World Report

As the pace hots up for the Athens 2004 Olympics, Greece is enjoying a new confidence and attracting fresh investment

he next two years are set to be the most exciting in Greece’s recent history. Although the country still has no common border with its fellow members of the European Union, its sense of isolation at the eastern end of the Mediterranean has faded into memory.
The last country to qualify to join the eurozone – and one of the first to usher it in – Greece is enjoying a new self-awareness as part of a community in which it will play an increasingly important role in the years ahead. The smooth transition from the drachma – one of the world’s oldest currencies – frees the government to focus on job creation and on obtaining real convergence with its eurozone peers this year.
And then there are the Athens Olympics. For the Greeks, the 2004 Games represent an opportunity, which they have grasped readily, to accelerate development and promote their country as a magnet for investment and tourism.
The Greek prime minister, Costas Simitis, says the country is already reaping the benefits of hosting the Games in terms of heightened international prestige, improved infrastructure and economic gains. “Greece is already at the centre of the international spotlight,” he says.

The importance of the Olympics to the Greek economy was acknowledged in a cabinet reshuffle late last year, in which a raft of deputy ministers was appointed with specific responsibilities for keeping preparations on track. A new international programme to attract foreign investors has been launched under the appropriate banner, ‘Greece: A Winner’s Choice’.
The Olympics will have a direct impact on the economy, especially in the tourism, construction and industrial
sectors, and will create some 130,000 new jobs. Greece will spend nearly $43 million this year on international advertising campaigns to attract tourists. More than $2.5 million will be spent on promoting the country in the United States, and a further $9.2 million on international television channels CNN, Euronews and Eurosport.

Finance minister Nikos Christodoulakis is determined, meanwhile, that the government will not stall on introducing structural reform. He says his ministry’s initiatives are aimed at setting Greece’s economy on a faster growth track and creating stronger business units. “Structural reforms will go ahead,” he says. “They are the economy’s oxygen, especially now after the introduction of the euro.
“In 2002 the attempt to obtain real convergence and create jobs will have top priority. We will cover the gap that separates us – in terms of growth and per capita income – from other eurozone members.”

Growth for 2002 forecast at twice eurozone figure

The minister forecasts Greece’s economic growth for 2002 at double that of the eurozone as a whole, despite the current slowdown in the global economy. He says that if Greek gross domestic product (GDP) growth outperforms the eurozone by two per cent for the next four to five years, then per capita income will reach 80 to 85 per cent of the eurozone average.
“Greece is among the few countries that, while achieving nominal convergence, are also achieving real convergence,” he says. “2001 ended with growth of 4.1 per cent, placing a goal of 3.8 per cent for 2002, despite the fact that international conditions last year have produced a slowdown in economic growth.”

The forecast is for growth of four per cent in 2003 to 2004, after this year’s expected 3.8 per cent. Unemployment is forecast to fall to 9.8 per cent in 2003, from 10.9 per cent in 2001. Inflation is forecast to decelerate sharply from the spring until the end of this year at an average rate lower than last year’s level of 3.4 per cent.
EU finance ministers last month approved Greece’s stability plan for 2001-2004, which was updated at the end of last year. Greece also stands to benefit this year from the EU’s third Community Support Framework (CSF), which is estimated to account for about one-third of the country’s predicted growth. Another third is expected to come from public investment expenditure.

The government has affirmed its commitment to liberalisation and privatisation, despite recent setbacks such as the collapse of the merger between the state-controlled National Bank of Greece and Alpha Bank and difficulties with the sale of national airline Olympic Airways.
Lucas Papademos, governor of the central bank, believes Greece needs to step up its competitiveness in order to improve its standard of living as a eurozone member. “Clearly, the country has to make more effort if it really wants to improve living standards in a fiercely competitive environment,” he says.
“Structural reform is the most essential thing now and must be aimed at a more effective operation of markets and a rise in competitiveness in the private sector.”

Madden
‘We are encouraging UK companies to take an interest’

Britain’s ambassador in Athens, David Madden, says Greece presents huge opportunities for UK firms. He believes the message from the Greek authorities to potential investors is a strong one and that there is real commitment to tackling old stumbling blocks such as bureaucracy.
“The Greek government is very committed to economic reform, liberalising the economy, privatisation and making the economy more efficient,” he says.
“We have a big programme for encouraging UK companies to take an interest in Greece, particularly during the Olympics.”

Greece had a one per cent surplus in its trade balance with the Balkan countries in 2001, which accounted for about 21 per cent of total annual exports. The government’s ambition is to become the top investor in Bulgaria, for example. The first trans-border international trade centre between the two countries recently opened at the Kulata checkpoint.
Greece’s status as a valued EU member is reflected also in its improved relations with its historic rival, Turkey. Greece’s geographic location means it will be pivotal in integrating Turkey and its neighbours in the Balkans into a stronger and more secure Europe.

Numerous agreements have been made between the two countries in recent years, on subjects such as tourism and the environment, and last month a memorandum of understanding was signed with the aim of increasing bilateral trade from the current $1 billion to $5 billion.
There is also pressure from the EU for a political solution to the division of Cyprus, the main barrier to normalisation of relations. “The timing is right to try again,” Greek foreign minister George Papandreou said recently.