I would like to thank you for your invitation today.
It is a real pleasure for me to
have the opportunity to speak to the members of the “Frankfurter Gesellschaft
für Handel, Industrie und Wissenschaft” about recent economic developments in
Greece.
Greek and German political and economic relations have traditionally been
close, and the two countries have been working methodically and efficiently
towards strengthening the Eurozone’s unity and the entire European project.
Greece has come a long way since 2009.
Our country suffered all the consequences and has been at the focal point
of the most severe global financial crisis since 1929.
Thanks to the sacrifices of the Greek people and the support of our
European partners, the Greek economy is beginning to show the first very
encouraging signs of rebalancing and recovery.
Greece is actually implementing the most challenging economic adjustment
programme of modern history.
In 2010, the Greek government agreed with its European Partners and the
IMF on a multiannual package that provided the necessary funding to Greece that
was then facing a debt crisis. This crisis was the result of high fiscal and
current account deficits as well as the accelerated loss of competitiveness
that had led to its cut off from the international capital markets. The
substantial financial support that Greece received was followed by the
necessary fiscal and structural reforms that the country had to implement, in
order to return to a sustainable growth path.
Today, after four years of fiscal consolidation and structural reforms,
the adjustment of the so-called twin deficits, the two main causes of the Greek
economic crisis, is by all means impressive. By now, over 85% of the required
fiscal adjustment needed to reduce debt to sustainable levels by 2020 has been
completed.
Furthermore, the loss of competitiveness in terms of unit labour cost
that Greece suffered over the previous decade (2001-2009), after joining the
Eurozone, has been fully reversed. This is reflected in the sharp decline of
more than 20% of relative unit labour costs since 2010 and the sharp decline in
the current account deficit.
In fact, by the end of 2013, for the first time after many decades, both
the primary fiscal deficit and the current account deficit not only have they
been eliminated, but they turned into substantial surpluses.
Greece has realised an unprecedented fiscal adjustment. Since 2009 the
headline primary deficit has declined by more than 10% of GDP – the biggest and
fastest ever recorded adjustment by an OECD country. A primary surplus of 0.4%
of GDP is projected in the 2014 Βudget for 2013, although it seems, as new data
from the Budget execution come in, that even this revised ambitious target will
be largely surpassed. Moreover, it is estimated that, since 2009, Greece’s
cyclically adjusted primary balance has improved by more than 20% of GDP. There
is no other case of such an adjustment in recent economic history.
On the external side, for the period 2008-2012 the current account
deficit declined by 12.5% of GDP (from 14.9% of GDP in 2008 to 2.4% of GDP in
2012) and it is now projected that, by the end of 2013, there will be a current
account surplus close to 1% of GDP.
Hence, the Greek economy has undergone an unprecedented rebalancing. At
the same time, the macroeconomic environment is also improving: The GDP
performance in the second quarter of 2013 was better than originally
anticipated (-3.7%) while in the third quarter the rate of decline was even
milder (-3%).
The projection for GDP growth for the whole of 2013 was therefore revised
upwards, from -4.2% to -4%. Now it seems that the final outcome will be even
better. Domestic and international institutions were also led to an upward
revision of their projections for 2013.
Furthermore, after six years of deep recession, it is projected that this
year (2014) the rate of growth of GDP will turn positive.
Confidence is gradually being restored. The economic sentiment indicator
has reached one of the highest levels in the last five years. The spread of the
Greek 10-year government bond compared to the German bund has fallen below 700 basis points, whereas at the
peak of the crisis it surpassed 3000 basis points.
Retail sales increased in November 2013 by 2.9% on a y-o-y basis for the
first time after a 44-month continuous fall.
Furthermore the PMI Index in January surpassed the threshold of 50,
indicating expansion for the first time since August 2009
These developments combined with the gradual improvement in confidence
over the last months, point to a reversal in the economic climate, which is
expected to be reinforced even further in the months to follow.
Developments in the external sector have also been positive. Receipts
from exports of goods over the period January-November 2013 increased by 3.3%,
compared with the same period last year. Net travel receipts rose by 17.7%
while the international tourist arrivals beat expectations. The figure up to
November stood at 17.5 million.
Greece has the lowest inflation rate in the Eurozone. Consumer price
inflation turned negative in March last year for the first time since 1968 and
has remained negative since. Overall, in 2013 prices fell by 0.9%. This is good
news both for real disposable income and competitiveness.
