Address by the Greek Minister of Economy, Competitiveness and Shipping, Ms Louka Katseli, on the Occasion of the 11th Capital Link Forum, New York
December 3rd, 2009
Ladies and gentlemen,
I am honored to address such a distinguished audience attending the 11th Capital Link Forum. Needless to say, I am delighted to be here in New York which I consider home outside Greece. Having spent 15 years of my life in the States, first as a university student at Smith and Princeton and then as a University Professor at Yale, I have to admit I am quite moved to be able to come back as Minister of the Economy, Competitiveness and Shipping of Greece to speak about the many untapped opportunities that exist for even more productive collaboration between the business communities of our two countries. I would like to congratulate the organizers of the Forum, especially Nikolas and Olga Bornozis and their colleagues for all the effort that they have put for so many years to build solid bridges across the two communities.
Time is running fast. Almost two months have gone by since a new Government took office in Greece determined to set a new course for the economy and the country as a whole, to implement needed structural changes and to improve governance .
Transparency and accountability constitute top priorities to enhance credibility and trust in the government’s ability to implement its programme, to avoid capture by private interests, to promote healthy competition and combat corruption. It is for this reason that all major political appointments for public sector jobs are being advertised over the internet and all legislative or policy initiatives in Parliament are preceded by 10 days of open public discourse I urge you all to visit www. opengov.gr . It is through this open gov procedure that Mr Mantzoufas, the new Special Secretary of Public Private Partnerships who is here with us today was recruited from Grant Thornton having worked for Bank of America in the past.
Compared to other European countries, Greece and its economy have proven to be quite resilient to the current financial crisis. While the European Commission’s Autumn 2009 Forecast estimates the real 2009 GDP drop for the Eurozone at 4%, real output, in Greece is expected to drop only by 1.2%, with the effect particularly pronounced on investment expenditures in tourism and shipping receipts. The deterioration however in Greece’s fiscal indicators, which had preceded the world financial crisis has been significant. Large, unplanned increases in state budget expenditures of approximately 4 billion euros, coupled with an unprecedented reduction of planned revenues by 8.7 billion euros, have increased the deficit of the general government as a share of GDP to 12.7% , up from 3.7 % that was the official projection provided by the previous government to the European Commission in January 2009 in the context of the Update of the Stability and Growth Programme 2008-11. The stock of debt of the general government at the end of 2009 has similarly overshot to 113.4 % of GDP and is projected to grow to 120.8% next year before starting declining.
Even though these adverse fiscal developments were well known at least within Greece for a number of years, they caught financial markets by surprise. This explains the temporary increase in lending spreads over the last two weeks, which fortunately have been reduced substantially to expected levels once the government’s determination to improve the sustainability of Greek finances and put its house in order has become apparent.
The 2010 Budget which my colleague, the Minister of Finance has submitted in Parliament last week represents a first step in our sustained effort to restore a sound fiscal position and ensure transparency and accountability. Through primary expenditures’ reduction and permanent measures to enhance revenues and fight tax evasion, the general government deficit for 2010 is expected to be reduced to 9.1% of GDP. The Hellenic Statistical Service is becoming an independent body. An overhaul of Public Finance Management and introduction of programme budgeting is planned for 2010 and 2011. The operation of a Unified Payment System through which all public servants will be paid will rationalise wage expenditures. A comprehensive reform of taxation towards drastic simplification, elimination of exemptions, introduction of a unified tax scale and a stable and transparent tax system will be completed within 2010.
Ladies and gentlemen,
There is no doubt that addressing macroeconomic imbalances and restoring fiscal discipline is a top priority. It is a necessary condition for restoring credibility and stability in financial markets so that the country can finance at relatively low cost its growth and development. It is not a sufficient condition however.
The major challenge for the country is to enhance its productive base and competitive advantage in global markets; to increase productivity and competitiveness, to exploit its untapped potential and unexploited resources, to produce new wealth and secure jobs and a better standard of living for its citizens and for the young generation which aspires to a better future. This is the main challenge for policy making. This is my biggest challenge as Minister of the Economy, Competitiveness and Shipping.
