Magazine article Global Finance

Greece: Economic Overview

Magazine article Global Finance

Greece: Economic Overview

Article excerpt

Under the leadership of Prime Minister Costas Simitis, Greece is struggling to balance its needs for improved infrastructure and capital imports against an EU-endorsed fiscal austerity program aimed at reducing the budget deficit, debt, and inflation. Failing to address the country's need for modernization will limit its attractiveness to foreign investors, but failing to meet the EU fiscal goals will preclude the participation of Greece in the European Monetary Union.

By following the current fiscal program, with goals set through 1999, Greece stands to gain EU support worth close to 5% of the

country's GDP, or close to $6 billion a year. The disbursement of the EU support funds, however, are contingent on the success of the government to meet the its targets.

FOREIGN INVESTMENT CLIMATE

One element of the government's fiscal reform plan is to shed equity in a number of state-owned companies through privatization or concession. Current plans include the sale of minority stakes in some $1.8 billion worth of state-owned companies, including several small banks. Overall, however, the program has been slow to develop.

The government holds controlling interest in more than 50 state companies, including the largest insurance funds and three-quarters of the banking system. Resistance from organized labor has at times slowed the privatization process, as in the case of the delayed sale of the Skaramangas shipyard.

Greece maintains foreign investment restrictions for equity holdings in the banking, maritime, air transportation, and real estate sectors. …

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