GREECE: ‘An extroverted economy’
Thomas Cromwell

After joining the European Economic Community as the tenth member in 1981, Greece was long viewed by more developed members as a black sheep. This perception persisted when the EEC became the European Community and later the European Union. Greece’s economy was weak and dominated by an inefficient government sector, its infrastructure relatively primitive (even lacking a national highway network), and personal incomes were far below the average of developed members.

Today all that is changed.

In a recent interview with, Greece’s ambassador to Washington, Alexandros P. Mallias, described the transformation of his country. The most fundamental change, he said, was that Greece had become an “extroverted economy.”

For a country whose traditional strength had been trading along the world’s sea routes, this might be surprising statement. But there are several important changes that have brought this about.

First, Greece after the Junta (1967-74) became increasingly socialist, and high taxes discouraged ownership of fleets by Greek companies, sending Greece’s shipping tycoons to places like London and Monaco, which offered better tax conditions and more developed banking systems.

Second, registration of ships under the Greek flag meant accepting Greek maritime regulations that demanded a high percentage of Greek crew members, increasing operating costs. Many ships owned by Greeks, were registered in places like Liberia and Panama.  

Finally, Greece itself was isolated from the rest of what is now the European Union by Communist bloc countries. Along its northwestern and northern border lay Albania, Yugoslavia and Bulgaria. And to the East is Turkey, a long-term enemy despite being a fellow member of NATO.  

Being a member of the European Union has had a dramatic impact on Greece. Greece has had to make its legislation conform to EU standards, and in 2001 it adopted the Euro, along with the rest of a first wave of members to do so. Ambassador Mallias said that EU membership has meant “drastic reforms” and Greece “playing by EU rules.”

At the same time, the EU has poured tens of billions of dollars into the Greek economy, helping it develop highways, railways, a new airport for Athens and other critical infrastructure.

EU membership also brought with it, the ambassador said, a “new dynamism... development in new areas of economic activity... and an increase in productivity.”

Development activity was accelerated to fever pitch to prepare for the Athens 2004 Olympic Games, preparations that would have been impossible without EU assistance.

With the breakdown of the Communist bloc at the end of the 1980s, Greece was in the fortunate position of being the only developed European country, and European Community member, to share a border with, or be close to, a string of newly independent countries in Southeast Europe. Thessaloniki became a shopping destination for busloads of East Bloc residents, but, more importantly, Greek companies began an ambitious program of engagement and investment in the region.

Ambassador Mallias explained that Greek foreign policy has encouraged integration of Southeast Europe into the European Union and NATO. “We were very happy when Bulgaria and Romania joined the EU,” speaking of the EU’s most recent members. For the first time, Greece had a fellow member on its border to the north.

At the same time, Greek companies have been rapidly expanding their presence in the region. The ambassador noted that there are now some 3,000 Greek companies with a presence in Southeast Europe and the East Mediterranean (including Turkey and Egypt), and Greece is ranked the first, second or third source of foreign investment in the Balkan countries, accounting for some $23 billion in total investments to date.

The ambassador said that these investments have created an estimated 200,000 jobs in post-Communist countries where private employment opportunities are sorely needed.

All of this has happened in the last 10 years or so, “and I am confident it will continue,” the ambassador said.

He pointed out that, “Our businessmen know how to take risks in the area.” They also know “who to deal with and when to move.”

This talent has begun to turn Greece into a regional hub for investment and business. In May this year the Carlyle Group invested $1 billion in Greek chemical company Neochimiki.

"This is Carlyle's first investment in a Greek company and reflects our confidence in the country's strong economic growth prospects as well as Greece's position as a gateway to investment in Eastern Europe," Carlyle Managing Director Robert Eastern said.

Also in May, Deutsche Telekom invested over $5 billion to purchase a 25 percent stake of the Greek state telecoms company, OTE, which owns part or all of several fixed and mobile line operators in the region.

The Carlyle and Deutsche Telekom investments represent something Greece has long wanted and talked about, but never achieved: serious consideration as a regional base for doing business in a market of some $150 million people in Southeast Europe and Turkey.