The rebalancing of the financial sector, which was hit hard during the
crisis, is currently underway. The four systemic Greek banks have been
recapitalized, while smaller ones have been restructured or resolved. Since the
elections in June 2012, there has been a net inflow of deposits to the banking
sector...
Unemployment shows signs of stabilization, although it remains at
unacceptably high levels, especially for young people. It now stands at 27%,
despite the substantial improvement in unit labour cost.
The remarkable adjustment of the economy has come at an extremely high
socioeconomic cost. Since 2009, GDP has declined by approximately 25%. Such a
reduction has never been experienced by a developed country with the exception
of the United States during the Great Depression. Additionally, according to
EUROSTAT, 35% of the Greek population is at risk of poverty or social
exclusion. This is partly due to the increased unemployment, but also due to
the fact that real household disposable
income has shrunk by over a third since the beginning of the crisis.
In the structural reforms front, Greece implemented a series of reforms
that helped to close the competitiveness gap and create an investment-friendly
environment. Important reforms have been undertaken in almost all areas of
economic activity, with the most significant implemented in the labour market,
the pension system, the health system and the tax administration. As a
consequence, in recent years the OECD consistently ranks Greece as the most responsive
of its member countries in adopting its growth-friendly recommendations.
Allow me to mention a few examples in two key areas:
As regards business environment, we established a “one-stop-shop” for
starting a business in one day; we have removed the 30 most significant
barriers to entrepreneurship; and we created a fast track process for
investments.
In the area of tax reforms, we have introduced a new simplified tax code;
a repeal of the Code of Books and Records; a new IT system interconnecting all
tax offices; full scope audits according to risk based criteria; and auditing
rights outsourced to private auditing companies. These changes have already
produced results: in 2013 tax revenues exceeded the target for the first time
in more than ten years.
Overall, Greece’s substantial competitiveness gains, as well as the
recently provided investment incentives offer significant investment
opportunities. Thus, foreign direct investment in Greece already shows a
positive trend upwards.
FDI inflows have primarily focused on the tertiary sector (driven by the
development of the country's financial system, the liberalisation of
telecommunications, and the stimulation of trade), while significant
investments have also been made in the secondary sector.
The rapid promotion of reforms and the subsequent reduction in the cost
of production create significant investment opportunities. Greece’s comparative
advantages (geopolitical, climatological, historical, natural resources, human
skills) are also very strong.
I would like to illustrate some of the key drivers of the growth model we
wish to develop.
Tourism is a key component of the Greek economy and I would say it is an
“export champion” for Greece. Prospects for 2014 in the tourism industry are
bright. The tourist season in Greece
could be further expanded by several months.
In the area of energy, Greece is emerging quickly as an important player
in the regional energy map. Greece combines the ideal conditions to be an
energy hub. In terms of value added, the energy sector contributes more than 4
percent of GDP.
Food and Agriculture enjoy a privileged status, with low operating costs
and abundant, high-quality raw materials. Greece is a leading producer in a
number of products, such as olive oil, sea bass and sea brim, while it has a
significant positive trade gap in a variety of other products.
Greece’s ideal location, at the crossroads of three continents, makes it
an ideal logistics hub for companies that wish to benefit from the constantly
increasing trade flows through the region. The Piraeus port is only 210
nautical miles from the main Mediterranean route, and is the only main port in
the region.
The highly-skilled human resources provide the basis for further advances
in the production of generic drugs, research and development in new treatments,
and clinical trials.
There are also considerable prospects in aquaculture, information
technology, telecommunications, real estate development and transport.
Greece’s new growth model will rely on these sectors and it is our
intention to put in place all the necessary policy instruments and
infrastructure to accelerate its implementation.
I would like to mention three key incentives for investors:
-Firstly, the Fast Track law, which streamlines the licensing procedure for Strategic Investments and makes the process easier, smoother and more attractive. The Fast Track scheme currently includes several projects in Renewable Energy Sources, in Tourism and Mining.
-Secondly, the provisions of the Investment Law, including tax relief;
subsidies; leasing subsidies; and soft loans by the National Fund for
Entrepreneurship and Development (ETEAN).
-Thirdly, the residence permits for strategic investors and third-country
citizens, who own real estate property, the value of which exceeds 250,000
Euro.
