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6th issue - November 2007

(20.4*)

Greek Economy & Markets

07

Economic lift comes from Brussels Greece, Turkey team up on energy front Green tourism leads the way Plan set to build on FDI success


6th issue - November 2007

Contents Cover Story Yiannis Papathanassiou 40 bln euros to fund development and real convergence with EU

(page 14)

Panagiotis Drossos Reshaping the future: NSRF seen as key to Greece’s development

(page 16)

Alexandros Kontos Competitiveness and environment protection top target list

(page 22-23)

Dex Agourides MOUs inject know-how, avoid inflexibilities

(page 24-25)

Dimitrios Kontos Human capital: Driving force for growth and social cohesion

(page 26)

Themes Gas pipeline forms important link in international energy chain The pipeline will figure importantly in upgrading Greece's geostrategic role, making it a natgas transit route. (pages 7 to 8) 'Green' tourism to assist with modernisation of vital sector With tourism receipts exceeding 11.5 billion euros per year, the sector contributes around 18 percent to economic growth. (pages 11 to 12) Greece to build on record year as inflows reach 4.2 bln euros The Hellenic Center for Investment (ELKE) is promoting the numerous investment opportunities that Greece offers and is proactively supporting the path of economic growth that emanates from Greece. (pages 44 to 45) Greek Economy & Markets 07 A publication of the “Agora Ideon” forum.

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Greek Economy & Markets 07 is also distributed along with the International Herald Tribune (IHT) and Kathimerini English Edition newspapers in Greece, Cyprus and Albania. The content of the magazine does not involve the reporting or the editorial departments of the IHT.

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Companies Nine month earnings

(pages 34 to 39)

Piraeus port on development route as financial results improve

(pages 40 to 41)


Facts & figures

The profile of the Greek economy

Latest Statistical Data Period

Value

Consumer Price Index (CPI)1

October 07/October 06

3.1

Harmonized Index of Consumer Prices (HICP)1

October 07/October 06

3.0

Producer Price Index in Industry1

September 07/September 06

4.0

Industrial Production Index (excluding construction)3

September 07/September 06

2.3

August 07/August 06

7.7

Gross Domestic Product (provisional data)1

Q3 2007

3.6

Unemployment Rate2

Q2 2007

8.1

2001

-

August 07/August 06

-1.3

Turnover Index in Retail Trade1

Population (2001 Census)4 Building Activity)3 1

Annual rate of Change, 2Rate, 3Periodical rate of change, 4Value

In October, the unemployment rate decreased by 1 percent in comparison to same period last year. However, the Consumer Price Index increased by 3.1 percent. Also in the second quarter gross domestic product expanded by 4.1 percent, whereas in the third quarter the growth rate decreased to 3.6 percent. Finally, the Producer Price Index in Industry increased by 4.0 percent in September compared to 1.6 percent last July.

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Facts & figures

NSRF’s 20.42 bln injection

The budget for the European Union’s contribution to the National Strategic Reference Framework (NSRF) amounts to 20.42 billion euros, including the Cohesion Fund. Budget allocations, although expressed as a package for each country, are calculated per region. The total budget, which includes Greece’s national contribution, reaches 31.9 billion euros. The Finance Ministry has said that 80 percent of EU-backed funding programs for the 2007-2013 period will be aimed at regions other than Attica. The programs will aim at boosting the extroversion of the economy, improving competitiveness and helping diversify the country’s vital tourism product. Other areas that funds will be poured into include securing energy efficiency, digital convergence and improving the health system. In comparison with the previous funding program, the third Community Support Framework (CSF), the NSRF will focus more on Lisbon-oriented goals by earmarking 67 percent of funds for related actions. The respective percentage in the CSF stood at 55 percent.

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The pipeline will figure importantly in upgrading Greece's geostrategic role, making it a natgas transit route and, in combination with the Burgas-Alexandroupolis oil pipeline and South Stream, a vital link in the chain supplying Europe with hydrocarbons from the Caspian and, potentially, the Middle East and Africa.

Gas pipeline forms important link in international energy chain he Turkey-Greece Interconnector inaugurated by prime ministers Costas Karamanlis and Recep Tayyip Erdogan on November 18 is part of a larger project that will link Turkey and Greece with Italy, supplying Western markets with natural gas from the Caspian basin. This partially EU-funded and US-supported project is the first that will bypass Russia — at least in the present phase — and is aimed at transporting 11.6 billion cubic meters of Azeri natural gas annually by 2012-2014, when the ITGI (Interconnector Turkey-Greece-Italy) will become fully operational. Through the creation of this pipeline, Karamanlis and Erdogan — who have invested heavily in economic diplomacy, with particular emphasis on the energy sector — hope to achieve closer relations in the political, social and cultural sectors as well. The realization of this project, in combination with other projects under way, in fact goes a long way toward establishing not only their energy security, but also that of the region (though ultimately this will require the settlement of certain pending problems in the region, such as that of Kosovo). At the same time, the horizontal corridor taking shape and bearing on most of Southeast Europe — with a number of projects coming from regional players — is expected to create development prospects and investment opportunities for the region as a whole.

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The Greek dimension The ITG pipeline will also figure importantly in upgrading Greece's geostrategic role, making it a natgas transit route and, in combination with the Burgas-Alexandroupolis oil pipeline and South Stream, a vital link in the chain supplying Europe with hydrocarbons from the Caspian and, potentially, the Middle East and Africa. Meeting the European and Western need for diversification of energy sources and transit routes, the ITG will enhance Greece's role in Europe and give it a stronger voice in the broader region and on energy and trade issues in general. But the 'extroversion' Greece's energy policy has been undergoing in recent years needs to be continued and broadened if Athens is to avoid being caught in the Russian-Western energy cross1

fire. To this end, Greece can enter into direct, bilateral agreements with hydrocarbon-rich states (whether in the Caspian basin, the Middle East or North Africa), fortifying its position and optimizing its latitude, while also maximizing the commercial benefits to be gained from energy transiting its territory. Assuming adequate storage facilities and infrastructure are created, this would lead to benefits beyond mere transit duties: There is money to be made — and leverage to be gained — from the resale of natural gas, oil and petroleum products. It is reasonable to expect that Greek-Turkish bilateral relations will become more ‘predictable,' mainly because any crisis hotspots will be less likely to flare up in the future if this means losses for both sides. A Greek-Turkish crisis would not only damage the credibility of both states as transit routes, but might also impact the flow of energy to Central Europe, raising energy prices for European consumers, with a possible backlash for those responsible. So the ITG should bring the two countries closer together, given that such an endeavor requires consistency, stability and commitment, and will thus force the two countries to find common ground on which they can both build a profitable future. This pipeline will also serve as a bridge for better understanding between Athens and Ankara: It is, in effect, a joint, Greek-Turkish commitment to Europe. However, despite rendering Greek-Turkish relations more ‘predictable' and engendering positive developments in certain low-policy areas, the ITG will not resolve the thornier issues in their relations.

Western options on the ‘nationality’ of natgas With regard to the sustainability and operability of the ITG pipeline and future projects — provided we want them to be more competitive, working at capacity in the mid-term — there are, realistically, three alternative solutions: Turkmenistan, Russia and Iran. In the case of Turkmenistan, the upside for the West is that potential energy agreements with Ashgabat (presumably accompanied by corresponding investments) would go some way toward loosening 

If the ITG is to be 'filled,' Azerbaijan will have to more than double its production in the coming years, which in practical terms means huge new investments, new infrastructure and, consequently, fresh capital.

by Dr Constantinos Filis Head, Russia and Eurasia Center, Institute of International Relations, Panteion University www.cere.gr

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Themes

 Russia's hold on the country. At the same time, Russia would be bypassed, fulfilling the ardent desire of both Washington and Brussels. Of course, an agreement of this kind would depend to a great extent on the Russian state and the energy colossus Gazprom, which holds the rights to 80 percent of Turkmenistan's current energy reserves and has closed exploration deals for new natgas fields. What is more, Moscow controls the pipeline network on which — for the time being — Turkmenistan's natgas exports to the West depend. Consequently, with a relatively unpredictable political regime, with the legal status of the Caspian still unresolved, with neighboring countries raising environmental objections to the undersea pipeline to Azerbaijan, and with the country's reserves under dispute, Turkmenistan doesn't appear to be the best of alternatives. However, there is always the mega-producer Russia, which can and wants to satisfy the pipeline's supply needs, despite the fact that it is also promoting South Stream, a project that would compete with the ITG. Just last year, the pipeline was the focus of Russian interest for the transport of Gazprom natgas. In fact, Russia offered to construct the Greece-Italy pipeline, arguing that it is the only country that can actually fill it with gas. This brought a strong reaction from Washington and Brussels, which are pursuing both diversification of Europe's energy supplies and limited dependence on Gazprom. So Russia may look like the ideal solution in terms of its being able to supply the necessary quantities of natural gas, but there are two major obstacles that would be difficult to overcome. The first — and less critical — is resistance from the powerful American camp. The second — and much more intractable — is that Europe and the West in general do not want to be hostage to Moscow's energy and strategic wiles. Iran, on the other hand, has the quantities of natural gas required to supply the pipeline. Opting for Iran would enhance diversification of suppliers and routes, while also helping to supplant Russia. Iran is, after all, the only country that can compete with Russia to the extent of threatening Russian dominance. Moreover, Tehran is anxious to put its natural gas on the global market — and at a competitive price — in pursuit of a badly needed currency injection. However, the US embargo on Iran, the unpredictable regime of the mullahs and Ahmadinejad, and the latter's nuclear program all

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stand in the way of Iran's supplying the pipeline in question or other energy projects directed at Western markets. Based on the above observations we can conclude that — all things being equal, and provided the serious issues in Iran's relations with the West are resolved — Tehran is the least problematic alternative as far as Western strategic planning is concerned. Regardless of the pending issues that exist, Iran should by no means be prompted toward more extreme actions. In fact, in the present state of affairs, Iran is the more attractive of the three alternatives, given that Russia — which, by the way, due to its interdependence, does not have the room to maneuver that some incorrectly credit it with — will be bypassed; suppliers and transit routes will increase in number; and new pipelines will be more economically and commercially viable thanks to increased competition. Iranian-Western energy cooperation would also bring Tehran closer to us, setting relations within a new, more predictable framework. And this is why we may well see Europe

put pressure on the US in the midterm future to lift its embargo on Iran and come to terms with the fact that a marginalized Iran does not facilitate diversification of energy suppliers. By the same token, Tehran will have to change its tack if it wants the West to see it as a potentially reliable supplier. Regardless of any Western preferences as to who will supply the ITG, if the pipeline is to operate competitively — that is, at or close to its full capacity of 11.6 billion cubic meters — it will have to carry either Russian or Iranian gas; otherwise, profitable operation will have to be postponed. It is hard to predict the ‘nationality' of the natgas that will fill the pipeline. And it is equally difficult to foresee whether Western energy independence from Russia — so strongly desired in some circles — will be achieved, and what developments we will see from here on in on the global energy map. One thing is certain: Energy-related issues, with all of their intricate and profound strategic implications, will continue to be high on the international relations agenda.


The Greek and Turkish prime ministers opened the new pipeline in a high-profile event. The project is seen as helping to diversify European energy supplies and boosting the region’s presence on Europe’s energy map. Karamanlis repeated Greece’s support for Turkey’s bid to join the European Union and said the pipeline would improve stability in the region.

Old rivals Greece and Turkey team up on natural gas pipeline

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Commercial ties between the two nations in the last few years have improved considerably, with cross-border deals becoming larger and more frequent. According to industry data, Turkish exports to Greece more than doubled between 2000 and 2006 to reach 1.3 billion euros — a rise from 1.18 to 2.62 percent of Greece's total imports. Greek businesses on the other hand have been expanding into Turkey as a means of tapping the country's strong growth prospects while putting aside political concerns. In the biggest foreign investment made by a Greek bank, National Bank, Greece's largest lender, has purchased a majority stake in Turkey's Finansbank for more than 2 billion euros. After the inauguration of the natural gas pipeline, it was announced that Karamanlis will make an official visit to Turkey early next year, a trip originally slated for 2005 that would be the first of its kind in nearly 50 years. ANA

reece and Turkey inaugurated a pipeline transporting natural gas from the Caspian Sea area to the continent in a move seen bringing the two rivals closer together and boosting the region's presence on Europe's energy map. The opening of the natural gas project comes at a time when steps also appear to have been made on the Burgas-Alexandroupolis oil pipeline and Greece is laying the groundwork to have a second natural gas network passing through its territory. The opening of the Greek-Turkish connection involved a high-profile ceremony in which Greek Prime Minister Costas Karamanlis and his Turkish counterpart Recep Tayyip Erdogan shook hands at a symbolic meeting on a bridge over the Evros River. ‘It is a great step forward for relations between the two countries and for stability in the region. By cooperating we can build a better future for all,’ Karamanlis said. ‘This pipeline is the first in a series of important energy pipelines which are transforming Greece into an international energy hub,’ he added. The pipeline will provide the European Union with its first supply of gas from the Caspian region, bypassing Russia and the volatile Middle East. It will carry up to 400,000 cubic meters of Azeri gas this year to help cover increased demand in Greece's recently liberalized electricity market. This will rise gradually to 115 billion cubic meters annually after a planned extension to southern Italy is completed in 2012. Greece will take up 3.5 billion cubic meters annually, with the remainder going to Italy. Greece's Public Gas Corporation (DEPA) has signed a 600-million-euro deal with Italy's Edison Group to build the extension beneath the Adriatic Sea. The project is expected to help boost Greece's position on the European energy map and act as a deterrent for any future crisis with Turkey. Karamanlis repeated Greece's support for Turkey's bid to join the European Union and said the pipeline would improve stability in the region. ‘The pipeline adds energy not only for development but also to strengthen Greek-Turkish ties. It acts beneficially for ties between us. It transforms the two countries into a transport hub toward Central Europe,’ the Greek prime minister added. Greece and Turkey, still divided over territorial disputes in the Aegean Sea and Cyprus, agreed in 2004 to build the 285-kilometer natural gas pipeline between Karacabey in northern Turkey and Komotini in Greece.

