the

Greek economy. The approval of the abovemen-

tioned projects in just one year demonstrates the

establishment of this new market. A market in

which consulting firms, consultant engineers,

banks and construction companies can all be

active, a market open and accessible to any inter-

ested private party, a market which can yield sig-

nificant benefits to all stakeholders involved.

Up to now, the procedures for the appointment

of specialized financial, technical and legal advis-

ers have been completed for half of the abovemen-

tioned projects, while it is estimated that the rest

(apart from the last five projects approved in

August 2007) will be completed in the next three

months. There has been a great interest in these

projects, since more than 100 Greek and foreign

companies have participated in the respective ten-

ders.

As for the tendering of the PPP projects them-

selves, the Hellenic Public Real Estate Corporation

(KED SA) was the contracting authority that pro-

cured the first PPP project for the construction and

maintenance of seven new fire stations of the Hel-

lenic Fire Service. The procurement of this project

is estimated to be completed by March 2008, and

the construction of the infrastructure is therefore

estimated to start in June 2008.

In July 2007, the General Secretariat for the

Olympic Utilization launched the tender for the

selection of the private partner for the transforma-

tion of the Faliron Pavilion (Tae Kwon Do stadium)

into an international conference center. According

to the planning of the PPP unit, from December

onward, on a monthly basis, a new PPP tender will

be launched, beginning with the construction and

maintenance of three new prisons, the construction

and maintenance of six new buildings for the

University of the Peloponnese and the Attica

schools project.

The progress of PPPs creates positive prospects

for their further implementation in Greece. It is

now demonstrated in practice that the Greek pub-

lic authorities have a clear picture of the benefits

and the new opportunities that the careful design

and implementation of PPP projects can yield for

the faster provision of infrastructure and better-

quality services to the citizens. It is also evident

that the private sector considers PPPs as a new

field for business activity. The approval of the

implementation of a significant number of projects

across different sectors creates substantial invest-

ment opportunities that stimulate the interest of

many firms for participating in the implementation

of these projects.

As for the participation of foreign companies in

the tenders of the first pilot projects, it clearly

demonstrates that the Greek PPP market has been

established quickly enough but with careful and

cautious steps, so as to mobilize the interest of for-

eign companies that have significant expertise and

know-how which they can efficiently disseminate

around our country.

Besides access to more projects, both foreign

and Greek companies, through their participation

in the Greek PPP market, can accumulate and add

to their existing know-how, resources and credibil-

ity that will render them more competitive in the

new PPP market throughout Europe. The 24

approved PPP projects, along with the clear legal

framework and the transparent procedures, with-

out doubt render Greece a focal point on the map

of PPPs with significant business opportunities for

foreign investors.

Ministerial committee OKs 3.1 billion euros of projects

The progress of PPPs creates positive prospects for their further implementation in Greece. Itis now demonstrated in practice that the Greek public authorities have a clear picture of thebenefits and the new opportunities that the careful design and implementation of PPPprojects can yield.

Leonidas KorresSpecial Secretary for

Public-Private Partenshipswww.sdit.mnec.gr

Themes

40

Themes

First the facts: The first application for public-

private partnership (PPP) in the field of

waste management (WM) has already been

approved by the Special Secretariat for PPPs

and the Interministerial PPP Committee.

The project of ‘Integrated Waste Management

in Western Macedonia’ includes design, construc-

tion and operation of a modern waste treatment

facility and the relevant landfill for residues, as

well as the operation of nine transfer stations that

have already been constructed, for 25 years. A

detailed profile of the project can be found at

http://www.sdit.mnec.gr/en/projects/projects/proj-

ect0020.html. The budget is around 120 million

euros and up to 50 percent of this will be covered

by the Greek government through PPP law regula-

tions, while the rest will be contributed by the local

municipalities, through their Waste Management

Authority (WMA), DIADYMA.

The project is already in the pipeline and it is

expected to start operations in early 2010. During

the preparation of the project, which has not yet

been completed, there several interesting issues

have arisen that need to be discussed in a public

dialogue. The most important are addressed below.

DriversThe Greek WM market is in transition. A lot of

landfills do exist and are in operation and still more

will be constructed during the next years, but the

challenge of waste treatment has not yet been con-

fronted. Although there is a national strategy

regarding EC Directive 99/31 that establishes strict

targets for biodegradable waste and its diversion

from landfills, the steps already implemented have

been inadequate.