It can be done.
The case has been proven in shipping where Greece is a leader among maritime nations elected to the fourth position in the recent elections for the IMO Council, ahead of the US and Russia. The decision to upgrade the status of the former Ministry of Merchant Marine and make it an integral part of the newly created Ministry ,which I have the honor to head, reflects the fundamental importance that the new Government attributes to Greek Shipping, its accomplishments and its contribution to the national economy.
It can be done because the country is blessed:
by its strategic location at the crossroads of three continents in the midst of a dynamic regional market,
by its unique natural environment which makes it one of the most desirable and attractive destination for business and tourists alike,
by its unparallel cultural heritage and social capital
by its untapped renewable energy potential
by its highly intelligent and very well educated human capital who, if properly motivated can produce miracles.
The main challenge is indeed to turn these advantages into concrete and viable opportunities. Opportunities for new investment; opportunities for joint ventures; opportunities for value-added services; opportunities for regional and international cooperation.
This is the main task ahead of us: to abolish disincentives and create appropriate incentives that will turn advantages into opportunities.
Three are our top priorities:
Priority #1: To cut down on all red tape and pursue a major regulatory reform to lower the cost of doing business and support rather than stifle entrepreneurship. Within 2010 we are determined to simplify all procedures of business start ups, licensing and operation. The bill is under preparation in cooperation with Business Chambers which are to become << one stop shop services>>. Through use of an electronic registry, supported by the appropriate software and infrastructure, the time and the relative requirements required to open up a business will be greatly reduced.
The regulatory reform agenda also include strengthening of competition policy which has practically remained unchanged since 1977, so that competition in both goods and services is enhanced for the benefit of the consumer.
Priority #2: To spur a sluggish economy through channeling liquidity in the market especially to small and medium sized companies that face a severe liquidity squeeze and enhancing investment demand .
Two new bills are sent to the parliament next week, which enable companies and individuals in hardship to restructure their loans and maturing obligations and in the case of individuals even to annul their debt obligations by court decision if they are proved to be unable to repay. These are to be complemented with capital infusion and provision of state guarantees for new loans targeting small enterprises in distress.
In parallel, public investment is expected to increase by 800 million Euros in 2010 raising the investment budget as promised to 4,2% of GDP. Almost 70% of the total investment budget for nest year is financed by the Community fund programme totaling 26 billion euros covering the period 2007-13.
The mobilization of investment demand will also be supported through the full repayment of all government obligations due to private domestic and foreign companies by the first semester of 2010 as well as by the acceleration of evaluation procedures for 2,100 project applications pending at the Ministry.
Priority #3: To improve competitiveness through appropriate restructuring and new greenfield investments. Priorities include the energy sector, especially renewable energy in wind, PV, geothermal, hydro etc, the tourism and cultural sectors, environmental management, the ICT and BIO sectors where Greece is a leader in mobile penetration, major infrastructure projects and other business services including logistics, etc.
Foreign direct investment in these and other areas is very much welcomed.
This can be supported by both available grants and/ or tax benefits through the Investment law or and via Public Private Partnership. Further, we are in the process of creating a Hellenic development Fund which will be able to participate in a number of large economically viable and financially promising investment projects. The provision of loans, equity as well as investment partnerships will be funded through a wide range of HDF securities, from large volume benchmark bonds to private placements and commercial paper programs.
Ladies and gentlemen,
None of the above can be achieved if we do not strengthen our collaboration. If we do not profit from each other’s strengths, ideas, resources and experience.
The US offers a lot. So does Greece; a country with history that is moving forward.
Relationships between Greece and USA are founded on a long tradition of shared values that underpin our democratic institutions..
I am confident that in the coming years we can establish new grounds for further consolidating our cooperation.
Let us expand our trade and investment relations. Let us exchange ideas and turn advantages into shared opportunities. Challenging times demand bold decisions. Let us dare to…. Succeed!!
Thank you very much for your attention.