Foreign support The EU supports the project as it looks to diversify its energy suppliers and reduce its dependence on Russia, from where it buys about a quarter of its gas. The US is also promoting the energy-rich Caspian nation as an alternative gas supplier for Europe following the recent commissioning of the south Caucasus pipeline to Georgia and Turkey, which will eventually carry 20 billion cubic meters annually. Political commentators said it is no coincidence the opening ceremony was attended by US Energy Secretary Samuel W. Bodman and the new US ambassador in Athens, Daniel Speckhard, in his first public engagement since arriving in Greece. Bodman described the new energy supply link as a ‘significant development, one that builds a critical new energy bridge between the East and West.’ ‘This project is remarkable in many ways, not least of which is the technical and financial complexity involved in its construction,’ said the US energy secretary. ‘Building this pipeline also required a regional consensus, complex environmental analyses, and a lengthy and productive dialogue with all of the communities along the entire route,’ he added. Bodman described the pipeline as a ‘critical first step in a new energy supply chain; and it comes on line at a critically important time. The European Union is the world's biggest gas import market — and one of the world's fastest growing. It is reasonable to expect that Europe's dependence on energy imports will continue to grow over the next 25 years 

By Stelios Bouras 9


Themes

 — meaning that Azerbaijan and the rest of Central Asia is poised to become Europe's newest main source of supply, alongside the North Sea region, Russia and North Africa.’

Petrol deal follows The recent signing of the oil pipeline deal linking Bulgaria's Black Sea port of Burgas with Alexandroupolis in northeastern Greece is also seen as boosting Greece's energy profile while prying open the door of new business opportunities for the region. The Thrace region is one of Greece's poorest and the government has high hopes for economic development stemming from the pipeline projects. The deal, which will involve pumping mostly Russian crude to the Mediterranean, will take Greece a step closer to transforming into an energy hub at a time of soaring petrol prices and a growing world appetite for power. Construction of the 280kilometer pipeline is scheduled to start at the end of 2008 with a completion date set for the start of 2011. Once completed, the pipeline will be able to transport around 35 million tons of oil per year. This amount could increase to 50 million tons at a later stage, according to officials involved in the project. Politicians have repeatedly called the signing of the deal an ‘historic occasion' as they point to the fact that it is Europe's first major pipeline project

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in the last 40 years. The signing of the deal between the three countries — Greece, Russia and Bulgaria — took 14 years to complete. Earlier this month, the three countries signed a key protocol which will open the way for the realization of the long-delayed oil pipeline, according to Greek Development Minister Christos Folias. ‘A major and encouraging step has been made that will allow us to move forward. There remain, of course, several issues for discussion, but we are on the right track,’ he said in an interview with daily newspaper Kathimerini. The protocol provides for the setting up of a joint international company which will build the pipeline from Burgas to Alexandroupolis, carrying Russian oil and bypassing the congested Bosporus. Folias said he found an excellent spirit of cooperation during his recent visit to Moscow. ‘Loose ends are being tied up on the basis of a specific timetable and we are ready to take sure, steady and, above all, quick steps. Already, on my own initiative, representatives of the three national consortia participating in the scheme met in Athens and concluded the signing of a protocol which opens the way for the setting up of the international company,’ he said. ‘With the implementation of these major energy projects, Greece is being transformed into an energy hub and an attractive pillar of investment in the energy sector,’ the minister added.

South Stream project Greece's decision to take part in the construction of a natural gas pipeline to run under the Black Sea, linking Russia with Europe, will further upgrade the country's role as an energy player, according to senior government officials. Karamanlis has stated that Greece will be part of the South Stream pipeline after he met with Russian President Vladimir Putin. Italian energy company Eni SpA and Russia's statecontrolled OAO Gazprom have signed a memorandum of understanding on the possibility of supplying Russian gas to European Union countries through the South Stream pipeline.Under the plan, more than 900 kilometers of pipeline could be laid under the sea and across Bulgaria before splitting off into two directions, north through Hungary to reach Austria and south through Greece and on to Otranto, a port near the southeastern tip of Italy. Improved ties with international energy networks are needed to help satisfy Greece's growing energy thirst — a trend likely to keep growing in the future given the country's strong growth rates. According to figures from the International Energy Agency (IEA), final energy consumption in Greece reached 23.5 million tons of oil equivalent in 2004, about 50 percent higher than levels recorded in 1990. Experts estimate that this growth rate indicates that Greece will be required to double its current energy supply within the next eight years.


With tourism receipts exceeding 11.5 billion euros per year, the sector contributes around 18 percent to economic growth. On the other hand, it serves for the creation of new employment posts as well. A crucial starting block for the industry is its promotion abroad.

'Green' tourism to assist with modernisation of vital sector ourism comprises a national priority for a very simple reason: It attributes a tangible and countable result to Greek economy. It is not abstract or mutable. Its development is perceptible through the rhythms of our economy, outlining an important aspect of the country's general profile. Tourism receipts alone, for example, exceed 11.5 billion euros. This means that the sector contributes 18.2 percent to the GNP. On the other hand, it serves for the creation of new employment posts as well. Just think, tourism development in Greece has offered the country, and especially the new generation, thousands of employment posts over the past few years, to the point where we can proudly say that the tourism sector has provided jobs directly or indirectly - to more than 850,000 people. What does all this mean? First of all, it means that tourism development is a bet of national importance which should be based on quality, entrepreneurship and investments. Secondly, we ought to be realists, willing to comprehend that nothing can yield fruit if we haven't sown the seeds of investment first. The crucial starting block is promotion abroad. This involves not only investment in our international image abroad, but dealing with its reformation as well, mostly after the devastating fires in August. The country's promotion abroad should be inspired by vision, imagination and inventiveness. And so far we have presented the modern image of Greece, the image of a country with four seasons, where everyone can live the true experience. The second step is our steady orientation toward the continuous upgrade of our infrastructures and services, with respect to the natural environment, highlighting our country's inexhaustible and unique wealth. One of the newest forms of tourism, having today an exceptional and competitive position worldwide, is ecological tourism, or 'green' tourism, as I call it. I often speak about 'green' tourism because I think that if we want to win the bet on profitable tourism development, we should vitiate the point of view which holds that development - and in this specific case tourism development - has to be against the environment. Actually, that is not entirely correct. What I believe is that the new era's creation could be carried out in perfect harmony with the protection and utilization of the natural environment. For this reason, we aim to establish green tourism at our tourist destinations using pilot programs, in cooperation with the local authorities. Some of the first moves in this matter have to do with the creation of various places

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for ecological campsites and ecological marinas. These interventions are important not only for the environmental consciousness that should govern the tourist development of this country; they actually show us the way that will help us to change Greece into a more human, qualitative and multidimensional country. In order to achieve the above, we are do ing our best and raising the framework of tourism politics to a national venture. The modernization of the tourist product is our main target. Attention, though: Tourism investment is a multidimensional affair. It consists of various initiatives, which are public infrastructures, big private investments in tourist installations, promotion, human resources and, without doubt, technological applications. Hence, we support entrepreneurship that leads to the modernization of the tourism product, keeping in mind that the general image does not emerge from indiscriminate management but from small and very important investment activities that develop the product systematically, paying attention to the details and being steadfast to the end. Moreover, through the investments under way, as well as through all those that are to be announced in the next few years, we desire a kind of alteration of our tourist product, so as to become more competitive internationally and claim our consolidation among the most popular destinations worldwide. How? By the development of special forms of tourism. By the application of natural resources management models. By the formation of the staff. And, of course, by the projection of tourism models via digital applications, new technologies and the media. The fact that we are in the position to increase investments is not something new. We are already doing it. In total, up to June 30, 2007, 1,057 tourism investments have come under the Development Law, a total budget of 3.8 billion euros, while public expenditure is up to 1.5 billion euros. With regard to the development of Community resources by the Operational Program 'Competitiveness' (OP), up to October 25, 2007, the percentage of absorption for the tourism sector was 73.37 percent. The total amount that we managed for the OP was 719.7 million euros. The numbers say it all. So, it is clear that Greece has turned a page and is struggling with all its might to impose its own vision of tourism, a vision that will give the country a social and cultural characterization within the 21st century. And, step by step, it is succeeding in making its mark. For example, according to Greek Nation- 

By Aris Spiliotopoulos, Minister of Tourism www.mintour.gr

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Themes

 al Tourism Organization (GNTO) data, during the first nine months of 2007, 93 opinions regarding the establishment or extension of hotels were issued for insertion into the Development Law. Twenty-five of them concern five-star hotels of a total capacity of 5,000 beds. And while the current activities are taking place, all the necessary initiatives are being promoted in order to reinforce tourism development within the framework of the OP for the 4th program period 2007-2013 while respecting environmental protection. In total, the ministry is preparing to put to use 550 million euros in tourism. Of this amount, 300 million is connected to the OP 2 framework, to be shared between the eight non-transitional districts of the country. Also, it would be interesting to mention the enhancement of the Districts of Transitional Support, mostly by the Regional Operational Programs. Our target is to create the necessary conditions to promote Greek culture based on the special and multiform features of every region. This way, we motivate every district, every destination to promote its very own cultural identity. The total amount of these interventions comes to 250 million euros.

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As a representative example, I could highlight some basic axes that are under the intervention framework of the program period 2007-2013. For the modernization of the operational infrastructures, the rearrangement of the tourist sector includes the enhancement of the tourism investments through the Development Law, the development of the special tourism forms and the additional business reinforcement programs that don't come under the Development Law, total quality activities, models of environment and energy management applications and supplementary activities for the enrichment, the skills upgrade and the augmentation of the human resources mobility. The last one will be effectuated by the use of a 10 percent provision. With regard to the infrastructures completeness and upgrade, aiming at the utilization of the country's natural and cultural resources, the pilot program includes projects for sea-tourism development, reception centers at commercial ports, the construction of tourist centers focusing on thematic, cultural, environmental, ecotourism and historical activities of national importance, pilot programs that promote tourism development in ecologically vulner-

able regions, improvement of the administrative support by new technologies and, overall, the construction of information centers that will promote both products and services. Bearing in mind all the above, we are focusing on the tourism sector's enhancement so as to achieve the target that has set every single intervention that has to do with the tourist product promotion: the creation of a new image for our country, a modern and competitive one, laying emphasis on culture and the environment, an image of beautiful places and beautiful people, far from one-dimensional sun-and-sea cliches which nowadays sound as obsolete as the concept that tourism is something occasional that should be left to its fate, like the decisions one makes depending on whether there will be rain or sun. Well, it's not. Tourism is actually a creative and multidimensional life science which demands, in order to be proved profitable for a country, what a field demands, too, in order to bear fruit, that is, care and persistence. It demands, in other words, solid philosophy, consistent goal-setting, ideas and visions. Only in this way will Greece be able to play a leading role.


Funding for regional growth European Union funds have helped provide a massive change to the country’s infrastructure in recent years by part-financing projects such as road and public transport. The funds are also helping to make the economy more competitive in a fast-changing environment, through human resources training and farming schemes. The Third Community Support Framework (CSF) for the 2000-2006 period is winding up while the government is preparing to absorb funds from the National Strategic Reference Framework (NSRF) for 2007-2013. A breakdown of the CSF and NSRF will help give readers a more concise picture of goals and policies adopted in projects changing the country. Benefiting from EU funds in the future is certain to change now that the single bloc has expanded to 27 countries. The conservative government has said the country’s regional areas will benefit from the NSRF as some of these areas still rank among the poorest in the EU. EU-backed programs include human resource schemes that will encourage innovative business practices and boost sea transport links, a vital sector of the country’s economy.

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Cover The rational, efficient and effective exploitation of the resources constitutes Greece’s main political choice so the country can maximize the benefits during the procedure for real convergence with the European Union.