Two mechanical biological treatment (MBT)

facilities have gone into operation, but their envi-

ronmental results are questionable, to say the

least. In any case, these facilities do not satisfy the

requirements initiated by Directive 99/31.

At the same time, a lot of the big landfills are

coming under increasing pressure due to lack of

space, with the case of Athens serving as a symbol

of the failure of the actual WM policy to meet EU

targets.

The Greek WM market and WMAs understand

the necessity for waste treatment, but until now

there has been no certain indication that EU or

national funds will be used to that end. So the com-

bination of treatment necessity and the lack of finan-

cial resources is a big driver for PPPs in WM.

The response of the Ministry of Finance to this

situation is a hopeful signal for the market and we

hope that this is just the first of the required steps.

Additionally, the very short time period remain-

ing to achieve the targets for biodegradable waste

provides a great advantage to PPP procedures.

Although the preparation of a PPP contract is nei-

ther an easy nor a rapid task, there is much more

flexibility and the PPP law provides certain tools

that can significantly reduce the preparation period.

One more important driver is the experience gained

from the poor operation of the existing WM facilities.

We all now understand that there is no point in spend-

ing decades and millions of euros developing waste

treatment facilities if we cannot ensure their effective

operation. And the truth is that effective operation can

be achieved if the contractor is responsible for that,

which can only be achieved through PPP contracts.

BarriersDespite the fact that real, strong drivers do exist, the

application of PPPs in WM in Greece is a difficult

issue due to the specific characteristics of the solid

waste management systems.

First, the status and the human resources for

most WMAs are not capable of preparing and imple-

menting PPP contracts. It is not by chance that the

first effort started with DIADYMA SA, a managing

authority with remarkable status in terms of human

resources and a certain record of successes in EU

funding and project implementation. But there are

very few similar cases.

Second there is the cost barrier. In most parts of

the country, Greek citizens are used to paying a negli-

gible price for waste management and even so it is not

always certain that they achieve value for money. The

Public-private partnerships in wastemanagement: The first experience

The first application for public-private partnership in the field of waste management hasalready been approved. The project, already in the pipeline and expected to start operationsin early 2010, has raised several interesting issues requiring a second look.

Antonis MavropoulosCEO EPEM SAwww.epem.com

41

country’s great dependence on landfills is also testi-

mony to that. There is a need for brave political deci-

sions to achieve a gradual but steady increase of WM

funds if we want to see the successful implementation

of recovery and recycling targets.

One of the reasons that led to the successful

preparation of DIADYMA was that the local authori-

ties were persuaded they had to increase WM

spending in order to achieve great environmental

results. And the generous contribution of the Min-

istry of Finance in its willingness to pay is a good

example that will certainly affect the political deci-

sions required.

Last but not least of the barriers are the negative

experiences of some PPP efforts that have been

made previously. Of course one must understand

that these efforts came out of the new framework. In

general terms these failures were characterized by:

ñ Poor or no preparation;

ñ Lack of performance standards;

ñ Lack of risk distribution;

ñ Lack of reliable commitment between the PPP

contractor and the municipalities.

Project preparationThe Greek WMAs, the consultants involved in WM,

as well as the government and the contractors

need to reassess project preparation.

The application of PPPs to WM projects:

— Should be combined with certain changes to proj-

ect design. The overall feasibility of the project must

be carefully documented, since PPPs are long-term

relationships which are based on the financial con-

tribution of citizens and municipalities and not just

European Union funds. Local affordability levels

must be determined and evaluated before the con-

tracts.

— Must lead to project preparation with an empha-

sis on specific, desirable and quantified results

instead of the usual more-or-less detailed design

of the facilities that dominate the Greek market.

— Needs careful and justified consideration of the

potential risks of the project. This is something

that is not yet understood by the public decision

makers, who are used to ignoring long-term risks,

but we all know that a PPP contract without effi-

cient risk allocation will be a certain disaster.

Combination of fundsOne of the most important lessons provided by the

DIADYMA experience is that the modern waste

management gate fees are too high for Greece,

even in the case of one of the most efficient and

expensive WM systems in the country, that of

Western Macedonia.

The Ministry of Finance has made a great contri-

bution of funds in order to cover the existing gap

between gate fees for modern waste management

treatment and citizens’ ability to pay. But if a large

part of the construction cost was covered by EU

funds, the gap would be much smaller and the

implementation of similar projects would be afford-

able in many more cases.

The new government should consider this as

the last opportunity for Greece to develop modern

WM infrastructure utilizing EU funds that do exist.