After four years of adjustment programmes, the hard efforts and
sacrifices of the Greek people are starting to pay off. According to the latest
estimates, 2014 will mark the exit of the country from the six years recession
while in the following years Greece will experience robust, gradually rising
growth rates that will be based on sustainable factors such as investment,
exports of goods and services, innovation, foreign direct investment, while
further structural reforms will take place in the product and services markets,
as well as in public administration. On this ground, one of the most worrying
macroeconomic figures, the debt to GDP ratio, is expected to de-escalate
radically, while unemployment is also expected to enter a downward path.
Two of the most critical and inter connected issues Greece is facing is
the depth of the economic recession and the severe liquidity crisis. The
recapitalized Greek Banking System and, to some extent, the European Investment
Bank are expected to provide the much needed liquidity to the Greek economy.
The Greek Government is also looking to address the liquidity issue as
well as the issue of capital shortages through the establishment of a
Development Fund, an institution that will improve financing conditions,
especially for SMEs.
The Institution for Growth (“IfG”) wishes to enter into a long-term
strategic partnership with key international financing institutions, such as
the KFW, which is based here in Frankfurt.
The IfG will provide:
(i) debt financing for SMEs
(ii) equity capital to SMEs having
significant growth potential, and to private equity and venture funds, and
(iii) debt or equity financing for infrastructure projects
The intention of the Greek Government is to retain only a minority equity
stake in the capital of IfG since the Greek State participation will only be
the catalyst in order to successfully attract private and institutional
investment funds to promote growth.
Greece assumed the rotating Presidency of the EU Council in a difficult
period. The debt crisis, recession and unemployment, undermined the confidence
of the EU citizens to the very idea of European integration. But now Europe
needs to move forward, not backwards. Jobs creation and sustainable growth are
therefore political priorities for the Greek Presidency.
As a member-state of the European Union and the Eurozone, Greece is
representing a European Union that must show its commitment to great values,
solidarity and the European social state. The value of the European model for
competitiveness and growth can reaffirm the European project in the hearts and
minds of the people of Europe.
Ladies and gentlemen,
The complementarities of the Greek and German economies, despite the
difference in size, can ensure significant mutual benefits. German exports to
Greece, although declining since 2009 because of the crisis, remain strong in
relation to other countries.
According to recent data of the Hellenic Statistical Authority, Greek
exports to Germany for the period January - September 2013 showed an increase
of 1.6% compared to the same period in 2012. It is interesting to note that
this increase follows a reduction of 7.6% in 2012 as a whole.
For the same period, German exports to Greece showed a slight decrease of
2.9%.
Furthermore, while German direct investments in Greece are significant,
they still remain at low levels in relation to the potential of the German
economy.
In addition:
• The German expertise in the utilization of renewable energy sources can
be combined with the natural resources of the country.
• The German experience in environmentally friendly waste management can
contribute to the country’s waste management infrastructure projects.
Significant growth opportunities exist for this domain in the coming period
2014-2020.
I would like to mention at this point the very successful partnership
between the Greek National Telecommunications Operator (OTE) and Deutsche
Telekom. Deutsche Telekom is the major controlling shareholder of OTE and a
partner with the Greek State in this investment since 2008.
We believe that despite the crisis, OTE’s competitiveness has greatly
improved over the last years due to the efforts of the local management team,
the support provided by Deutsche Telekom and the bold and daring structural
reforms the Greek Government has implemented in all sectors of the Greek
economy and particularly in the labor market.
As telecom infrastructure is the backbone of growth and employment in the
Digital Economy, further investments are expected from OTE and Deutsche
Telekom.
Capital expenditure is expected not only for the enhancement and
improvement of the quality of current
services, but also in Next Generation Networks.
They are necessary both for the company's growth but most importantly for
the development of the country. A relevant European study shows that a
10%increase in broadband penetration leads to a 1% higher GDP. Consequently,
this affects job creation, particularly for the young.
This does not only have a direct impact on the telecom sector, but also
affects all other sectors of the economy.
Beyond this, further opportunities do exist for cooperation between Greek
and German companies. To mention just a
few: Food and beverages, various industrial products, clothing, medicines,
fuels, medical tourism.
The examples I have just quoted are only part of the synergies that can
be achieved. I am sure that each of you
could add many more.
Thank you.