40 bln euros to fund development and real convergence with EU reece is beginning to exploit the vital resources amounting to 20.1 billion euros (constant prices 2004) secured during the European Council meeting in December 2005. The summit's agreement was reached following laborious negotiations on a political and technical level and, despite the restrictions of the Cohesion resources, Greece managed to augment its share among the total of the old member states (EU-15) for the current period (2000-2006) from 11.7 percent to 12.04 percent. These resources, together with national and private sector contributions, are expected to reach the sum of 39.5 billion euros and to fuel the development and the real convergence of Greece during the period 2007-2013. The rational, efficient and effective exploitation of the resources constitutes our main political choice so that the country can maximize the benefits during the procedure for real convergence with the European Union. During the following years, the course of the Greek economy will be determined to a large extent by its ability to adjust to the international environment and the entire improvement of its position through the powerful and constant thrust of its competitiveness. The approval of the National Strategic Reference Framework (NSRF) and the Operational Programs for the period 2007-2013 constitute the starting point of a long course during which the European Union will contribute in many ways in the constant effort of the country to benefit from the great opportunities offered by globalization and the digital revolution. Today, 12 out of the 13 Operational Programs have already been approved and we are shortly expecting the approval of the 13th Operational Program. The reforms promoted, which are already bearing fruit, are playing a very important role in the country's effort. The Greek economy is constantly recovering, presenting encouraging signs of dynamism. Growth has been accelerat-

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Yiannis Papathanassiou Deputy Minister of Economy and Finance www.mnec.gr

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ed, marking higher rates than those of the other eurozone countries. Unemployment is decreasing. Exports are growing. Services are increasing. Private investment is multiplying. More than 4,000 Greek enterprises have extended their activities in the broader region of Southeastern Europe. The development policy applied permits the gradual creation of an attractive investment environment which provides new opportunities for entrepreneurial initiatives in general and especially in certain fields such as the energy infrastructures, the renewable energy sources, tourism, banking, commerce, transport, communications and shipping. Significant effort has also been applied during the last three-and-a-half years in the macroeconomic field. We certainly still have a long itinerary to cover but we are proud because our policy resulted in the improvement of economic indices. We reduced the high financial deficits, while preserving simultaneously the high development rates after the end of the 2004 Olympic Games. Our corporate tax scheme was reduced by up to 10 percentage points. We enacted new fiscal measures to support private investment. The new Investment Law for development and regional convergence and the Law for Public-Private Sector Cooperation were also ratified by Parliament. Political choices, which initially provoked resentment and negative reactions, have proved fair in practice and today offer new investment opportunities, new jobs and new income for the entire country. Through the sector policies for the period 2007-2013, Greece will focus on the development of quality manpower, the promotion of continuous training, in-house business training, active employment measures as well as equal opportunities in the labor market. Particular support will be given to research and technology by promoting the knowledge economy. We are promoting innovative entrepreneurial initiatives and networking. We are supporting productive, high-added-value invest-

ment with objective resources. We are upgrading the institutional environment and dramatically reducing bureaucracy by modernizing and re-organizing the public administration in order to be able to plan strategically and thoroughly, to operate professionally and to effectively schedule actions and resources. We are investing in the capitalization of infrastructures with the completion of all projects and the exploitation of those already materialized. We are modernizing our energy infrastructures and finishing the environmental ones. We are giving priority to the fields of water resources and waste management by promoting in parallel ‘green entrepreneurship.’ In contrast to the management of the resources of the 3rd Community Support Framework, the government decided for the National Strategic Reference Framework (NSRF) 2007-2013 to exploit private sector contributions to a greater extent. Consequently, the strategic targeting of NSRF has to focus on the appropriate policy mix which on the one hand will ensure the necessary resources to complete the infrastructures, but also has to achieve an increase of the share of resources which serving the Lisbon Strategy, from 55 percent to at least 67 percent in NSRF. This is the main qualitative difference between CSFIII and NSRF. At the same time, we are investing in the competitiveness of the regions. Our new policy focuses on the formation of competitive regions on the basis of new Regional Operational Programs as well as on the creation of five spatial unities in order to strengthen their financial functionality and to stimulate their extroversion, enabling them to better face the challenges of the international environment. Greece is proceeding to the implementation of the government's program platform with careful strategy and the vision to create an economy with a sound international presence, with competitive and extrovert regions and enterprises and an improved quality of life and prosperity for all.


Cover Total public expenditure for NSRF programs amounts to 32 billion euros, constituting a major development project for the country, which promotes economic and social convergence in line with the Lisbon Strategy. Philosophy focuses on human resource development, aiming to develop peoples’ skills and abilities more efficiently, upgrading their knowledge basis and cultivating new skills.

Reshaping the future: NSRF seen as key to Greece’s development he National Strategic Reference Framework (NSRF) 2007-2013, known in Greece as ESPA, was instructed by the Ministry of Economy and Finance on the basis of the new approach to Cohesion Policy and constitutes one of the vital new tools for the developmental course of Greece. The total public expenditure for NSRF programs amounts to 31.93 billion euros, constituting a major development project for the country, which promotes economic and social convergence in line with the Lisbon Strategy. The development strategy of the NSRF mainly includes: investing in the productive sector of the economy by increasing extroversion and foreign direct investment inflow; promoting innovation, research and entrepreneurship; investing in sustainable infrastructure; investing in human capital and upgrading the institutional environment by simplifying the regulatory framework. Furthermore, the NSRF is fully in line and complementary to the National Reform Program, since it focuses policy on a national and regional level in a way that will make the countryÅfs regions _ as well as its major cities _ attractive business locations. In order to achieve a rapid pace in absorption of funds and to ensure complete transparency, as well as high profitability for the National Strategic Reference Framework, the government has already planned five regional and eight sectoral programs. With 80 percent of funds being allocated for the countryÅfs regions, which reaches approximately 20.4 billion euros, it is more than certain that the NSRF will make the difference in GreeceÅfs regional development issue. The entities of Macedonia-Thrace, Western Greece, the Peloponnese and the Ionian Islands, Crete and the Aegean Islands, Thessaly, Central Greece and Epirus, and Attica remain

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Panagiotis Drossos Secretary-General for Investments & Development www.gea.gr

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central in focus and comprise tangible proof that the creation of a viable, competitive, regional economy with an intensive outward-looking orientation and internal socioeconomic, territorial and administrative cohesion is a vision that will soon be fulfilled. At the same time, eight sectoral programs form the basis for policies aimed at protecting the environment and the public health system, improving citizensÅf quality of life and enhancing the economyÅfs competitiveness. NSRF philosophy focuses on human resource development, aiming to develop peopleÅfs skills and abilities more efficiently, upgrading their knowledge basis and cultivating new skills - vital assets for the support of employment, competitiveness and economic productivity, within the framework of the globally emerging Knowledge Economy. The new Operational Program ÅeCompetitiveness and EntrepreneurshipÅf focuses on small and mediumsize enterprises, incorporating measures focusing on cooperation between enterprises, cooperation between production units and research and technology units, the transformation of know-how into innovative products, procedures and services, as well as the support of investments, contributing to the advancement of entrepreneurial competitiveness and extroversion. New potential for development across the country is expected to be created through the Digital Cohesion Program. With new infrastructure in the area of information technology and telecommunications infrastructure, Greece will be able to take the digital leap that will enhance productivity, business activity as well as everyday quality of life. At the same time, the ÅeEnhancing AccessibilityÅf program aims at improving access to various regions of the country - both in terms of

Trans-European Transport Networks, as well as the national/regional network - and improving the quality of offered transportation services. The ÅePublic Administration ReformÅf program targets the development of a citizen-focused, effective, open and flexible public sector, aiming at achieving the transition from an administration geared toward executing ordinary tasks and procedures to the type of management that produces political results and services. Moreover, the Greek government has implemented new legislation designed to make public enterprises and entities operate according to principles of profit and to generate their own revenues, so as not to have to rely on budget subventions. New legislation regarding the NSRF, which was recently passed by Parliament, provides incentives for the achievement of annual targets, but also penalties in the event that those targets are missed. The new legislationÅfs main purposes are to set up the new management and control system of Operational Programs 2007-2013, to simplify and accelerate administrative procedures, to enhance transparency and finally to introduce measures to support implementation bodies and procedures. Aiming to fully comply with EU policies, the NSRF can support Greece with the infrastructure it needs and facilitate further improvement of the new developmental model, as well as the competitiveness and the extroversion of the Greek economy. The General Secretariat for Investments and Development, operating under the auspices of the Ministry of Economy and Finance, coordinates the effective implementation of the policies set out in the NSRF; it also supports the Public Investments Programs by introducing measures and institutes that guarantee the effective use of national funds.


Cover Sea transport is of great importance for the country. It is obvious that ports will increasingly play a crucial role since they represent an indispensable part of the transport chain but further investments are needed to achieve goals.

Plan aims for high-quality services, boost to competitive advantage mong the main scopes of the transport policy in Greece is to facilitate transport in a way that economic activities are promoted and to achieve well-balanced national and regional development. Sea transport is hereby of great importance for Greece, especially in the light of the Trans-European Transport Networks and the Motorways of the Sea, and the recent EU efforts regarding the formation of a new maritime transport policy. It is obvious that ports will play an increasingly crucial role, since they represent an indispensable part of the transport chain. Facing dramatic challenges in a totally new and very demanding environment for the port industry, the policy of the ministry on port development seeks to secure high-quality port services, maintain and strengthen the comparative advantages of Greek ports and enhance their productivity and competitiveness. In order to achieve these goals significant investments are required. The ministry has planned the modernization and development of the infrastructure (piers, dredging works etc) and superstructure (passenger reception buildings, warehouses, equipment etc) of ports as well as their hinterland connections as top priorities. Taking into consideration the resources required for this purpose, the ministry seeks to

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The ministry seeks to take full advantage of the financial opportunities offered for port development in Greece. take full advantage of the financial opportunities offered for port development in Greece. In this respect, the ministry considers the National Strategic Support Framework 2007-2013 as an important financial basis. Within this context, the General Secretariat of Ports & Port Policy cooperated closely with the competent authority of the Ministry of National Economy & Finance and relevant provisions for ports have been incorporated in the final text of the Support Framework. In cooperation with the Port Authorities, the needs of ports have been identified and proposals for proj-

ects will be submitted to the calls that will follow. Pursuing an integrated approach and synergies between the various financial opportunities, the policy adopted by the Ministry of Mercantile Marine, Aegean & Island Policy combines the Support Framework 2007-2013 with the Financing Protocol that has been signed between the ministry and the European Investment Bank, according to which the EIB will provide loans for investments in ports up to the amount of 3 billion euros for projects up to 6 billion euros. Furthermore, strong participation of the private sector in the port industry is expected, which will follow on a public-private partnership basis according to the recent legislation. Many big firms have already expressed their interest in relevant projects and therefore we are very optimistic about it. Last but not least, the financial support through the Support Framework 2007-2013 is to be combined also with the opportunities opened up within the framework of the Trans-European Transport Network and the Motorways of the Sea. Greek ports can take advantage of the development of the East Med Motorway of the Sea and concrete steps have been made so far toward this end.

by George Vlachos General Secretary of Ports & Port Policy Ministry of Mercantile Marine, Aegean & Island Policy www.yen.gr

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Cover

CFS 2000 - 2006

Community Support Framework (CSF) 2000-2006

National Strategic Reference Framework (NSRF) 2007-2013

1. What is the budget at the EU level?

258,656 million euros (2004 prices), representing 35 percent of the total EU budget for 2000-2006.

308,041 million euros (2004 prices), representing 35.6 percent of the total EU budget for 2007-2013.

2. How many countries?

The 15 ‘old’ EU countries. As of May 2004, the 10 new member states are also receivers of aid in the form of the various national Community Support Frameworks.

All 27 member states (the 15 ‘old,’ the 10 ‘new,’ plus Bulgaria and Romania since January 2007) are eligible for funding from the Structural Funds.

At a glance

3. What is the budget for Greece?

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vs NSRF 2007- 2013

The budget allocation, although expressed as a ‘package’ for each country, is in reality calculated per region, following specific allocation criteria. Cohesion Fund allocations are calculated using each country’s GDP. Regions with GDP/capita lower than 75 percent of the EU average belong to Objective 1 (‘Cohesion for growth and employment’), whereas the rest belong to Objective 2 (‘Competitiveness for Growth and Employment’). The differences between the two consist of the aid intensity per capita and of the type of actions that can be co-financed. All must earmark various percentages of their budget for Lisbon-type actions (‘Growth and Jobs’). The country itself chooses the mix between Social and Regional Development Funds. Whereas in 1999 the budget was mainly concentrated in the so-called ‘Cohesion Countries,’ some important differences have arisen since: 1. Nine out of the 10 new member states (with the exception of Cyprus) are poorer in relative terms than the rest of the EU countries. This means that their average GDP/capita, which is the main parameter for the allocation of the Structural and the Cohesion Funds, is lower than the average GDP/capita of the old member states. As a consequence, the EU GDP/capita average is lowered significantly, and new regions are now beneficiaries of the Structural Funds. 2. Greek regions’ GDP/capita has risen, both in absolute terms (as compared with 1999 data), and in relative terms (as a result of the statistical effect of the lowering of the average EU GDP/capita, because of the inclusion of the new members). As a consequence, two regions (the southern Aegean and mainland Greece) are phasing into Objective 2 regions (those whose GDP/capita is above 75 percent of the EU-15 average). Three regions — Attica and Central and Western Macedonia — are phasing out of Objective 1 (their GDP/capita is above 75 percent of the EU-25 average, but below 75 percent of the EU-15 average). ‘Phasing out’ and ‘phasing in’ are transitional aid schemes, within objectives 1 and 2 respectively. Also: 3. The Cohesion Fund and the Community initiatives are incorporated into the main policies. 4. The European Agriculture and Rural Development Fund (and the Fisheries Fund) is separated from the Structural Funds. For the period 2007-2013, Greece has ensured 12.04 percent of the total available budget for the old member states, compared to 11.7 percent for 2000-2006. EU contribution: 21.3 billion euros in Structural Funds plus 3.3 billion euros in Cohesion Fund. The total budget (EU + national contribution) is 39.56 billion euros. The budget is expected to rise to 51.14 billion euros, by adding the private financing. Community Initiatives: (Interreg, Urban, Equal, Leader+) 918 million euros is allocated to Greece through the various (1.28 billion euros, including the national contribution).

EU contribution: 20.42 billion euros, including Cohesion Fund. The total budget (EU + national contribution) is 31.9 billion euros. The budget is expected to rise to 39.5 billion euros, by adding the expected private financing.


Community Support Framework (CSF) 2000-2006 4. What is the strategic aim of the country?

5. What are the specific development aims for Greece?

National Strategic Reference Framework (NSRF) 2007-2013

The NSRF is more Lisbon-oriented. While 55 percent of the CSF 2000-06 was earmarked for Lisbon actions, this percentage rises to 67 percent in the NSRF 2007-13. Within the total NSRF budget, 27 percent is for the European Social Fund. Overall, 80 percent of the NSRF budget is directed toward regions other than Attica ‘Contribute to Greece’s further integration in the EU and in the knowledge-based world economy by promoting structural change, higher productivity and employment.’ Productivity is the key factor determining a sustainable long-term growth rate and thus the conditions for improved living standards. CSF priorities are focused on the types of investment in physical, human and knowledge capital that are most conducive to increasing Greek productivity.

