After 4,5 years of uncertainty due to the economic crisis in Greece, the new government is taking steps to move forward. Due to the New Democracy’s majority in the Greek parliament, New Democracy is aiming to bring political stability back in Greece.
By Stavros Theocharis, Corporate Legal Counsel European Law (LL.M), Leiden University
The promising new government has set a new goal: the creation of an investment friendly environment which will attract foreign investments from all over the world. The new minister of Development and Investments highlighted during his speech at the Economist that: “Greece will be a totally new country for business”.
In confirmation of this statement, he is leading conversations to make sure the long-stalled privatisation of Hellinikon, a prime site that used to be Athens’s airport, gets under way this year. Hellinikon Project is an EUR 8 billion investment that is estimated to create more than 75,000 job openings in total. Under the supervision of the new minister, huge investments in Corfu and Rhodes, which had been stucked for many years due to bureaucracy, are finally taking place.
It is evident that Greece is back on foreign investors’ radar screens as Greece is considered an attractive destination for investments. After a series of meetings with important European leaders and after the meeting between the Greek Prime Minister and the US Secretary of Commerce Wilbur Ross, the Greek Prime Minister is promoting the great investment opportunities in Greece.
The markets have already shown positive reactions to Mr. Mitsotakis and his New Democracy. On July 16, 2019, Greece issued its first seven-year bond since 2010. A modest target of €2.5bn ($2.8bn) issued was hugely oversubscribed: offers exceeded €13bn, pushing down the yield on the new bond to 1.9%. According to Bloomerg on September 12, 2019, for the first time in more than a decade, Greece’’s 10 year bond yield is moving close to 1,50%, lower than that of the US.
The new Greek government must show foreign investors its will to establish a stable tax system. In order to achieve this, the new government announced the following measures: i) lowering corporate taxation from 28% to 24% in 2020 and to 20% in 2021, ii) a reduction in withholding tax on dividends from 10% to 5%, iii) a lowering of social security contributions, iv) a reduction in the standard and reduced rates of VAT from 24% and 13%, respectively, to 22% and 11%, v) a VAT exemption on construction services for a three-year period, vi) a 30% reduction in the unified property tax known as ENFIA for all property owners.
It’s common knowledge that the best way to achieve sustainable growth internationally is to attract foreign investments. As a Greek living in the Netherlands for the past 17 years, in a country where trade and foreign investments play a significant role for the Dutch economy and after seeing the first positive steps of the new government, I came in contact with Mr. Adonis Georgiades, the Minister of Development and Investments. After a warm welcome we discussed the attraction of foreign investments and any opportunities which would advance the growth of the Greek economy. Furthermore, during our conversation I highlighted the importance of avoiding bureaucracy in any potential investments and after that meeting. I got the feeling that Greece has a minister who understands the importance of the elimination of the bureaucracy in order to be able to attract new foreign investments.
Therefore, a stable, efficient, fair and business-friendly tax system is rendered as necessary now, more than ever before, and the creation of a simplified system of tax incentives and tax relief for investments is essential. The reduction of bureaucracy, the increase in transparency and the improvement of the services offered to investors are catalytic elements for the future of the Greek economy that is immediately expecting a range of significant investments. To start with, Onex Elefsis Shipyards is to invest up to $400m over a 15-year period to acquire fellow Greek firm Elfesina Shipyards, a 120-million-euro investment in a tourism project in the Kassiopi region of Corfu and a huge investment in Afandou beach on the southeastern Aegean island of Rhodes, where hotels and luxury houses will be built and the existing 18-hole golf course refurbished. In order for Greece to be an attractive investment destination, it is of importance to provide advanced services to help investors analyze investment decisions and deal with business activities. The actions include the improvement in the quality of sources, effective operation of services such as the one-stop-shop that aims to reduce bureaucracy and to improve the speed and efficiency of enterprises in Greece. It is also of importance not to only target the main sector (i.e. tourism) as Greece has much more than that to offer.
A great example might be my city, Volos. Volos has one of the most important ports in the country and a modernized airport, but none of them is exploited as it should be by the State. Proper use of the airport and port would be the beginning of the activation of the industrial area of Volos. The industrial area used to be a prestigious area whereby great factories used to create job opportunities to thousands of locals in the past, but most of these factories do not exist anymore. For this reason, the creation of a serious investment plan is a necessary step in order to highlight the area and to achieve the creation of new job opportunities.
Furthermore, promoting the improvement and the stability of the Greek economy to investors should be more prominent. Last but not least is the importance of the creation of a strong banking system as a strong economy requires a strong and reliable banking system to support new investments and growth in Greece. Therefore, Greek banks have to focus on the major issue of tackling non-performing loans in order to achieve the targets set by the Bank of Greece for their immediate reduction in the next period.
The new government which now exists of many young experienced Greeks with working experience abroad gives me personally the hope for great achievements in the nearly future. It’s a great opportunity for them to make use of their working experience abroad and to bring some fresh air to the government in order to make some major changes in the country. My dream and my desire is to personally help my country bring in some great investments in the time to come.
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