If these funds are once again used just for landfills

and transfer stations, this opportunity will be lost.

Then, the future of waste management in Greece

will be much more expensive and, undoubtedly,

difficult to consider.

42

Themes

Δhese last few years, the Hellenic Public Real

Estate Corporation (HPREC) has been mov-

ing toward the development of services

regarding the implementation of the Accom-

modation Program for the Greek Civil Ser-

vices, as well as the acceleration of the business

plan, aiming to develop and utilize a large number of

major public real estate properties.

Implementation of the public housing program

through building facilities suitable to support services

of high standards is an absolute priority, and therefore

an important parameter in the efforts toward modern-

ization of the Greek public administration.

To date, accommodation projects have been

implemented almost exclusively through public fund-

ing. However, the significant extent of the program

along with the need to optimize use of public funds

render necessary the use of alternative funding tools

by employing private funds. Our goal is to implement

the program with the best quality, at the best cost for

the Greek state, within acceptable budget lines and

within the set implementation time frame.

The Accommodation Program for the Greek Civil

Services currently comprises 244 projects. These

projects cater to a wide range of housing needs. The

overall budget amounts to 2.6 billion euros. The

superstructure of projects under the Accommodation

Program covers a total of approximately 1 million

square meters, while basements and auxiliary facili-

ties totsl an additional 0.5 million m2. Twelve per-

cent of the program has already been completed in

recent years, and another 5 percent is either under

auction or in progress.

Implementation of the program is essential for the

modernization of accommodation of the Greek civil

service. Based on the compiled data, a considerable

number of key public administration bodies are cur-

rently housed in inadequate buildings, while housing

and relocation needs are increasing. There is also a

lack of appropriate technical management services to

prevent devaluation of the existing buildings.

For those entities in need of accommodation, it is

important to ensure the best possible quality of hous-

ing services at the lowest cost. Quality of housing serv-

ices implies quality in both building infrastructure and

auxiliary services, which is necessary for the smooth

operation of these infrastructures in the long run.

In the conventional project implementation model,

the private sector assumes specific responsibilities

over a limited time span, primarily focusing on the

construction objective. With the new housing models,

the private sector is expected to contribute to the

implementation of the program, thus undertaking the

funding of housing projects, and most importantly

assuming an essential part of the risks associated with

the overall life cycle of such projects. The added value

of private entity involvement resides in their ability to

manage certain risks in a more effective manner,

therefore resulting in more cost-effective solutions.

Private entities contributing to the implementa-

tion of the Accommodation Program comprise not

only construction companies, but also include a mul-

titude of other categories, such as real estate man-

agement companies, specialized investors of public-

private partnership projects, institutional real estate

investment companies, technical management

providers, investors in real estate leasing schemes,

and funding entities, such as banks.

The public sector is currently implementing two

basic alternative models in project implementation or

provision of housing services: a) the proprietary

model and b) the leasing model.

In the proprietary model, the public entity assumes

all risks of the project, which often leads to deviation for

the original construction and operation budget. In con-

trast, under the leasing model, the private entity

assumes an extremely large proportion of the risks, and

the public entity on the other hand bears the cost of the

high flexibility retained under this scheme. In both

cases, the overall housing cost for the public entity is

elevated, therefore rendering these conventional meth-

ods less cost-effective. Financial return is defined as the

metric system used to compare the cost to the value of

services offered (value for money).

Private initiatives The goal of the Accommodation Program is to high-

light and select new implementation and funding

tools for housing projects which will increase the

financial return for the public sector in comparison to

conventional methods, thus equally meeting the

requirements of accommodated parties, the public

administration and investors.

The new tools fall under two general categories:

ñ Implementation tools of new housing projects,

or upgrade of existing projects through private

funding;

ñ Fund-raising tools through exploitation of existing

building facilities or other real estate properties.

The first implementation category referring to new

housing projects comprises two basic tools: the pub-

lic-private partnership (PPP) schemes and infrastruc-

ture implemented through long-term operation lease

with construction.

HPREC and the public are especially interested in

the second fund-raising tool category, through the

HPREC targets improved efficiencyof public real estate

Konstantinos GratziosHPREC Chief Executive

Officer/Agronomist Land Surveyer

Urban Plannerwww.ked.gr

Implementation of the program is indispensable for the modernization of theaccommodation of the Greek civil service. The goal is to highlight and select newimplementation and funding tools for accommodation projects, which will increase thefinancial return for the public sector in comparison to conventional methods.