‘Widen the development opportunities, sustain a high growth rate, raise the productivity rate above the EU average, and create employment opportunities, in order to achieve real convergence and improve the standard of living for all citizens.’ Greece of 2013 will be a more extrovert economy with a strong international presence. Emphasis will be placed on education, youth, quality, innovation and technology, as well as in the protection of the environment. Concerning territorial development, there are three priorities: sustainable urban development, rural development and international as well as inter-regional cooperation.

‘There are 7 development aims: 1. Investment in human and knowledge capital: Taking into account the principle of equal opportunities, action focuses on improving education and vocational training systems, diffusing technological innovation, and promoting the Information Society. The CSF also promotes job-matching services, certification, market-driven approaches and open tendering procedures. 2. Investment in transport infrastructure, which is aimed at reducing peripherality vis-a-vis the rest of Europe and at bringing down transaction costs. Specific attention is also given to investment for ensuring the rational management of environmental resources. 3. As regards competitiveness, the intention is to modernize and diversify the system of business support with a focus on SMEs and business start-ups, putting tourism on a normal business footing, introducing new types of financial products, integrating training and education with investment in assets, and finally supporting the liberalization of energy markets and the achievement of the Kyoto targets. 4. Regarding agricultural and rural development and fisheries, priority is given to overall rural competitiveness in a sustainable and balanced way, focusing on the promotion of quality, improvements in manufacturing and marketing of the products. The protection of natural resources and the environment is also a priority. For fisheries, priority is given to the reorganization of the fleet, aquaculture, and product processing. 5. Quality of life refers to environment, culture, health and welfare. A reinforced effort is being made to fully meet EU directives concerning drinking water quality and wastewater treatment, and to promote proper management of solid and toxic waste. Environmental actions are reformed to reflect the ‘polluter pays’ principle. In the field of culture, both preserving cultural heritage and the development of modern culture is promoted. The involvement of private funding is actively encouraged. In the health sector, the focus is on supporting reform of the management system. 6. The development of Information Society in Greece is a key factor to enhancing business competitiveness and public sector efficiency. This priority refers to several fields as a part of a wider development strategy. 7. Regional development aims at sustainable regional development by strengthening competitiveness, economic development and employment in the regions. The regions themselves have determined their strategy, while keeping in line with the general guidelines established in the CSF. These guidelines foresee a substantial effort in favor of rural areas, disadvantaged urban areas, and island and mountainous areas.

There are 17 development aims: 1. Improvement of the extroversion of the economy and of the incoming foreign direct investments. 2. Development of entrepreneurship and increase of productivity. 3. Diversification of the tourist product. 4. Improvement of quality and intensity of investments in human capital and the educational system. 5. The strengthening of research and technology and the promotion of innovation in all sectors, as a necessary condition for the restructuring of the Hellenic economy and its transformation into a knowledge economy. 6. Digital convergence and a systematic use of ICT in the economic and social sectors. 7. Strengthening workers’ and businesses’ adaptability. 8. Facilitation of access to employment. 9. Promotion of social inclusion and equal opportunities. 10. A viable and compensative health system, providing high-quality, personalized care. Focus on prevention. 11. Promotion of gender equality in connection with the social and business environments. 12. Improving the quality of public policies and their impact on citizens and entrepreneurship. 13. Construction and modernization of transport infrastructures. 14. Securing sustainable energy efficiency. 15. Sustainable use of natural resources. 16. Sustainable and effective environmental protection. 17. Highlighting cultural heritage as a vital element of Greece’s economic development.

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Community Support Framework (CSF) 2000-2006 6. How many operational programs (OPs) are there?

In the period 2000-2006, each OP could include actions financed by various funds. For the new programming period 20072013, there is an obligation in the regulations to set up programs that will only be financed by one fund (with the exception of environment and transport OPs that can receive financing both from the European Regional Development Fund and the Cohesion Fund). Therefore, all regional OPs are ERDF-financed. Sectoral OPs are divided according to type of actions, into ESF-financed and ERDF-financed. A second important difference for Greece is that, for the first time, five of its regions do not qualify for financing under Objective 1 (see above). Thus, following regulations’ obligations that the OPs must be single-objective, all ERDF-financed OPs will apply only to the eight Objective 1 regions. The other five regions must cover all their ERDF needs through the regional OPs only. This requires a careful setting up of priorities and management. Using the exception clause, Greece has prepared regional OPs, as well as the ESF-financed sectoral OPs, as multi-objective. Especially for the regional OPs, the political choice was to group regions by three (excluding Attica) in order to create economies of scale and thus multiply the positive results and achieve more flexible management. There are 12 sectoral, 13 regional operational programs, and four Community initiatives. ‘Education’ is the Operational Program for Education and Initial Vocational Training designed to aid Greece in meeting the challenges arising internationally due to the development of innovative technologies. This program aims at turning these challenges into opportunities for development of infrastructures and improvement of quality of life. ‘Employment and Life-Long Learning’: Investment in human capital, in order to reduce unemployment and promote employability. Promotion of equal opportunities. ‘Health — Social Welfare’: Restructuring of health services, education of health personnel, mental health. ‘Competitiveness’ focuses on supporting entrepreneurship in the areas of energy, industry, services, research and technology, tourism, commerce and human resources. ‘Roads, Ports and Urban Development,’ and ‘Railroads, Airports and Urban Transport’: The main aim is to further integrate Greece into the core of EU trans-European Networks, reduce disadvantages due to peripheral position, open up to neighboring areas, and reduce urban congestion, by further developing eco-friendly modes of transport. The ‘Rural Development’ program targets the improvement of competitiveness of the Greek agricultural sector in the view of the challenges raised from a very competitive international environment, the sustainable and integrated development of the rural areas in order to improve their competitiveness and attractiveness as a living space which in turn will improve its social and financial functions. ‘Fisheries’ is aiming at adjusting the fishing effort, renewing and modernizing fishing vessels and the protection and development of aquatic resources. ‘Culture’ is financing cultural interventions (museums, archaeological sites, cultural centers etc) which aim at improving the quality and at enforcing the overall development of the cultural sector in Greece. ‘Environment’ is a program which promotes the environmental improvement of the country, compliance with the relevant EU directives, and the creation of the necessary conditions for sustainable development. ‘Information Society’ is the main level for implementing an overall national strategy leading to the Information Society. Major institutional actions are being implemented in parallel with supplementary measures, mainly addressed to the public sector. ‘Technical Assistance’ The 13 Regional Operational Programs correspond to the regions of Greece: ‘Eastern Macedonia and Thrace,’ ‘Central Macedonia,’ ‘Western Macedonia,’ ‘Epirus,’ ‘Thessaly,’ ‘the Ionian Islands,’ ‘Western Greece,’ ‘Central Greece,’ ‘Attica,’ ‘the Peloponnese,’ ‘the Northern Aegean,’ ‘the Southern Aegean.’ Their common focus is the boosting of local opportunities for economic and social development, by creating the necessary infrastructure, applying soft measures and supporting local entrepreneurship. Special provisions regard environmental protection and the minimizing of intra-peripheral inequalities, such as on the islands. Beside the three priority objectives, the Structural Funds also provide financing through four Community initiatives: Interreg: promoting cross-border, transnational and interregional cooperation, with a view to stimulating balanced development and spatial planning within Europe; Urban: financing the economic and social regeneration of cities with serious structural problems, to promote sustainable urban development; Leader: supporting rural development; Equal: funding for transnational cooperation to promote new practices that guarantee full equality of opportunity in access to the labor market.

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National Strategic Reference Framework (NSRF) 2007-2013

There are 8 sectoral, 5 regional, and 12 European Territorial Cooperation operational programs. ‘Reinforcement of Public Administration Efficiency’: Creating an effective, citizen-centered public sector, an open governance scheme and promoting better policy design and deliverance. ‘Development of Human Resources’: Creating the conditions for full employment and better working conditions and improving workers’ adaptability and responsiveness to challenges. Special measures will be applied for the more vulnerable social groups. ‘Education and Life-Long Learning’: Investing in the future; life-long learning and a higher level of basic skills for all; professional education. ‘Environment — Sustainable Development’: Protection, upgrade and sustainable development for the environment, public health, with a view to improving living conditions and economic competitiveness. ‘Accessibility Improvement’: Developing and modernizing transport infrastructures. ‘Competitiveness and Entrepreneurship’: Improving the competitiveness and extroversion of businesses, strengthening the production system and support innovation. ‘Digital Convergence’: Making a strategic digital step toward better quality of life. ‘Technical Assistance’: The Regional Operational Programs correspond to wider regional groupings: 1. ‘Macedonia and Thrace’ 2. ‘Western Greece, the Peloponnese and the Ionian Islands’ 3. ‘Crete and the Aegean Islands’ 4. ‘Thessaly, Mainland Greece and Epirus’ 5. ‘Attica’ As in the CSF, the regions themselves have determined their strategy, while keeping in line with the general guidelines established in the NSRF. The 12 European Territorial Cooperation Programs are the successors of the former Interreg Program.


7. What are the main features of the management system?

Unlike the managing system for 2000-2006, the new Management and Control System is lighter in its features, incorporating only those elements that are described in the EU regulations, and are therefore obligatory. The system is characterized by fewer managing authorities and by the political choice to delegate responsibility to the appropriate level — which is where each project is taking place — while keeping an oversight and responsibility toward the European Commission centrally. It also introduces new elements, aiming at improving the time and quality of the projects undertaken. 1. Certification of beneficiaries. All beneficiaries must comply with a certification standard that is being currently developed, in order to qualify for carrying out projects. This is expected to reduce the number of beneficiaries and improve results. Those that are not certified will be able to delegate their project management to agents acting as intermediaries. 2. Demos SA (Municipality SA). This public company will help municipalities-beneficiaries that cannot carry out projects, by undertaking them on their behalf and ensuring full and quality delivery. A similar company, called Nomos SA (Prefecture SA) may also be created. 3. Regional Development Organism. It will assist the regions in their setting up of development policies and the follow-up of projects. 4. Two new companies are introduced, Digital Reinforcement SA and Administrative Restructure SA, with responsibilities in the relevant fields of action.

Sources: Ministry of Economy and Finance, and OJ of the EU, L147/29 (14/6/2003) and C139/10 (14/6/2006)

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Cover Greece’s plan for rural development will be served by four objectives capitalizing on the country’s opportunities and advantages in the the primary and rural sector. The national strategy has been reviewed to stave off the significant impact of summer 2007’s disastrous blazes through short-term and long-term measures reaching 200 million euros.

Competitiveness and environment protection top target list reece's priorities for rural development in the framework of the 4th Programming Period 2007-2013 shall be served by the Rural Development Program 2007-2013, foreseeing Community co-financing of 3,707 million euros and national participation of 1,371 million euros, in other words total public expenditure of 5,078 million euros. If private participation is added to the abovementioned amounts, standing at 1,496 million euros for programs where private participation is provided for, then the overall program amount stands at 6,574 million euros. The Ministry of Agricultural Development and Food’s overall strategy and policy on rural development for the period 2007-2013 focuses on: ➢ Sustainable rural development through primary, agri-food and environmental sectors’ competitiveness improvement in a viable countryside. Greece's development vision on rural development will be served by four strategic objectives capitalizing on the country's opportunities and advantages, dealing at the same time with primary sector and rural areas’ accumulated structural problems. The national strategy has been reviewed to stave off the significant impact of summer 2007’s disastrous blazes through short-term and long-term measures to be financed with 200 million euros.

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Rural Development Program 2007-2013 strategic objectives The strategic objectives of Greece's Rural Development Program for the 4th Programming Period are the following:

Alexandros Kontos Minister of Agricultural Development and Food www.minagric.gr

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General Strategic Objective 1 Maintaining and improving agriculture, forestry and agri-food sector competitiveness This objective contributes to the primary sector’s further development and its adaptation to the new international economic reality, characterized by increased competition, trade deregulation tendencies, high-quality and added-value products demand and CAP interventional mechanisms reduction for European agricultural products prices support. Emphasis will be placed on transfer of knowledge, modernization and innovation, with investments in natural and human capital and customer satisfaction with regard to provision of excellent product quality. Similarly, actions will be included to meet agricultural holdings’ sustained structural problems (age distribution, small size of agricultural holdings and segmented average plot) through early retirement

and encouragement for the setting up of young farmers as well as infrastructure development for the primary sector relative to access to agricultural and forest land, as well as water management. The aforementioned strategic objective achievement will be pursued through the following specific objectives. ● Reversion of age distribution and agricultural holdings’ small average size; ● Restructuring and development of business structures through technological equipment and innovation promotion; ● Primary sector infrastructures’ upgrading and improvement; ● Development of human resources skills for their adaptation to new requirements. General Strategic Objective 2 Protection of the environment and sustainable natural resources management This objective contributes to natural resources protection and improvement in order to preserve biodiversity and develop agricultural and forestry systems in areas of high natural value and traditional landscape, to improve water balances and aquifers, to deal with soil erosion and mitigate the impact of climate change. Actions will be promoted toward the conservation of biodiversity and rational use of agricultural land and forests, water quality protection, and support of producers in mountainous and less favored areas in order to maintain agricultural activity. In particular, interventions for soil and water protection will be financed, as well as for forests increased either directly by afforesting agricultural lands or indirectly by reforesting forestland ravaged by fires and, finally, by promoting organic farming and animal husbandry and spreading methods and techniques aimed at saving water resources. The aforementioned strategic objective will be pursued through the following specific objectives. ● Soil protection; ● Water resources protection; ● Climatic change mitigation; ● Protection of biodiversity; ● Protection-conservation of agricultural land; ● Improvement of forests’ ecologic stability. General Strategic Objective 3 Improvement of quality of life in rural areas and encouragement of rural economy diversification The interventions proposed within the framework of the current general objective (Axis 3) focus on


gies planning and implementation; Program approval is expected in November 2007, while its implementation has already started, at the beginning of 2007 (the only one out of all Greek 4th Programming Period 2007-2013 programs) and already 427 million euros has been disbursed for early retirement, compensatory allowance for agricultural land’s afforestation, denitrification and other agri-environmental measures.

