World Report

Southeastern Europe’s most dynamic economy expects to make long-term gains from the 2004 Athens Olympics

aving raised its international profile to new heights with its acclaimed staging of the 2004 Olympic Games, Greece is determined to make the most of it. The Games presented Greece with an opportunity to link its past with its present and future, and to portray itself to a world audience as a country that is both ancient and modern. It seized the opportunity and spent a record amount in doing so. Now it hopes its dynamic new image and proven capabilities will pay dividends in increased trade, tourism and investment.

The new face of Greece is best symbolised by Athens, its upgraded and modernised capital. But with the Games over the emphasis has shifted towards achieving balanced growth across the country. The focus is on spreading development beyond the main industrial centres of Athens, Thessaloniki and Patras, and realising the potential for economic growth that lies in the regions.

Central to this is the ongoing construction of a modern region-wide transport network with the help of EU support funds. In March, six major new road projects were announced, worth a total of 7 billion euros (£4.8 billion). Recent months have seen auctions for a series of public works, worth 2.6 billion euros (£1.8 billion) – 90 percent of which will benefit the regions.

Directing the process of change and improvement is the centre-right New Democracy government of Costas Karamanlis, which last year found itself swept to power for the first time in over a decade. Their task is to make Greece more competitive, encourage investment and secure stable growth.

Prime Minister Costas Karamanlis is promoting a policy of ‘reform with social responsibility’.

The government has declared 2005 a “year of competitiveness” and Mr Karamanlis has promised a year of major changes and economic reforms. The list includes tax reform, a new development law, modernisation of state-run enterprises, a new licensing system for new businesses, deregulation of markets and transparency in public procurement.

Annual growth rates in Greece have been around 4 percent in recent years. The Bank of Greece (BoG) is forecasting growth of 3.3 percent this year, but with European GDP increasing at just 2 percent per year, Greece remains one of the most robust economies in the EU. Membership of the eurozone since 2001 has brought stability. Greece’s positive economic record and strategic positioning as a base for expansion into developing regional markets give the country strong advantages as a destination for foreign investment.

The government is taking steps to improve the business environment, by establishing a stable and clear regulatory framework, offering new incentives and combating the bureaucracy that has deterred investors in the past. Tourism, energy and mining are among the most promising sectors for investment.

Extra funding is being put into scientific research, technology and innovation, which the government sees as the key to boosting productivity and increasing the competitiveness of manufacturing and industry.

Particular emphasis is being put on developing the service sector, the largest and fastest-growing area of the economy, which includes Greece’s biggest foreign currency earners: tourism and shipping. Attention to exploiting the huge but neglected potential of tourism, in particular, is long overdue.

Previous administrations have been content to rely on the enduring appeal of sun, sand and sea, but Mr Karamanlis is taking a more proactive approach and has established a Ministry of Tourism tasked with giving Greece a diverse all-year-round appeal.

The government’s commitment to a market economy is reflected in a denationalisation programme that will gradually reduce the 50 percent of the Greek economy currently under state control. Scheduled for this year are the flotation of Post Savings Bank and Athens International Airport, which are expected to bring 1.6 billion euros (£1.1 billion) into government coffers.

Future candidates for privatisation include the gaming company OPAP, the Public Power Corporation and the National Bank. Overall, the government hopes to raise 2.5 billion euros (£1.7 billion) to help it reduce public debt and deficit.

Moves to improve the business environment and raise the level of foreign investment

Putting public finances in order is another priority. Greece has been given until 2006 to bring its national deficit from a record 6.1 percent of GDP to within the limit of 3 percent required of eurozone countries, restoring financial credibility.

Economy and Finance Minister George Alogoskoufis says the EU deadline gives sufficient time for the deficit to be brought under control. At the same time, the administration plans to stick rigorously to its 2005 budget and to cutting government debt, which at 112 percent of GDP last year was the highest in the EU. The approach is described as one of “reform with social responsibility.”

When they came to office a year ago, Mr Karamanlis and his team were given just six months to get everything ready in time for the Olympics, and they turned in a winning performance. Now they have new challenges to meet and new hurdles to jump, but with a fair wind from the Athens Olympics behind them they have got off to a good start.

A key role to play in the development of the region

Greece is an enthusiastic member of the EU, committed to occupying a place in the European vanguard, according to Prime Minister Costas Karamanlis. He also believes being at the forefront of European developments is in the best interests of the country, .

Greece’s main trading partners are fellow EU states and Mr Karamanlis has reiterated that Athens fully backs the European prospects of other countries in the region, including Turkey.

The government wants to see Greece take advantage of its geography and history to become the economic hub of the region. Affluent, democratically stable and a leading economy in the EU, Greece is well placed to become a natural leader in the Balkans and East Mediterranean area.

Sotirios Hatzigakis, Vice President of the Hellenic Parliament and President of the European Affairs Committee, explains: “Greece can play this role because it has three times higher per capita income than other countries and has all the advantages of being an EU member.”