43

exploitation of existing buildings or other real estate

properties. These funding tools are based on the fun-

damental concept of sale and leaseback (S&L). The

funding tools can combine solutions, such as

exploitation of existing real estate with implementa-

tion of new housing projects, as in the case of S&L

with construction.

The Accommodation Program includes 21 cate-

gories of projects which can form one or more agree-

ments each. Of a grand total of 244 projects, 185

will be handled under project implementation agree-

ments, while the remaining 59 projects will be

undertaken through fund-raising agreements.

With the aforementioned data in mind, HPRECãs

goal of preparing and announcing 17 separate ten-

ders of a total value of 1.130 million euros within a

three-year time frame is considered feasible.

A considerable number of Accommodation Pro-

gram projects will be implemented via conventional

implementation tools for public housing projects,

since other tools do not ensure return for the public.

In any case, the new tools are anticipated to operate

as alternatives rather than replacements to the insti-

tution of public works.

As far as the institution of PPPs is concerned,

the tender for the seven fire departments scheduled

to be completed within the first quarter of 2008 is

under way. The technical consultant for the techni-

cal management program of four buildings for the

Hellenic Police has been identified, and by the end

of the year the project should be put to auction.

Furthermore, the tender for the identification of a

technical consultant for the 11 police departments

is also in progress. By December, two more projects

of the Accommodation Program will be submitted to

the Bi-Ministerial Committee for approval: the Hel-

lenic Police Headquarters and the Fire Department

Headquarters.

It is common knowledge that HPREC is managing

a variety of public real estate properties, aiming to cre-

ate added value from the exploitation through flexible

investing schemes, with private sector standard of oper-

ation criteria, thus ensuring public and social welfare.

Properties for utilization Last July, an agreement was concluded between

HPREC and the Municipality of Glyfada in southern

Athens: a Memorandum Agreement on the upgrading,

management and secure operation and use of the entire

coastal zone of Glyfada. The goal is for the coastal area

to be remodeled into the most significant open-air

recreational space for aquatic and other sports in the

whole Athens and Eastern Attica region. We have

prepared a plan that envisages the remodeling of 18

hectares on the Glyfada seafront, which aims to

rearrange the entire coastal zone stretching over 2

kilometers, from the Asteria area up to Aghios Cosmas.

According to the plan, modern self-financing ven-

ues and infrastructure will be developed, employing

modern architectural standards and provision for the

creation of footpaths and bicycle lanes running all

along the coast next to the tram lines. This effort is

part of a generalized plan to modernize the coastal

zone, so that it can be returned to the people of

Athens. Finalization of the auction procedure is antic-

ipated by the end of next year.

— Another Memorandum Agreement was concluded

last May for the creation of the International

University of Greece in the region of Michaniona,

Thessaloniki, foreseeing cooperation of the

Municipality of Michaniona with the Ministry of

Education and HPREC for:

ñ The foundation of the International University of

Greece along with auxiliary facilities, which will

trigger development and exposure of the wider

Thessaloniki region;

ñ Contribution to the socioeconomic development of

the region, by creating new employment opportu-

nities for the local population, ensuring local busi-

ness participation in the project works, and thus

boosting the economy of the Michaniona area.

Furthermore, there is a provision for the design and

subsequent operation of an international conference

center along with auxiliary facilities. Thessaloniki is

currently lacking such facilities, which are indispen-

sible for the unobstructed operation of both the

International University and the Pole of Research and

Innovation, already operating in eastern Thessaloniki.

— Regarding the former US Telecommunications

Facility of Gournes in Iraklion, Crete: The initial

approach to development of the area focuses on

implementing two operational and building units:

a business park, featuring a business center with

office space, stores and recreational facilities; a

leisure park for tourism, recreation, culture and

sport, including hotels, specialized facilities for

tourist activities, auxiliary activities, aquatic sport,

multifunctional recreational centers, and more.

— The real estate property of Antirio, which stretch-

es over some 22.3 hectares, mainly comprises

sections of the former construction site of the Rio-

Antirio Bridge. This property is in a strategic loca-

tion, expected to attract significant investments in

the coming years, especially in light of the com-

pletion of the Ionian Highway.

HPREC is in close cooperation with the regional fund

for development of Western Greece, the Aitoloakar-

nania Prefecture and the Municipality of Antirio, on

this issue, and utilization of the property is already in

the pipeline, first viewing to enhance development

and investing opportunities in the project. The auc-

tion procedure of the project, focusing on identifying

a suitable investment scheme for development, is

anticipated to be initiated at the end of 2007 and to

be completed by the year 2009.