Competent authorites and bodies

mountainous/less favored areas, placing particular emphasis on basic infrastructure creation, as well as on promotion of local economy diversification focusing on entrepreneurship enhancement with emphasis on innovation and economic diversification. Within this framework, initiatives will be undertaken for rural economy diversification and quality of life in rural areas, aiming at employment opportunities and the creation of economic growth prerequisites. In particular, the aim is to reverse the adverse depopulation trend, mainly in declining areas where the local economy depends largely on the primary sector, as well as to integrate these areas in a comprehensive effort to create living and evolving rural areas with growth perspectives through promotion of multi-employment opportunities, ensuring equal opportunities between men and women, exploiting the natural and manmade environment, upgrading infrastructures, and protecting and highlighting rural areas’ particular characteristics, which will contribute to rendering inhabitable areas more attractive and attracting investments. Furthermore, actions will be undertaken to activate rural areas indigenous potential through support of small-scale entrepreneurship or through interventions for local product processing and boosting tourism. Strengthening the exploitation of rural areas, new housing, and urbanization or reurbanization standards supported by great infrastructure projects funded by structural funds will be exploited under this general objective. The aforementioned strategic objective achievement will be pursued through the following specific objectives: ● Enhancement of rural areas’ attractiveness; ● Enhancement of entrepreneurship.

General Strategic Objective 4 Creation of local capabilities for employment and diversification in rural areas through the LEADER approach The local development strategies developed through the LEADER approach have a comprehensive and multi-sector character. The comprehensive approach regards promotion of all economic activities the local production system is based on, equal development of the agricultural area (mountainous, less favored and lowland areas) and local development within the framework of economic, social and environmental balance. The comprehensive approach to local development is identified with the ‘bottom-up’ approach, since it presupposes participatory programming (planning) and mobilization of local authorities and local populations, being cognizant of the area's problems and abilities. The approach's interventions will regard governance improvement and rural areas’ indigenous growth potential mobilization through enhancement of cooperation and networking of areas and authorities and industries in order to develop new ways and processes to meet the problems of selected rural areas, aiming at supporting innovation in all areas of local economy and innovative interventions with positive results for intervention areas’ competitiveness, as well as the ability for new employment opportunities within the framework of a comprehensive local development strategy. The aforementioned strategic objective achievement will be pursued through the following specific objectives: ● Implementation of cooperation plans; ● Enhancement of local authorities’ ability and population mobilization for local development strate-

According to Article 74 (2) of Reg. 1698/2005 for the implementation of the Rural Development Program of Greece 2007-2013 that is going to take place at the national level, the following authorities are being established: ● Managing Authority (MA) ● Accredited Paying Agency (PA) ● Certification Body (CB) 1. Managing Authority (MA) As RDP Managing Authority, pursuant to Article 75 of Reg. 1698/2005 is designated the Special Management Service of the Operational Program ‘Rural Development - Restructuring of the Countryside 2000-2006’ (SMS of OPRD-RC). The Managing Authority is responsible for NSPRD (National Strategic Plan for Rural Development) and RDP management and implementation in an effective and sound way and mainly for the following: a) The Managing Authority is the country's basic interlocutor with the European Commission on issues of NSPRD and RDP; b) Monitors and coordinates RDP implementation progress, drafts revision proposals which it submits to the European Commission after approval by the Monitoring Committee; c) Is in charge of program management and audit system planning; d) Ensures that there is a system for data entry and storage in computerized form relative to implementation purposes; e) Takes care of state aids co-financed actions programming and implementation coordination; f) Selects the operations to be financed according to RDP criteria and ensures the compliance thereof with Community and national rules in force during the whole implementation period etc. 2. Accredited Paying Agency (PA) OPEKEPE is designated as Paying Agency, pursuant to Article 6 of Reg. (EC) 1290/2005 on the Common Agricultural Policy financing and as provided in Article 3 of L. 3508 (OG 249 ∞/16-11-2006). In application of Article 6 of reg. 1290/2005 the Paying Agency can delegate its tasks, excluding the payment of Community aids. 3. Certification Body (CB) The Certification Body, pursuant to Article 7 of Reg. 1290/2005, may be a public or private entity, selected after an open public call for expression of interest. The Certification Body is responsible for the accredited Paying Agency accounts audit, examining if they are true, complete and accurate, with regard to the existing administration and audit system.

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Cover The Management Organization Unit aims to strengthen the management capacity of authorities implementing EU-funded programs. The exchange and transfer of knowhow with European regions is among its top priorities.

MOUs inject know-how, avoid inflexibilities ver the 25-year course of Greece's accession to the European Union and due to the need for better management of assistance delivered through Structural Funds, substantial changes were introduced in the country’s public administration. Since 1986, the European Union has financed thousands of projects in Greece, either through the Integrated Mediterranean Programs or the successive Community Support Frameworks (CSF). During this period of EU interventions various weaknesses were identified — namely structural inefficiencies of public bodies, bureaucratic procedures, lack of specialized staff, as well as serious technological gaps. Some of the above were tackled by granting a greater role to the private sector, by deconcentration of decision making and by introducing a sound management, audit and control system. This effort was reinforced by the creation of government agencies, run under private sector rules and staffed by qualified human resources, aiming to safeguard Community interventions in terms of quality assurance, certification and project monitoring. One such agency is the Management Organization Unit (MOU) of the Community Support Framework. It was established in 1996 by a joint decision of the Greek government and the European Commission in order to strengthen the management capacity of the implementing authorities of EU-funded programs, to inject know-how from the private sector and avoid the inflexibilities of the public sector, without, however, substituting its tasks.

O

Identity

Dex Agourides Director General The Management Organization Unit SA www.mou.gr

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The CSF Management Organization Unit is a government agency operating under the auspices of the Greek Ministry of Economy and Finance. It is governed by a nine-member board of directors and its work force is made up of highly qualified personnel recruited from both the private and public sectors (the vast majority being university graduates, most of whom have postgraduate degrees). MOU's mission is currently to support CSF managing authorities by providing quality capacity building in the fields of: ñ Human resources (selection and recruitment of specialized personnel, training and assessment); ñ Management systems and tools; ñ Administrative assistance and improvements in infrastructure facilities. In 2007, MOU obtained the ISO 9001:2000 certification by TUV Rheinland in the area of ‘Support of Administration and Implementation of EU

Structural Funds Interventions.’

MOU’s role in the 2000-06 period MOU has played a vital role in setting up CSF management structures. Specifically, the organization: ñ Recruited specialists for the staffing of the managing authorities; ñ Deployed task forces to support implementing bodies (so-called ‘final beneficiaries’) with management weaknesses; ñ Elaborated systems and tools related to the management of EU-funded projects; ñ Carried out intensive training programs; ñ Procured state-of-the-art office equipment and modern infrastructure facilities to accommodate the managing authorities; ñ Organized, installed and operated the managing authorities' information technology systems; ñ Created Internet sites for citizens' information on EU co-funding opportunities (www.info3kps.gr) and promotion of best practices (www.hellaskps.gr/bestpractices).

Deployment MOU's work force to date numbers 1,150 employees, where the majority (approximately 1,000) are seconded to the managing authorities. MOU itself consists of a central unit based in Athens including several task forces which provide direct support to final beneficiaries. These task forces target specifically: ñ Remote and island areas; ñ European Social Fund projects; ñ Minority groups' projects; ñ Solid waste and wastewater management projects; ñ The CSF Management Information System (MIS); Their support consists of: ñ Management consulting; ñ Technical advice and transfer of know-how; ñ Monitoring of the appropriate regulatory requirements; ñ Project studies assessment; ñ On-the-job training.

μeyond the borders An area of high priority for MOU is the exchange and transfer of know-how with European regions outside Greece. MOU actively participates in major European networks such as IQ-Net (improving the quality of Structural Funds programming through


exchange of experience) run by Strathclyde Business School in Glasgow, the INFORM Community network for information officers on Structural Funds run by the European Commission etc. It also participates in exchange of activities, particularly with new member states, which are initiated by government entities and/or the private sector. MOU has participated in such activities involving countries such as Romania, Bulgaria, Poland, Cyprus, Hungary, Slovakia, the Czech Republic and Albania.

The new period of EU structural interventions (2007-2013) The National Strategic Reference Framework (NSRF) was endorsed by the Commission in March 2007. This strategic document lays out how European Cohesion Policy will be applied to deliver growth and jobs in the seven years to come. Greece is the second member state to have its plan and priorities approved by the Commission. The Ministry of Economy and Finance, for the drafting of the NSRF, has put in place an unprecedented mechanism for consultation involving all ministries and regions, as well as socioeconomic partners, NGOs and local communities. The new NSRF layout, flexible vis-a-vis the planning but also stringent as to the expected results, provides for seven sectoral and five regional operational programs (total

of 12 against 27 in the current period) with greater emphasis placed on the development of rural and semi-rural areas. The guiding principles underlying the planning of the new period are: ñ A more strategic approach to planning; ñ A reduction in the number of Operational Programs; ñ Fewer but efficient managing authorities; ñ The introduction of central coordination bodies (ex. Inter-Ministerial Committee for Coordination); ñ Greater synergies between co-financed interventions and measures funded under the national budget; ñ A reliable and effective management and control system with simplified procedures, aiming at improving quality and transparency; ñ The introduction of new implementing agencies and intermediary bodies; ñ Rationalization in the number of final beneficiaries and enhancement of their technical and managerial capacities (introduction of a National Certification System); ñ Prevention of compliance problems with EU legislation; ñ Dissemination of accumulated experience and know-how from previous programming periods.

MOU’s prospective role Under a new bill approved very recently by the Greek Parliament, MOU's role is further strengthened and expanded. This falls within the government's policy to press ahead with institutional and administrative adjustments for effective governance of structural interventions. Adapting to this new regulatory framework, MOU will concentrate on high-added-value areas such as: ñ Assisting in the restructuring process of services responsible for managing the EU funds as well as setting up, where required, intermediate bodies and regional development agencies; ñ Providing the necessary infrastructures, as well as better and faster networking; ñ Ensuring the flow of information on co-financed policies and actions to the wider public by fully exploiting the possibilities of new technologies, ñ Developing stronger ties with European partners for the transfer of know-how and exchange of best practices; ñ Improving flexibility, speeding up responses and disseminating innovative practices to other public structures. The strategy set by MOU's management for the coming period is to turn the agency into a center of excellence for EU structural interventions in Greece.

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Cover Life-long learning is the key element which releases the human being from stagnancy and obsolete productive procedures. The government, acknowledging the need to address these challenges positively, has put forward a program to enhance growth, employment and social cohesion.

Human capital: Driving force for growth and social cohesion he way European citizens live and work is rapidly changing. Globalization, accelerated technological progress and demographic aging all pose significant challenges for Europe’s economies and require radical changes in the labor market. On the one hand, businesses need to adapt their organizational structure and technology to the new and more complicated demands of the market in order to become more competitive. On the other, employees have to be equipped with the right skills in order to be able to adapt to the continually changing economic conditions. In this framework, where knowledge is the dominant element and goes hand in hand with quality and certification, human capital is of the utmost importance, plays a decisive role and at the same time lies at the heart of developments. The greatest investment that a country can make is in policies that prepare citizens to integrate into the new international economic environment while life-long learning is the key element which releases the human being from stagnancy and obsolete productive procedures. The government, acknowledging the need to address these challenges positively, has put forward a National Reform Program which focuses on the enhancement of the growthemployment-social cohesion relationship. Only when economic development and social cohesion go hand in hand can high levels of growth and competitiveness be achieved. On this basis, we are reallocating our financial resources for the next programming period 2007-2013, strengthening the development of human resources. A high priority is for national employment and social cohesion policies to meet the community financing of the forth pro-

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Dimitrios Kontos General Secretary of the Ministry of Employment and Social Protection www.ypakp.gr

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gramming period in order for our interventions to be more effective and efficient. In this context, and taking into consideration previous experience from the implementation of the three Community Support Frameworks (since 1990), the Ministry of Employment and Social Protection drafted the new Operational Program ‘Human Resources Development 2007-2013.’ The total funds for its implementation are 3,013 million euros and Community assistance comes to the amount of 2,260 million euros. It is worth noting that more than 80 percent of the funds go to the regions, aiming at regional convergence and the exploitation of our comparative advantages. It was designed on the basis of the real needs of the labor market and its main goal is to activate and upgrade human capital as a driving force for the development of Greece as well as for the promotion of social cohesion. It includes specific systemic interventions, concrete and measurable targets which were concluded through the active participation of social partners and a broader social dialogue. It is remarkable that the Ministry of Employment and Social Protection, through a ‘programming agreement,’ will provide up to 2 percent of the OP ‘Human Resources Development 2007-2013’ funds to the social partners, with the scope to improve their capabilities and to promote their active participation in planning and in the implementation of employment and social cohesion policies. The Operational Program ‘Human Resources Development 2007-2013’ is not simply a financing tool. It is about a dynamic, cohesive and integrated grid of actions, always in line with the Lisbon Strategy and the national policy for the promotion of employment and the enhancement of social protection, anticipated to shield the social net of the country and

ensure a society of equal opportunities for all. The main priorities of the Program aim at: – Ensuring conditions of full employment; – Improving the quality of work and productivity; – Promoting the adaptability of both employees and employers; – Promoting employment for the young, women, the long-term unemployed and generally for those who face difficulties in accessing the labor market; – Enhancing social cohesion and eliminating social exclusion. At the center of the governmental policy and the new Operational Program lies the effort to make life-long learning more attractive. For both the unemployed and employees we need the kind of training which will constitute an essential qualification for finding a job and for promoting vocational and geographical mobility during the professional life. In this respect continuous vocational programs will be implemented on the basis of their certification. For the employer we need the kind of training which will make the company more competitive. Our strategy, our aims and our policies are the guarantee for sustainable growth and strong social cohesion. The big challenge is the effective implementation. The results will be obvious in the near future and the fund management and utilization will be successful only when every Greek citizen can have equal access to knowledge, training, employment and services. It is of great importance for us to have positive results which will not depend on Community funds but will be sustainable and become part and parcel of the Greek society. To this end the social partners play an important role, as does the civil society, which, in cooperation with the government, can formulate an effective pattern of modern governance.