Ambassador Mallias pointed out that “Greece offers the knowledge, network and security” that investors want. And, thanks to the Olympics, it also offers the best infrastructure in the area.

The one fly in Athens’ Balkan ointment is the dispute with Skopje over what to call the Former Yugoslav Republic of Macedonia, as it is known officially at the United Nations and European Union. Greece is opposed to Macedonia as a name, on the grounds that a big part of its own territory uses that name, and irredentism could well gain strength in Skopje.

“Greece is receiving hostile, irredentist propaganda from the north,” the ambassador said.

Ambassador Mallias, an expert on the issue, said that Greece wants a “mutually acceptable,” win-win solution. Bi-partisan resolutions in the 110th US Congress (H. Res. 356, with 120 co-sponsors, and S Res 300, with six co-sponsors) support Greece’s position.

Greece is the number one foreign investor in Macedonia, and “they know Greece is their best neighbor,” the ambassador said. Conditions that should help reach a solution.

Asked about the impact of hosting the Olympics, an exercise that cost Greece an estimated $14 billion, the ambassador said the Games “branded Greece as a country that can deliver.” This is because in the lead-up to the Games there were oft-expressed concerns that Athens would simply not be ready, or safe, in time.

The ambassador said it was a matter of pride to the Greeks that they had met the deadlines, and that even though Greece is a relatively small country (11 million), it was able to pull off such a large event.

There has also been an upswing in tourism, with last year recording some 15 million arrivals, including an increase of over 400 percent from the United States since the Games. Before the hijacking of a TWA plane dampened American tourism to Greece in the 80s, arrivals from the States had topped 800,000 annually. Last year, the number was back up to about 700,000.

Conde Nast Traveler ranked Corfu, Rhodes and Crete among the top ten most popular islands of Europe for travelers from the United States, and Mediterranean cruises from the Port of Piraeus, next to Athens, have long been dominated by American tourists.

Hand-in-hand with increased American tourism, Delta flies non-stop to Athens from Atlanta, US Airways from Philadelphia and Baltimore, and Continental from Newark. Olympic Airways has long had direct flights from New York.

Post-Olympics growth in arrivals started to taper off last year, because of the global economic downturn and the high cost of Euros, making Greece an expensive destination. Still, tourism is now a year-round industry, and accounts for a solid 20 percent of Greece’s GDP. And there are some new prospects, such as Chinese couples who take advantage of a direct flight from Beijing to honeymoon in Greece, the ambassador noted.  

But shipping is still number one, and an arena in which Greece excels.

With the EU making taxation more uniform across Europe, new legislation in Greece has started to attract Greek owners to relocate their companies to their homeland. Today, Greeks own 14-16 percent of all shipping tonnage (making them No. 1 in the world). But, too, the Greek flag is now first in tonnage among EU members, and third in the world.

Ambassador Mallias pointed out that the Greek fleet is becoming the most modern in the world, with some 300 new tankers under construction in shipyards from Korea and Japan and Ukraine.

A measure of Greek shipping prowess: over 50 percent of all goods (and over 60 percent of hydrocarbons) imported by China are delivered on Greek ships.

The ambassador noted that with the United States concerned about control of the world’s shipping lanes, this strong Greek presence in global shipping helps forge a natural alliance between the two countries.

“Just imagine what would happen to the world economy if there was a strike of Greek shipping,” he said.

Greece is also becoming something of an energy hub. A gas pipeline from Turkey to Komotini in Western Thrace has been inaugurated and is due to be extended westward to link up with the natural gas network in Italy. It is named, suitably, the TGI Pipeline (for Turkey, Greece, Italy).

An oil pipeline from Burgas on the Black Sea in Bulgaria will bring Russian oil south to the Greek port of Alexandropoulos, with construction set to start in October this year. This will help alleviate the traffic jam of tankers that now have to traverse the Bosporus to get crude from Russia and Central Asia to Western markets by sea.

And there are plans to extend this route to Italy too, with 2012 the target date for completion of construction. With the oil pipeline that now links Thessaloniki with Skopje, this will make Greece home to four key pipelines bringing oil and gas to Western Europe from the east.