Balkanalysis.com

Major Economic Developments in Greece, with Regional Implications

By Ioannis Michaletos

Even though it has been a member of the European Union since 1981 and has been accepted in all major transnational organizations, Greece has yet to really enjoy the economic boom of which many feel it is capable. Until now, it has not proven as competitive on the world economic stage as it should have been, while its internal market was in most respects a kind of protected agora for certain major businesses.

This dynamic has been changing over the past year, however. Greek economic growth will most certainly have regional ramifications, since international capital is becoming more and more attracted to Greece as a forward base for penetrating the interior, by establishing investments and corporate offshoots throughout neighboring southeastern European/Black Sea states.

The Banking Sector

The major French bank Credit Agricole is set to buy in the coming days Greece’s Commercial Bank (Emporiki Trapeza), for a reputed price of 3.5 billion euros. It is interesting to note that this is the biggest takeover of a Greek bank in the country’s recent history, and will place the French bank in an advantageous position in the Balkans; Emporiki is already well positioned in Romania and Bulgaria, and has a large costumer base.

Moreover, the National Bank of Greece has recently acquired 46 percent of the Turkish Finasbank, for almost 2.2 billion euros and has plans to gain a majority share by 2007. It is the biggest-ever Greek investment in historic rival Turkey, and clearly indicates the goals that the Greek bank has in relation with regional expansion.

Further, NBG wants to acquire the Romanian deposit bank CEC, which has around 7,500 employees and 1400 outlets across Romania. Simultaneously moves are being made towards the Serbian Vojvodjanska, which will be sold by the Serbian authorities within the next few months.

Finally, further out of the neighborhood, NBG would be more than welcome to examine Egypt’s Bank of Alexandria , thus becoming a true regional bank conglomerate. It is obvious that the heads of NBG consider themselves capable of asserting a peripheral role within the European banking world, and at the same time withstand the increased competition.

Another Greek financial institution, Marfin Bank, was recently partially sold to an outside investor. Dubai Investment Group, a large Arab financial conglomerate, purchased 31.5 percent of the company, and is eying the underdeveloped Balkan markets through its cooperation with Marfin.

Other developments in the banking sector include Eurobank’s planned expansion to Poland, with the opening of 300 outlets over the next few years, and the buyout of 10 percent of the Bank of Cyprus by the Bank of Piraeus. And the Agricultural Bank of Greece, which is mainly controlled by state entities and has a market capitalization of almost 4 billion Euro is on the verge of being fully privatized. Most analysts expect that within the next three years, only three to four independent banks will remain in Greece, while the others are going to become affiliated to either foreign or domestic enterprises.

Industry

In other fields now such as the electronic sector, the Greek company Intracom last month sold its telecommunications sector to the Russian colossus Systema, a company that was founded in 1993 and which is already the largest in the electronic and telecommunications sector in the CIS.

In the Greek foods industry, a new group has been formed called VIVARTIA, combining major companies Chipita, Goody’s and Delta Holdings, along with a dozen more foods-related companies. The new enlarged enterprise will the largest in the Balkans, with an annual turnover of over 1 billion euros and some 18,000 employees. On a Europe-wide scale, it will be among the top 40 in its field.

Simultaneously, industrial giants such as the French Danone and the Swiss Nestle are enhancing their operations in Greece. Another one, the Dutch Friesland recently opened a new yogurt production facility in the city of Patras in southern Greece. This concentration of large companies will ultimately have, as a side effect, the elimination of mid-sized ones that cannot compete with the marketing or operational methods of their larger competitors.

Commerce

In the sector of commerce, globalization has made its entrance into Greece with the welcoming image of high-profile European chain stores and their irresistible offers. Already last year, the British Dixon’s electronics chain bought the Greek Kotsovolos stores, with immediate plans of investing in Bulgaria and Romania under the new management. Also, the German multinational Media Markt has made its presence felt, especially among Greek-owned electronic chain stores that could no longer compete with its low-cost offers and marketing techniques.

Finally, the French Leroy Merlin has set foot in the Greek DIY market, while the French bookstore chain FNAC has also established a presence.

Another German supermarket chain called Plus Supermarkets is set to make an entrance on the Greek market in early 2007, and has already drafted plans for a total investment of 600,000 euros. The Greek market has steadily become foreign-oriented in the past few years as far as ownership is concerned. Supermarkets like the French Carrefour and the German Lidl have acquired large market segments and expanded rapidly in Greece

Further, an increasingly commercialized Greece continues to get new mega-shopping malls. The first one, in Athens, is called simply The Mall, and in Thessaloniki has been built another known as the Mediterranean Cosmos. The former was constructed by the Greek property company Lamda Development, which is controlled by the richest Greek businessman, Spyros Latsis. Already, 50 percent of The Mall has been sold to the British bank HSBC for around 450 million euros, whilst the Mediterranean Cosmos is being managed by the British as well (Lambert Smith Hampton Properties).

Shipping

The Greek shipping sector is still growing strong nowadays and there have been some notable developments in the internal Greek market. The Chinese company COSCO has already acquired container logistic outlets in the port of Piraeus, and it views the port as its main destination for container cargo in the eastern Mediterranean Sea. The Port Authority of Piraeus has plans for collaborating with the Chinese, as well as with the Israeli navigation company ZIM for expanding the existing container facilities in order to be able to serve the Southeastern European region.

Moreover, during spring 2007, the American cruise company Carnival Cruises is set to make Piraeus its embarkation port for cruises ranging across the East Med. Easy Cruise, the latest company from famous Greek entrepreneur Stelios Hadjioannou, is negotiating its entrance for Aegean cruises. The company plans to target young people and middle-class customers not previously attracted to the cruise lifestyle, luring them in with the low prices concept already witnessed in Hadjioannou’s budget air carrier, EasyJet.

Technology

Developments have occurred in this sector as well and already the Greek telephone and internet provider Forthnet has been acquired by the Icelandic fund Novator Equities. As far as acquisitions are concerned, the fund has been active mainly in Eastern Europe. Further, Greek mobile telephony provider TIM was bought by the American funds APAX Partners and Texas Pacific Group for around 1.6 billion euros. The markets are anxious to see to whom these funds are going to resell the company within the next few months. The same American funds have bought Q Telecom, a mobile and land telephony provider, for 325 million euros, but they do not intend to merge it with TIM. Instead, the most probable outcome will be the individual reselling of the two companies to different buyers.

To Watch

Within the coming months the government will decide on the fate of OTE, the state telecom company, in which it has a 38 percent stake; new players are going to be unveiled and outside mega-companies such as French Telecom and Spain’s Telefonica are already on the move.

Also, Athens International Airport, in which the state has a 55 percent stake, is set for privatization through the stock market by early 2007.

During the past decade, large capital accumulation has occurred in the Greek shipping sector. The weight of the sector’s international assets will play a key role in the transformation of the Greek economy from one dominated by the state to one dominated by the private sector.

So far as regional expansion is concerned, the most profitable Balkan companies are going to remain targets of increased foreign capital, mainly through the Greek subsidiaries that had pioneered the Balkan expansion trail in the first place.