From a development perspective, the regions of Western Greece, the Peloponnese and the Ionian Islands present a number of comparative differences, as well as many common points. Altogether, these qualities are exploited in the formulation of policies in the Cohesion framework and the Lisbon Strategy, which will contribute to sustainable economic growth.

Western Greek, Peloponnesse and island infrastructure in for lift he Regional Operational Program (ROP) for the regions of Western Greece, the Peloponnese and the Ionian Islands concerns the entire territorial unit which these three regions comprise. This particular territorial unit constitutes one of the five new units that have been created as part of a series of initiatives for the reformation of the framework management of the program period 2007-2013. In addition to the various sectoral programs and with emphasis on the particular characteristics and the needs of each region, the ROP aims at contributing to the fulfillment of the strategic objectives for national development. These objectives were, in turn, formulated according to the territorial, economic and competitive characteristics of the areas involved. From a development perspective, the regions of Western Greece, the Peloponnese and the Ionian Islands present a number of comparative differences, as well as many common points. Altogether, these qualities are exploited in the formulation of policies in the Cohesion framework and the Lisbon Strategy, which will contribute to the sustainable growth of the economy in the area and to the improvement of its residents’ living standards. The General Developmental Objective (GDO) of our territorial unit therefore comprises the enhancement of the developmental possibilities, the acceleration of the pace of economic expansion and social growth, as well as a significant increase in productivity. In other words, the GDO pursues the achievement of real convergence with the rest of the European Union and improvement of the quality of life for the citizens of the planning area. More specifically, the GDO will be realized with the application of three priorities for the programming area: ■ Promotion of the attractiveness of the programming area as a place of investment, work and residence; ■ Investment in the productive sector of the economy in the programming area; ■ Reduction of intra-regional and trans-regional inequalities. These developmental priorities will be financed by at least three categories of funds: 1. From the 2007-2013 Regional Operational Program, at a total cost of 1,315,000.00 euros that will be covered exclusively by the European Fund of Regional Growth. The public cost for each region separately is: – Western Greece: 543,522,941.00 euros; – Peloponnese: 412,000,000.00 euros – Ionian Islands: 34,117,747.00 euros – Technical assistance: 17,329,312.00 euros

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2. From the Sectoral Operational Programs that will be financed from the Structural Funds and the financing tools of the EU for the period 2007-2013, including the: – European Fund of Regional Growth – Cohesion Fund – European Social Fund – European Agricultural Fund of Rural Growth – European Fisheries Fund 3. From purely national resources, within the frame of the National Program of Growth for the period 2007-2013. In order to achieve the maximum possible synergy with each other and with initiatives from other programs, as well as to serve the General Developmental Objective, the actions of the ROP are systematized in three general objectives: ■ General Objective 1: Growth and modernization of the accessibility infrastructures; ■ General Objective 2: Digital convergence with the exploitation of information technologies and communications and reinforcement of business dexterity; ■ General Objective 3: Sustainable development and quality of life. The core interventions planned by the ROP involve the following sectors: ■ Social infrastructures and services; ■ Health and social solidarity (hospital infrastructures, special units, health centers and open care etc); ■ Culture (improvement of basic cultural infrastructures, protection and appointment of cultural heritage); ■ Actions for the enhancement of accessibility and for the environment; ■ Action for viable urban growth; ■ Actions for the aid of mountainous, unfavorable and island regions; ■ Actions of business dexterity. Overall, the Regional Operational Program 20072013 for Western Greece, the Peloponnese and the Ionian Islands has been strategically planned in order to strengthen the local economies, reduce unemployment, promote environmental policies and establish sustainable growth throughout the territorial unit. In conjunction with ongoing public infrastructure projects in transportation and communications worth over 3 billion euros and in close cooperation with the private sector, we aim to reveal a totally new reality of progress and prosperity for the entire area. Indeed, we are very well within our targets for achieving this purpose.

Spyros Spyridon General Secretary Region of Western Greece www.ditikiellada-region.com

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Cover Taking for granted the fact that for the Region of Epirus the natural environment comprises a significant growth advantage, the region will target, on the one hand, the protection and emergence of the natural environment and, on the other, the rational management of natural resources.

Research & development to boost Epirus innovation, competitiveness he National Strategic Development Plan, widely known as ESPA, and the 4th Community Support Framework were designed and planned in the Region of Epirus targeting the needs of the region. The region plans and manages what its inhabitants wish and ask for. In order to carry out the operational plan we took into consideration, exchanged views on and were bewildered by an unprecedented fertile dialogue with all who were interested in putting forward their proposals and opinions. In recent years we have followed the governmental practice which stimulates ‘the wide collaboration with social, economical players and institutions which formulate policy, under full transparent procedures.’ Besides, we could not overlook the commitments of the Greek government toward the nation — commitments which we were obliged and compelled to fulfill. We have submitted our proposals for the mapping out of the economic policy of the region — focusing on the guidelines of the Operational Programs — at the Ministry of Finance, which is responsible for exercising a leading coordinative role deriving from its institutional and legal frame (regarding the midterm programming). Based exclusively on these proposals the following statement was formulated and included in the National Strategic Development Plan (ESPA). This statement reflects the vision for development and the strategic aims of the Region of Epirus. ‘In the Region of Epirus innovation and entrepreneurial competitiveness will be promoted through the strengthening and support of R&D, taking advantage of educational institutions and provision of Internet and digital services to the enterprises. These aims, combined with the improvement of infrastructure and collaboration among countries, will result in the emergence of the Region of Epirus as the country’s northwestern gate toward the European Community and the Western Balkans. Taking for granted the fact that for the Region of Epirus the natural environment comprises a significant growth advantage (biological farming, tourism) the region will target, on the one hand, the protection and emergence of the natural environment and, on the other, the rational management of natural resources for the benefit of all human activities.’ For the record, our joint Operational Program, with the regions of Thessaly and Sterea Ellada, was the first to receive the approval of the European Union. What the Region of Epirus has to gain from the 4th Community Support Framework is analyzed below: By locking the ERDF funds into the Regional Operational Programs, the regions which are eligible for Objective 1 — such as the Region of Epirus — are financed by ESPA in five ways at the same time: ❏ Directly through the registered credits of the ERDF per region (derived from the Regional Operational Programs); ❏ As exclusive recipients of the total resources of the five Sectoral Programs financed by the ERDF;

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Dimitris Panozachos General Secretary Region of Epirus www.roe.gr

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❏ As exclusive recipients of a concrete fund inside the three Sectoral Operational Programs which are co-financed by the ESF; ❏ As recipients of additional funding from the Cohesion Fund, which plays a role in the 13 regions of the country; ❏ As recipients of the resources derived from the cross-border and trasnational cooperation programs. Moreover, contrary to the 3rd CSF, the resources from the Rural Development Funds are not included in ESPA 20072013, meaning that a significant percentage of the total public funding will be directed to the Region of Epirus for similar actions. According to the final allocations of the Operational Program of ESPA 2007-2013 and the indicative regional distribution of the sectoral programs, the current financing picture of the region (public expenses) is reflected below: 1. Through the Regional Operational Program of Epirus, Thessaly and Sterea Ellada, the Region of Epirus accumulates approximately 485 million euros; 2. Through the sectoral operational programs financed through the ERDF & ESF the Region of Epirus accumulates approximately 900 million euros; 3. Through the Cohesion Fund the Region of Epirus accumulates approximately 150 million euros. Consequently the total amount that will result in the Region of Epirus approaches 1.5 billion euros without taking into account the resources derived from the Rural Development Funds. Although a big part of the abovementioned resources will be absorbed by infrastructure (through the Sectoral Operational Programs ‘Strengthening Accessibility’ and ‘Environment & Sustainable Development’) we must highlight the fact that we are obliged to finance actions that meet the goals set by the Lisbon European Council. The basis axes of the growth model which is promoted today in the Region of Epirus, a region that was confronted with a ‘growth shortage,’ are: 1. The creation of a competitive regional economy based on improving infrastructure — the contemporary transport infrastructure network stands out; 2. The new Developmental Law enhanced the Region of Epirus with the same growth motives as the other regions (situated near the borders) while its improvement attracted investors' interest; 3. Health, providence and the tertiary educational sector are the first priorities of the Region of Epirus, aiming at upgrading the quality of life; 4. Tourism and culture are an important developmental asset for the region; 5. Focusing on supporting human resources. Also targeting the increase of employment and promotion of equal opportunities in the job market; 6. Supporting the primary sector of the economy which plays a key role in the regional economy and strengthens social cohesion.


Judging from the high digital growth rates of the last two years, Greece has now demonstrated it has both the ability and means to cover the digital ground that it painfully lost during the last two decades. A new Operational Program titled ‘Digital Convergence’ is well under way for the period 2007-2013.

Digital Greece: A long story... in brief he discussion about the role of information and communication technologies (ICT) in Greece has long suffered from two interlinked issues: The first is an almost perverse linking of technology to ‘accounting’ terms, mostly attributed to the flow of European funds that have supported ICT projects since 2000. The second is a rather self-contained discussion about technology, on the basis of jargon, acronyms, and purely technological targets. As if broadband penetration by itself could mean anything to the Greek citizen who tests his patience in bureaucratic queues. Or as if a parent would care about how many PCs are installed in school labs, yet they remain locked and beyond the reach of his own child. Both of these issues stemmed from the same origin: Back in the year 2000 the effort to promote new technologies and broadband was mainly driven by the availability of European funds that had to be somehow invested in ICT. With the absence of a coherent plan, the availability of huge amounts of funds that had to be spent assumed the role of a ‘strategy.’ The structural peculiarities and the bureaucratic jargon of an Operational Program titled ‘Information Society’ were suddenly (and sadly) becoming the distorted meaning of ‘technology’ in Greece. Fast-forward to 2007. A new Operational Program titled ‘Digital Convergence’ is well under way for the period 2007-2013. Again it's all about European structural funds seeking to support Greece's growth. A total budget of almost 2 billion euros is allocated to information technologies and broadband. What would hinder a true repetition of the past? The answer should be sharp: The existing ‘Digital Strategy 2006-2013’ put into effect as an overall umbrella policy for ICT since 2006 by the Greek government, was — this time — just expecting its financing tool. The new program ‘Digital Convergence’ is now arriving to serve its role as the financing arm of the Digital Strategy. It should thus be of no surprise that the new program's structure is an accurate reflection of the Digital Strategy's structure. It comprises two main strategic objectives: a. Enhanced business productivity through the use of ICT, and b. Improved quality of life through ICT. The two strategic objectives are further broken down into six main directions, including:

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Business productivity includes increased ICT uptake by businesses, integrated digital services to firms, support to the ICT sector as a pillar of the Greek economy and supports entrepreneurial activity in ICT-enabled ventures. Secondly it includes quality of life refering to the improvement of citizen welfare through ICT snd the development of e-services for the citizen. As such, the new Operational Program is becoming a tool in the arsenal of the Digital Strategy. What would the country do if it were not for the EU funds? Shouldn't it have its own well-crafted ‘digital plan’ and seek to implement it? And what is driving reform after all, irrespective of the field of policy? The existence of funds or the willingness to change? The Digital Strategy clearly demonstrates that it should be the latter, rather than the former. Why should this approach be more successful? For a start, it is already based on the fertile ground of the first two years of implementation of the Digital Strategy. Since 2006, existing programs and funds were re-aligned to the aforementioned objectives. The results have been promising: During 2006, Greece came globally first as the country with the highest broadband annual growth rate,

A total budget of almost 2 billion euros is allocated to information technologies and broadband. according to data available from accredited international organizations. Market developments and the growth of competition in the electronic communications market have led to the slashing of monthly retail prices for broadband access. According to data gathered by the Observatory for the Greek Information Society, monthly retail prices for broadband access in Greece, and especially for new ADSL subscribers, have reached the EU-25 average levels after having been reduced by more than 85 percent since 2004. At the outset of the Digital Strategy 2006-2013, the Greek government had set the target of achieving a broadband penetration rate at the level of 7 percent of the population by the end of 2008, up from 0.1 percent at the beginning of 2004. However, this goal has already been achieved 18 months early. As of today, Greece posts a broadband penetration rate 

Dr Yannis Larios Adviser to the Secretary for Digital Planning Ministry of Economy and Finance www.mnec.gr

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 in the order of 8 percent of the population and is continuing to grow at the same rate within 2007. Furthermore, some new attributes of the ‘Digital Convergence’ program that have been unveiled give clues of a different approach: No longer should it be an exercise of funds allocation to ministries. Rather, it will be a race on the basis of the principle of excellence. Those who are fast developing digital services and serving the strategy's objectives with tangible results for citizens will be rewarded. Those that just seek to lock in budgets without a care for true implementation will be treated differently. Additionally, the new program should no longer address the public sector solely. Quite the contrary. The Digital Strategy promotes a shift toward digital services and interventions that will directly address the needs of citizens and businesses through ICT. The keyword is ‘directly’ and without the unnecessary intervention of a large and inefficient public sector. New institutions are being formed for making this shift a reality in the implementation process. To be fair, interventions for a digital public sector have not been abandoned. However, the viewpoint has now changed. E-government projects and ideas that will be evaluated for eligibility should have been designed — from the very start —