— The last property is where the broadcasting sta-

tion of Voice of America was based. The proper-

ty’s land area totals approximately 800 hectares

and the building surface is approximately 25,000

m2. This is coastal land on the estuary of the

Nestos River in the Xanthi Prefecture with excep-

tional ecological characteristics. It is included in

the NATURA 2000 network, and is protected by

the International Ramsar Convention for Wet-

lands of International Importance. The property is

also part of the National Park of Eastern Macedo-

nia and Thrace.

HPREC’s goal is to develop the property by high-

lighting its natural characteristics; to this end, col-

laboration has been initiated with the Prefecture of

Xanthi and the National Park Managing Body.

The strategic goal of HPREC is to develop and uti-

lize major properties through private funds. These prop-

erties feature adequate size and potential of attracting

trustworthy private investors. In this manner, the con-

ditions will be set for both development of investment

initiatives and optimization of public revenue.

44

Themes

On August 2, 2007, the Interministerial

PPP Committee, after consulting with the

Special Secretariat for PPPs, a task force

within the Ministry of Economy, agreed to

the ‘implementation of sewerage networks

and a sewage treatment unit in the Municipality of

Rafina.’ This project is the first ever project

planned under the Public-Private Partnerships

regime in the field of sewerage networks and

sewage treatment and involves the design, con-

struction, financing, maintenance, facility manage-

ment and operation of the new infrastructure for

25 years. The project will cost 40 million euros

(plus 20 percent for insurance and conservation

expenses) and it is now at the bidding stage for the

consultants’ appointment. The initial infrastructure

is intended to be constructed during 2008-2009

and to go into operation by 2010.

The Municipality of Rafina had been struggling

for years to find a funding opportunity for con-

structing this project, which is a necessity for local

residents. Finally, after gaining the full support of

all local councilors and the local community, the

Municipality of Rafina succeeded in absorbing the

relevant funds under the Public-Private Partner-

ships regime.

(For further information regarding this project,

please log on to http://www.sdit.mnec.gr/en/proj-

ects/projects/project0022.html.)

Present situation In the past, the population’s sewage treatment

needs were covered via infrastructure funded by

the EU or the Greek government. This was followed

by a huge amount of time taken to submit the proj-

ect proposal to release the relevant funds and final-

ly construct the proposed infrastructure. Despite

the fact that in recent years there has been impor-

tant progress regarding sewerage networks and

sewage treatment in Greece, there are still certain

significant problems, which can be summarized as

follows:

ñ Increase in local and seasonal population cre-

ates drinking water shortages and raises ques-

tions about its required quality. The Prefecture

of Attica and most of the islands popular with

tourists require extended attention in sewage

networking due to population increase needs,

especially during the summer months.

ñ Water availability forecasting in conjunction

with climate change makes the future uncertain

in many areas.

In many cases, misunderstandings regarding

the actual technical and financial capability of

those involved in the construction phase were the

main reason for unreliable project operation or

non-operation. Project parties were usually unable

to account for the real project needs or to take into

consideration any future additional work needed.

There is also significant inactivity reported in man-

aging sewage resulting from sewage treatment,

therefore creating the potential for an additional

service financed under PPP.

ñ Most of the sewerage network and sewage

treatment shortage is concentrated in small or

medium-sized areas.

ñ Most of the current infrastructure is not

designed to cover all expected population and

visitors’ needs and potential funding is not

secured for extensions.

Opportunities On the other hand, it is necessary to identify sev-

eral opportunities which may arise:

ñ Projects regarding sewerage networks and

sewage treatment (unlike waste management

projects) show increased community accept-

ability because the initial cost that citizens

would be required to pay for the establishment

of such a system is less than if there were no

such system at all.

ñ Many of the identified needs are observed in

tourist areas which usually possess the neces-

sary capital to fund such projects, bearing in

mind that such a project creates room for

improvement, therefore greater sustainability

and improvement in tourist indicators.

ñ There are several small areas that would be

Green light given for wastetreatment unit in Rafina

Dr EvangelosMihalopoulos

President of BoD

ASE SYNERGY CONSULTING SA

The government interministerial committee approved a 40-million-euro project that is at thebidding stage. The Rafina project, expected to be completed by 2010, has the backing of thelocal council and residents. However, broader problems regarding sewerage networks remain.

45

very difficult to absorb EU funding:

ñ Technological advancements may offer exten-

sive solutions to different and changing popula-

tion needs. This increased demand makes PPPs

an attractive solution to conservative funding

mechanisms of public infrastructure.

