By Nick Larigakis
Having just returned from my annual year-end trip to Cyprus and Greece, I am more aware of the serious and potentially dangerous economic climate confronting both countries, especially Greece. While the economic crisis hit the U.S. more quickly, the predictions of experts have come to fruition that both Greece and Cyprus were not going to be immune to the global economic crisis, anymore than they have been to the outbreak of swine flu. Though it hit later, the crisis appears to be more acute in Greece.
In one of my meetings in Cyprus with U.S. Ambassador Frank C. Urbancic, he hosted a coffee gathering at his residence and invited a handful of leading Greek Cypriot business executives to meet with me. The primary topic on the agenda was to explore ways of facilitating business between the U.S. and Cyprus. This is important and significant not only for the economic climate of Cyprus, but because it also would serve to further strengthen relations between the two countries.
In Greece, the situation is frankly more serious and spiraling sharply downward. Aside from the per usual Panathinaikos vs Olympiakos discussions or the ugly, albeit, scaled down riots and demonstrations to mark the one year anniversary of the December 6, 2008 shooting of a 15 year old youth, by far the biggest topic of discussion is the bleak outlook of the economy. European Commission economic forecasts lists Greece’s public deficit at 12.5% which translates into 112.6% of its GDP.
Greece’s sovereign debt was downgraded recently by Fitch, the international ratings agency. Fitch Ratings cut Greece’s debt rating from A- to BBB+ with a negative outlook, the first time in 10 years a major ratings agency has put Greece below an A grade, citing fiscal deterioration in the euro zone’s weakest member. The cut followed a Standard and Poor’s report that Greek banks faced the highest risks in Western Europe.
In 2009, Greece had the EU’s second lowest Index of Economic Freedom (after Poland), ranking 81st in the world. Among other factors, the country suffers from low global competitiveness relative to its EU partners.
Prime Minister George Papandreou has unveiled a series of spending cuts, warning that the country is at risk of “sinking under its debts.” He said that he plans cuts that would include 10% reductions in both social security spending and overall government operating expenditures.
Spending cuts and tax increases however are unlikely to be popular with Greek citizens as their country enters a recession while other countries appear to be returning to growth.
What can be done? No one has the immediate swine flu like vaccination. Even that took time to develop. However, untreated, the symptoms will continue to ferment which will lead to more political and social unrest. It’s amazing how many beggars one sees today on the streets of Athens and how petty theft crimes have sharply risen. Speaking to three female friends while I was there, I learned that within the past six months each one had been robbed on the street and two had been beaten as the robbers attempted to steal their bags! Having lived in the U.S. for 45 years, I can honestly say that I personally do not know of any three friends who have been robbed and beaten.
While we all know that Greece and Cyprus will not disappear off the map, we do know that the common person on “Main Street” will suffer the most enduring hardships. It takes time for economic policies and government sponsored economic stimulus programs to take effect, if ever. Greece, especially, is in much need of foreign direct investment. And a good place to try and entice this investment is from the U.S. From a statistical perspective, there has been practically zero direct investment from the U.S. in the past thirty years!
The AHI has long advocated as part of its agenda the need to promote U.S. investments in Greece and Cyprus. To this extent, AHI was the first Greek American organization (way back in 1975) that organized the first ever “Doing Business in Greece” conference. Over the years AHI has organized 15 such conferences. In addition, for a number of years the AHI bas been promoting Cyprus, through seminars in different U.S cities, as a regional U.S.-business-friendly destination. And in 1996, AHI published the third edition of “Doing Business in Greece” a two volume, one thousand page publication.
Over the years we have made serious proposals to leading Greek business chambers, including ELKE, the former Greek government “one stop shop” agency which was to promote Greece for foreign direct investment. Sadly, AHI never received a serious response to any of these proposals, despite being encouraged to submit them.
However, now more than ever, U.S. investment should be seriously pursued as one way of trying to revive the Greek economy. While this will not take care of the immediate short term needs, it is vital to Greece’s long term well-being, and it will require an overhaul of the Greek bureaucracy and of the way business is conducted in Greece.
The infusion of investment capital would create jobs and further strengthen the bilateral relationship between Greece and the United States. This would also have the potential to serve well Greece’s multifaceted foreign policy issues in the region. U.S. foreign policy has traditionally been inclined to be more supportive where U.S. business interests are involved.
Currently there are two American projects in the works – one in Cyprus and one in Greece. The Texas-based U.S. firm Noble Energy has been granted a license to search for oil in one of the designated blocks inside Cyprus’s exclusive zone off the south coast. The estimated investment is one billion dollars.
In Greece, Lockheed Martin, a major U.S. defense contractor, has long been involved through its partner, Hellenic Aerospace Industry (HAI), in off-set projects which have included different components of the F-16 fighter jet being manufactured in Greece. And recently, HAI has been awarded an approximately $180 million contract to manufacture a major portion of the fuselage of the C130 J Super Hercules. This is a deal that has the potential to create more than 300 new jobs over the years. Unfortunately, this deal could be in jeopardy in view of the current inflexible bureaucratic process, which is negatively affecting HAI’s ability to proceed with the hiring of the personnel required by this contract. The collapse of this contract would be detrimental to any such future projects, not just by Lockheed, but by others.
The real tragedy is that both Greece and Cyprus have always had the potential to attract foreign investment. However, neither country has ever really taken advantage of that potential. Nor has either country fully enlisted the support and participation of Greek and Greek Cypriot communities around the world in these efforts. Now is the time to start.
*** Nick Larigakis Executive Director, American Hellenic Institute