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through the viewpoint of either the citizens or the businesses. They should have as a unique guide the benefit to be accrued by the citizen. Inwardlooking, self-fulfilling grandiose back-office public sector ICT projects will hopefully become a casestudy of the past. Toward the same purpose, the new program titled ‘Digital Convergence’ aspires to closer cooperation with complementary programs (such as the one about ‘Public Administration Reform’) in order to introduce technology and business processes re-engineering hand-in-hand. Not to be ignored, though, is real support for technology as a policy tool for regional development. In the period ahead, ICT projects and Digital Strategy interventions with a strong regional dimension will be favored. Local authorities, cities and municipalities will have a first-rate opportunity to utilize ICT as a tool for triggering local growth. However, such an effort cannot and should not be driven by the central government downward. Unless the cities themselves decide to explore these new Digital Strategy opportunities, no one will be there and possibly no one should be there to enforce them! Last, but of equal importance, is an effort to set targets and to measure progress on two scales. One scale should certainly comprise technology indices — the usual ones but probably the least important

ones about broadband penetration, PC use etc. Such metrics that statistically savvy people usually hanker to check and compare. The other scale however is deemed to be the real metric of digital progress and it's all about technology's impact on real life. How many hours did the average citizen save by not sitting at queues due to a new e-service? How much more has the young kid learned at school by using his laptop? etc. These real-life metrics introduce a new meaning both to the role of technology and also to the impact of the Digital Strategy itself. Judging from the high digital growth rates of the last two years, Greece has now demonstrated that it has both the ability and the means to cover the digital ground that it painfully lost during the last two decades. The government's Digital Strategy is already there and it is an accredited plan. The financing tool is also there in the form of an Operational Program and it brings new and more innovative elements up until 2013. If there was a last hurdle that could possibly hamper this digital convergence effort, it would be nothing more than inertia and the fear of change. But for how long and at what price can we afford to pay for this fear? Digital Greece cannot and should not wait any longer. The digital journey has already started and it is really fascinating.


Companies Analysts described EYDAP’s financial performance in the first half of the year as positive and said the outlook for the year ‘looks even better.’ On the other hand, EYATH’s profit growth is strong due to the company’s expansion policy and cost containment.

Investor interest in Greek water utilities strong as shares outperform olid profit figures and speculation of a buyout from a large foreign investor have kept investor interest high in Greece's two largest water utilities, Athens Water and Sewage (EYDAP) and Thessaloniki Water Supply and Sewage (EYATH), helping the shares outperform broader gains on the Athens bourse so far this year. With a market value of 849 million euros, EYDAP is the largest water and sewage regional monopoly in Greece and serves more than 5 million consumers in the broader Athens area. Its counterpart in northern Greece, EYATH, is the country's second-largest business of its kind and serves more than a million consumers. The shares of EYDAP and EYATH have risen 13.5 and 62 percent respectively since the start of the year, outperforming the Athens bourse benchmark general index, which has gained 12 percent in the same period. EYATH's share performance has been boosted by market speculation that the Athens water utility was looking into taking it over. In a filing to the Athens bourse, EYDAP denied examining the option of operating in the northern Greek market and said that it is not aware of any interest being shown by French utility Suez. The denial, however, has failed to stamp out the rumors of a growing interest being shown by Suez in the Greek market. According to brokers, Suez holds just under 5 percent in EYATH. A decision concerning a possible stake sale would be made by the government, which owns 61 percent of EYDAP and 74 percent of EYATH. The Finance Ministry has not formally outlined its 2008 privatization agenda. Analysts described EYDAP's financial performance in the first half of the year as positive and said the outlook for the year ‘looks even better.’ ‘The main investment positives in EYDAP's investment case are its monopolistic position and exclusive access to a market that has been growing rapidly on the back of many factors, such as strong and sustainable water consumption, the prolonged heat waves and persistent droughts and the increase in the country's tourism volume by an average of 4-5 percent annually,’ said P&K Securities in a recent note. As far as EYDAP's first-half earnings are concerned, turnover grew by 7.3 percent at the end of June 2007, while the gross margin improved by

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16.5 percent to 78.4 million euros in the same period. Gross profit margin was 43.7 percent at the end of the first half from 40.2 percent a year ago. Earnings before interest, tax, depreciation and amortization (EBITDA) increased by 22.7 percent at the end of the first half of 2007, reaching 29.5 million euros from 24 million euros in the respective period of 2006. Earnings before interest and taxes (EBIT) recorded strong growth as they increased by 42.1 percent from 13.4 million euros at the end of June 2006 to 19.1 million euros at the end of June 2007. ‘It is also remarkable that for the first time in a first half of the year after the adoption of the IFRS the company has positive operating cash flow and significantly improved free cash flow,’ the company said in a statement. EYATH on the other hand said that earnings after taxes and minority rights have presented an impressive increase (64.12 percent) during the first semester of the current fiscal year compared to the equivalent one last year. In particular, they amounted to 4.2 million euros against 2.6 million euros last year. At the same time earnings before taxes have been increased by 45 percent approximately and reached 6.1 million euros against 4.2 million euros last year. Earnings per stock during the first semester reached 0.24 euros against 0.14 euros, presenting an increase of 71.4 percent. Meanwhile EYATH's turnover ‘closed' at 33.289 million euros, against 31.854 million in the first semester of 2006, presenting an increase of 4.5 percent. The company's net position from 73.3 million euros in the first semester of 2006, reached 73.9 million euros this year while at the same time cash holdings on 30/06/07 reached 12.6 million euros against 10.3 million on 31/12/2006, an increase therefore of approximately 23 percent. According to EYATH, significant strengthening of profit making is due to the company's expansion policy, balancing of expenses, limitations on waste and cutting back on certain people's ‘privileges.' ‘The main investment positives for EYATH include a monopolistic position and exclusive access to a fast-growing market, strong water market dynamics, and a guaranteed five-year tariff increase policy that removes uncertainty,’ said P&K Securities.

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Markets GAMING SECTOR he legal Greek gaming market comprises three major fields: sports betting, casinos and lotteries. Fixed-odds sports betting is controlled by OPAP while the Greek Organization of Horse Racing (ODIE) operates horse-race betting. Licenses for the lotteries have been granted to OPAP and the Greek State Lottery, while some years ago (up to 2003) Intralot was operating an instant lottery. The Greek gaming market for 2006 stood at 8.127 billion euros. The compound annual growth rate for the same period was 16.3 percent. For 2006, OPAP accounted for 55.7 percent of the market, leaving casinos with 35 percent in second place. The State Lottery (the only beneficiary is the state) has a market share of 5.1 percent while horse racing controls 4.2 percent. The latter has seen its market share decline significantly since 1998 (10.4 percent) compared to international trends. Staterun ODIE has recently made steps toward its modernization (e.g. relocation to new facilities and vigorous advertising), although it still carries the burden of high debt. In the past OPAP had investigated a possible alliance with ODIE. Such a possibility could lead to significant synergies but it may require significant investment. It should be noted that during the abovementioned period OPAP more than doubled its market share while at the same time casinos, horse racing and the State Lottery lost market share. During 2002, the Greek government prohibited gambling machines outside casinos. Additionally, it virtually banned every electronic device from slot machines to PCs running computer games. Following complaints and legal proceedings, the government clarified that computer games via the Internet or local network were allowed, as long as no financial stakes were involved. However on 18/10/2007, the European Commission decided to ask the European Court of Justice to impose a fine on Greece for failing to comply with the court's order to lift a blanket ban on all electronic gaming machines — including computer games — throughout the country. The Commission is recommending that the court impose a one-off fine of 3.5 million euros and a daily penalty of 31,798 euros on Greece as long as it refuses to comply. Immediately after the prohibition of gambling machines, OPAP introduced Super 3, Extra 5 (2002) and Kino (2003). The introduction of the latter, a numerical fixed-odds game accounting for 39.94 percent of OPAP’s revenues in 2006, proved to be a huge success. It is worth noting that after the

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Research

prohibition of gambling machines, the casino subsector did not gain market share against OPAP. Possible reasons could be: 1) the strong penetration of Kino via players who considered Kino as a good alternative; 2) the continuation of machine gambling through an illegal network. In addition, on 27/06/07 the European Commission launched infringement proceedings against Greece by a letter of formal notice. The Commission sought to verify whether the restrictions in question are compatible with Article 49 of the EC Treaty, which guarantees the free movement of services. The Commission considers that the restrictions in question are not compatible with existing EU law and that the measures taken by certain member states to restrict the free movement of sports betting services have not been shown to be necessary, proportionate or non-discriminatory. Furthermore, in the Commission's view, existing national operators cannot be regarded as non-profit operations, given that they are subject to strict annual revenue targets and often rely on commercial retail outlets to market their various gambling services. The Commission inquiries cover the crossborder provision of sports betting services, but also deal with issues such as advertising and sponsorship. The Greek government sent a response letter to the European Commission regarding the organization of the local gambling sector. The basic argument of the Greek side is that gambling was excluded from the Services Directive last year, so it’s up to every state to decide upon this matter. In any case, the Greek state has declared that is ready to discuss further restrictions on how OPAP regulates the market. Specifically, issues such as setting a monthly budget limit per player as well as advertising limits will be directly examined. It is clear that, up to now, the Greek state has shown no intension of deregulating the market, thus leaving the OPAP monopoly intact. Globally, during 2007 key members states of the European Union either liberalized their gaming markets or stated that they would move toward deregulation during the coming years. Specifically, Italy granted operation licenses to six operators, while in Spain every autonomous union will organize its own tender. Additionally, France and Sweden have already expressed their intention to liberalize the local markets. It should be noted that the Spanish, Italian and French lotteries were the top three European lotteries in terms of total sales for 2005. In our view, this trend demonstrates that sooner or later most of the member states will deregulate

Greek gaming sector’s evolution (mln euros) Year

1998

%

1999

%

2000

%

2001

%

2002

%

2003

%

2004

%

2005

%

2006

%

OPAP

669.4

26.43

591.8

21.96

1,420.2

37.87

1,766.4

41.28

1,934.2

42.03

2,230.6

49.02

3,067.9

52.58

3,592.9

52.01

4,524.1

55.67

Lottery (State & Instant)

474.4

18.73

466.2

17.30

472.1

12.59

497.8

11.63

505.1

10.98

462.5

10.16

376.9

6.46

416.5

6.03

417.5

5.14

Horse racing

262.8

10.37

330.4

12.26

347.9

9.28

349.3

8.16

336.4

7.31

347.9

7.65

328.7

5.63

322.4

4.67

337.5

4.15

Casinos

1,126.5

44.47

1,306.4

48.46

1,509.5

40.26

1,665.3

38.92

1,825.8

39.68

1,509.5

33.17

2,061.6

35.33

2,576.2

37.29

2,848.0

35.04

Total

2,533.1

100.0

2,694.8

100.0

3,749.7

100.0

4,278.8

100.0

4,601.5

100.0

4,550.5

100.0

5,835.2

100.0

6,908.1

100.0

8,127.2

100.0

Securities 32


OPAP

their domestic markets, but in any case we expect Greece to be among the last. Casinos A total of nine casinos operate in Greece, with only one run by the state. The Club Hotel Casino Loutraki maintained its leading position in the casino market for yet another year. Casinos operating near the two biggest Greek cities (Athens and Thessaloniki) account for 82 percent of total visitors. According to the 1994 law, the Greek state has the right to grant new licenses in areas where casinos already operate 12 years after the first operating day. The first casinos in Greece opened in 1995, while the rest came later. Currently there are rumors that the state is seeking to grant a new license on Crete (which as yet has no casinos), while at the same time it is examining ways to raise money by offering extension periods to existing casinos and privatizing Corfu’s casino. We think that, due to social concerns as well as the lack of demand in most places outside Athens, the opening of new casinos in Greece is not likely, with the exception of Crete and possibly a third license in Attica. Internet gambling Internet gambling is not legally available in Greece. To date OPAP has not expressed any official intention of introducing Internet betting, because even though such a move could boost its profits, it could also jeopardize its arguments on monopoly. In addition, the company is seeking ways to stop Internet betting. The United States, where betting transactions via credit card are blocked by the bank if the Internet site is physically located outside the country, could be a good example. However, the fact that the Ministry of Finance, the banking sector and OPAP would have to act in alliance on this matter may significantly delay the application of such a measure. Even though Internet penetration is low in Greece, we think that eventually OPAP should be at least internally prepared to face Internet competition. Social responsibility The social side effects that the liberalization of gambling would cause are the main arguments of the monopoly defenders in Greece and in the EU. As a result OPAP has made significant progress toward social responsibility, gaining legal backup in the deregulation issue. Specifically: ñ It does not advertise Kino at all, which, as previously stated, is the closest legal alternative to slot machine gambling. ñ It had the lowest advertising budget in Europe calculated as a revenue percentage (2005 figures). ñ It contributes much to society in terms of donations and sponsorships. ñ It has not launched any new games since 2003. As for the casinos, the Club Hotel Casino Loutraki, in cooperation with the Hellenic Center for Intercultural Psychiatry (SOS Line), has set up a 24-hour free phone line offering help to gamers, and a special program to fight gambling addiction, while at the same time it was the first company to initiate the self-barring policy.