ñ High correlation between conservative and new

technologies in project construction and opera-

tion of sewerage networking - sewage treat-

ments and renewable energy systems occurs to

the betterment of the service using cheaper

options in favor of the citizens.

The role of all stakeholders is crucial: the Ministry

of Economy, PPPs Department and PPP Secretary,

Local Authorities, PPP Consultants as well as

potential investors. For successful implementation

and cooperation there is a need for a new vision

when dealing with such projects.

The new vision Certain crucial matters arose from the open dia-

logue with the Municipality of Rafina:

ñ A new approach is needed. A new approach

that specializes not only in constructing the

infrastructure but in the way this service is

actually distributed. The way public authorities

used to operate sewerage networks and sewage

treatments is no longer appropriate. Population

needs, which change and increase as the years

go by, will be properly satisfied by a new aspi-

ration to create public infrastructure while

maintaining balance and quality vis-a-vis the

increased demand. Interrelation of cost-benefit

analysis must be in place for fighting disopera-

tion, abandonment and poor system conserva-

tion. In this way, citizens will be happy to

receive an up-to-date service.

ñ Public-private partnerships transfer a great deal

of risks (environmental, operational, legal, social

responsibility, demand) to the private sector and

the potential institutional investors. In the

meantime, this current PPP regime provides the

private sector with the opportunity to choose the

appropriate technological solutions depending

on performance indicators, while allowing citi-

zens to pay for a service with value for money.

ñ The European Union, via its potential participa-

tion in funding such projects, may have the

opportunity to increase the acceptability and

effect of fund release while transferring a sig-

nificant part of this shared responsibility to the

private sector. A further reason for participation

of funds in the constructing phase may be to

make this investment more attractive to poten-

tial investors.

46

Themes

Two years after the inauguration of the first

regional sanitary landfill in Greece, the Inter-

ministerial Committee unanimously agreed

on the incorporation of the municipal solid

waste treatment plant (MSWTP) of Western

Macedonia through public-private partnership.

The project, with a budget of 120 million euros

(at current prices), is expected to be subsidized up to

50 percent and this includes the manufacture of the

MSWTP and the operation of the regional integrated

waste management system (RIWMS) of Western

Macedonia for 25 years. It will be the first time at a

national level that an intermunicipal enterprise

undertakes the development of such a complex tech-

nological investment with an unusual institutional

process in this sector.

The objective is ambitious; however, the funda-

mentals are set and our prospects of attracting pri-

vate investors in the section of an integrated waste

management are intensely visible. According to the

chairman of the Waste Management System of

Western Macedonia (DIADYMA), Nikos Totonidis,

‘the cooperation with enterprising figures aims to

secure capital for the project’s development through

intense competition, combining enterprising ability

with the financial and technical know-how in terms

of managing and operating a municipal solid waste

treatment plant of similar scale.’

In mid-2011 the MSWTP will operate and will

quickly appoint the regional IWMS entirely compati-

ble with the European Union’s strategic plan in the

sector of waste management by forming a new model

in Greece which aims to reduce the environmental

implications and the rational management for natural

resources. Totonidis adds that the project’s rapid

development is already obligatory, as the remaining

life cycle of the sanitary landfill does not exceed

seven years.

This undertaking requires great effort and a com-

plete exploitation of technical know-how that the

company has accumulated on issues such as auc-

tioning and managing expenditure since 2002. More-

over, the smooth operation of the RIWMS from mid-

2005 has proved the company’s ability to manage

the technical composition and operation of a multi-

parametric system whose life cycle depends on the

financial stabilization insurance identified with the

revenue bond of the performed usage from the

municipalities.

Totonidis underlines that ‘the success of DIADYMA

is owed to our attentive goals, our ability at the tech-

nical, institutional and administrative levels and main-

ly to the observation of international progress through

the strong managing organization of the company and

its project.’ He adds, ‘The “capital” that we accumu-

lated in previous years in combination with social con-

sent constitute a solid base for the project’s develop-

ment, and the local government once more is asked to

respond to the institutional liability in relation to citi-

zens, environment and public health.’

A 120-million-euro wastemanagement project moves ahead

Nikos TotonidisCEO of DIADYMAwww.diadyma.gr

The objective is ambitious, however the fundamentals are set and our prospects to attractprivate investors in the sector of integrated waste management are intensely visible.

http://www.ttbank.gr/

http://www.opap.gr/