OPAP SA was established as a private legal entity in 1958, was reorganized as a societe anonyme, or corporation, domiciled in Greece, in 1999, and its accounting as such began in 2000. On 13/10/2000, the company purchased from the Hellenic Republic the 20-year exclusive right to operate certain numerical lottery and sports betting games for the amount of 322.817 million euros. According to the latter, the company has the sole concession to operate and manage nine existing numerical lottery and sports betting games as well as two new numerical lottery games, which it has yet to introduce. The company also holds the sole concession to operate and manage any new sports betting games in Greece as well as the right of first refusal to operate and manage any new lottery games permitted by the Hellenic Republic. The company currently operates six numerical lottery games (Joker, Lotto, Proto, Extra 5, Super 3 and Kino) and three sports betting games (Stoichima, Propo and Propo-Goal). It has also designed two new lottery games (Bingo and Super 4). It distributes its games through an extensive on-line network of approximately 5,338 dedicated agents. Starting February 2007, OPAP has undertaken the execution risk of running Stoichima (its main fixed-odds sport game) on its own, aiming to boost sales and save 2-3 percent of extra costs. In addition, on 01/08/07, the company signed an agreement with Intralot for the procurement of 29,400 new terminals divided between agent, touch screen, and ticket checker terminals. The company’s basic economic figures according to financial statements for the year ended 2006 are as follows: Turnover came to 4,633,428,778.34 euros against 3,695,234,505.83 euros in 2005, presenting an increase of 25.39 percent. Operating profit came to 738,211,249.40 euros, presenting an increase of 3.31 percent, while net profit was up 11.23 percent to 509,806,697.57 euros. In addition OPAP disclosed 2007 first-half results. Revenues were down 2 percent year-on-year to 1,224 million euros, EBITDA reached 201 million euros, up 32 percent y-o-y and net profit stood at 142 million euros, up 35 percent y-o-y. Headlines were above consensus, due to the strong Kino and Joker top line and the change of accounting of Intralot’s know-how transfer contract. Prize payouts to lottery and betting winners, as the main account of the cost of sales, represent the profit of the games’ winners of the company according to the rules of each game. Distributions to the Hellenic Football Association are related to the Propo and Propo-Goal games. All in all, OPAP has been reporting solid results for a number of years and aims to benefit further via a new business plan expected at the beginning of 2008. After considerable delays the former management of OPAP was expected to announce the business plan by September 2007. However, following the recent management change, it is normal that the new president and CEO, Christos Hadjiemmanuil, should be updated before any official announcements. The new business plan could include opportunities such as: ñ Participation in cross-border million-euro-type lotteries. ñ Governmental approval for machine games (VLTs, AWPs etc). ñ Operation of games via new media. ñ A major sport event to boost Stoichima results in 2008. ñ Kino to be introduced on ships. ñ Bill and ticket payment services to add a new niche market. As far as risk is concerned, the possible deregulation of the gaming market in Greece is a threat to OPAP. Even though the management claims that in such a case the company has the liquid assets needed in order to expand internationally and generate synergies in lottery and betting operations, it is also true that it would be difficult to retain its local market share. Thus, it is possible that the management will seek to sign contractual agreements with the agents connecting the issue with the refurbishment of the agencies.

www.pkonline.gr 33


Companies Piraeus Group

Solid growth in volumes, profitability rofitability and business volumes of Piraeus Group continued the fast pace of growth in the nine months 2007. Loans grew by 43 percent and deposits by 27 percent on a yearly basis. This significant increase of business activities led to net profit in the nine-month period of 512 mln euros up by 50 percent y-o-y, while core profit was up by 52 percent. This performance and the recent completion of the Bank's 1.35-bln-euro share capital increase, in combination with the fast expansion of Piraeus Group activities to the broader geographical region of Southeastern Europe and the Eastern Mediterranean, made the revision of our business plan necessary. According to the revised business plan, which is based on organic growth, Piraeus Bank Group's total assets will be close to 80 bln euros by the end of 2010 compared to 40 bln euros today, while net profit of 2010 will reach 1.2 bln euros.’ (Michalis Sallas, Chairman of the Board of Directors) Key performance points of the 9M 2007 period ñ Increase of Group profit after tax and minorities by 50 percent up to 512.1 mln euros against 342.1 mln in 9M 2006. Earnings per share 1.83 euros versus 1.23 euros last year, increased by 49 percent.

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Increase of core profit, excluding the net revenues that resulted from the unwinding of the cross-shareholding with ING in 2006 and the selling of the stake in Bank of Cyprus this year, by 52 percent to 358.8 mln euros from 236.7 mln last year. Improvement of return-on-equity ratio (RoE) to 34.9 percent from 29.9 percent in 9M 2006 and return-on-assets ratio (RoA) to 1.83 percent from 1.68 percent respectively. Net interest income on average interest earning assets (NIM) at 3.01 percent. Increase of net interest income by 28 percent and net commission income by 25 percent y-o-y. Improvement of cost-to-income ratio to 42.7 percent compared to 46.6 percent previous year. Loan portfolio grew by 43 percent and deposits grew by 27 percent y-o-y. Significant increase of international operations' volumes: doubled loan portfolio (100 percent), growth of deposits by 44 percent y-o-y. Expansion of branch network to 690 branches in September 2007, out of which 309 branches in Greece and 381 branches abroad.

Cosmote:

Expansion in all markets osmote Mobile Telecommunications SA, the mobile operator with the widest presence in Southeast Europe, has announced its consolidated financial data and operational key performance indicators (KPIs) for the nine months ending September 30, 2007, under International Financial Reporting Standards (IFRS). Cosmote operates in five countries — Greece, Albania, Bulgaria, the Former Yugoslav Republic of Macedonia (FYROM) and Romania — through Cosmote Greece, AMC, Globul, Cosmofon and Cosmote Romania. Since October 2006 Cosmote has also been consolidating the position of its subsidiary Germanos, a chain of stores offering phone and computer goods and services. Over the past nine months and in all its operations Cosmote has continued to realize strong customer additions, as a result of Germanos’s contribution and expansion, both resulting in fast revenue growth. Total subscribers added in all markets in the third quarter of 2007 exceeded 1 million, double the amount added in Q3 2006, leading to total net additions during the first nine months of 2007 of almost 3 million. Overall, the Cosmote Group's customer base has reached 14.1 million, a 42 percent increase from a year ago. This strong subscriber growth is clearly leading to a faster-than-anticipated achievement of the 15 million subscriber benchmark, initially targeted for 2009 but now well within reach in the next two quarters. Consolidated revenue growth for the nine months reached 38.1 percent year-on-year, and excluding the

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Germanos impact approximately 14 percent. In Q3, consolidated revenue growth reached 39 percent, an acceleration compared to earlier quarters, mainly due to the accelerated Q3 growth in Greece and Germanos sales. In Greece, Cosmote continued to power sales growth through increasing subscriber numbers and market share, mainly in the post-paid segment and through the Germanos distribution channel. At the same time, positive usage elasticity is leading to significant outgoing revenue growth despite tariff reductions. As a result, average revenue per user (ARPU) declines have been contained, despite aggressive prepaid offerings. In Albania, AMC continued its strong performance, with revenues increasing through subscriber expansion in a stable AMOU & ARPU environment; in Bulgaria, Globul succeeded in sustaining fast revenue growth with significantly improving margins; Cosmofon in FYROM is continuing its upward path in its KPIs, with substantial improvement in its EBITDA performance; Cosmote Romania is attracting very strong subscriber numbers and is on track to meet its ambitious financial targets for 2008 and 2009. Throughout the past 12 months, Germanos has been the key to the Group's growth, by increasing substantially its net additions to Cosmote in all regions of common operations and accounting for around 56 percent of total Group net additions (excluding Albania) in Q3. Consolidated EBITDA increased by 13.4 percent in Q3 and 15.9 percent in the first nine months. The continuing EBITDA growth is the result of

steady improvements in the profitability of all international operations with record margins in Bulgaria, Albania and FYROM, in addition to the strong turnover growth. In Greece, EBITDA increased by 2 percent in Q3, with a margin decline largely due to one-off factors, discussed below. Group net income in Q3 declined by 15 percent compared to Q3 2006, leading to a nine-month increase of 1 percent. The net income decline in Q3 is mainly due to significant FX losses of approximately 19 million euros in Romania due to the RON devaluation during Q3, increased interest costs and higher depreciation, resulting from the substantial capital expenditure in Romania and Bulgaria. Group progress in 2007 remains on course to meet the key targets set in terms of revenue and EBITDA growth. Total Group capital expenditure reached approximately 340 million euros in the first nine months of 2007. Romania continued to absorb the majority (approx 132 million) as it is investing heavily to expand its network capacity. Greece absorbed some 97 million euros and Bulgaria a further 66 million. Increased customer intake, resulting in substantial traffic growth in all markets, is leading to higher capital expenditure requirements. As a result, Cosmote expects to revise its capital expenditure plans upward for 2007 to a total of up to 540 million euros, related mainly to capacity expansion in Greece, Romania and, to a lesser extent, Bulgaria. At the end of September, Group net debt stood at 2.4 billion euros.


Aegean Airlines

Passenger traffic lifts earnings urnover rose 20 percent to 370.5 mln euros from 307.6 mln euros. Pre-tax earnings increased 36 percent to 41.7 mln euros. Net profit for the period increased 45 percent to 33.4 mln euros from 23 mln euros. EBIT increased 24 percent to 42.8 mln euros. Total passengers welcomed onboard rose by 19 percent to 4.1 million. Average passengers per flight improved to 96 from 94. Dimitris Gerogiannis, managing mirector, commented: ‘I am pleased to report a positive set of ninemonth results, showing net profits of 33.4 mln euros, 45 percent higher compared to the respective 2006 period. These improved results were driven by a consistent strong momentum in passenger traffic growth combined with successful cost efficiency measures. I am also pleased to report progress in areas that have been set as key priorities in our strategic development plan and these include expanding our international network, further strengthening our relationship with Lufthansa, reinforcing our domestic position and, last but not least, achieving progress on the cost of distribution front. ‘Looking forward into 2008, where the major part of our fleet modernization would take place, we are focusing on improved customer services as well as further cost efficiencies that the renewal will bring, in an overall challenging cost environment. The oil price, which has repeatedly hit and exceeded record high levels, has become the most immediate challenge for the near future. While partially mitigated by the weak US dollar and the application of fuel surcharges, we believe its effect will be felt in 2008. To this end, among our goals is to accelerate the re-fleeting process — to the degree possible — so as to more rapidly improve the fuel efficiency of our fleet as well as enhance our revenue potential as a result of our improved services.’ Total revenue rose by 20 percent to 370.5 mln euros from 307.6 mln euros attributed to the strong demand trend and network expansion. Aegean Airlines achieved excellent profitability during the nine months of 2007. Pre-tax profits showed an improvement of 36 percent to 41.7 mln euros from 30.7 mln euros. Net earnings after tax for the ninemonth period jumped 45 percent to 33.4 mln euros with a respective margin of 9 percent. Net earnings growth for continuing operations was even higher, standing at 59 percent. Important factors that contributed to the improved profitability were scale economies and distribution efficiencies due to higher web sales. As far as the traffic development is concerned, Aegean Airlines welcomed more than 4 million passengers on board during the nine-month period, achieving a 19 percent y-o-y growth. Domestic demand remained strong with passenger traffic up 12 percent to 2.6 million passengers, confirming the success of Aegean's strategy to further strengthen its presence as well as stimulate demand in the domestic market. Growth in international routes was higher, reflecting efforts for further international network expansion, with Aegean Airlines transferring 1.5 million passengers, 34 percent more compared to last year.

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Companies

Titan Cement Company

South eastern markets strong itan Group turnover for the first nine months of 2007 was 1,144 million euros, down 4 percent versus the prior year. Year-to-date EBITDA was 342 million euros, down 7 percent against last year. Net profit for the Group, after minority interests and taxes, reached 193 million euros, down by 9 percent on the previous year. At constant exchange rates,

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Group turnover and EBITDA would have decreased by 1 percent and 5 percent respectively year-on-year. In the US, the significant downturn of the residential sector, compounded by the crisis in the subprime mortgage market, strongly affected sales across all product lines, despite the positive contribution from recent acquisitions. The decline is more pronounced in the previously buoyant Florida market, but is also noticeable in the other states where the Group operates. Furthermore, the court-ordered cessation of mining in Florida's Lake Belt region since July 17 has radically reduced the profit contribution from the aggregates activity and adversely influenced production costs at our Pennsuco cement plant. In Greece, the surge in demand posted at the beginning of the year receded, as expected. Construction activity in the third quarter declined, compared to a strong Q3 in 2006. In addition, solid fuel prices and dry-cargo freight rates reached unprecedented levels, affecting the Group's profitability. Southeastern Europe posted a considerable increase of profitability, primarily due to the enhanced performance of Bulgaria, with the remaining markets also making a positive contribution. In Egypt, profitability declined, due to rising energy costs and the scheduled shutdown of the Beni Suef plant for over a month, for upgrade of capacity. Group investments for the third quarter reached 395 million euros, mostly relating to acquisitions but also to improvements in operations efficiency. Titan also proceeded with the buyback of 344,092 own shares

with a total value of 12.2 million euros during the current financial year, with a view to enhancing longterm value creation for shareholders. For the remainder of 2007, we anticipate demand for building materials in Greece to be below last year's levels, while markets in Southeastern Europe are expected to maintain the prevailing dynamism. In the US, the housing crisis is extremely severe while concerns remain about a broader slowdown of the economy. Regarding the court decision affecting mining in Florida's Lake Belt region, the Army Corps of Engineers is expected to complete the requested Supplementary Environmental Impact Statement (SEIS) in early 2008. In parallel, the hearing of the appeal we filed against the judge's ruling at the 11th Circuit Court of Appeals in Atlanta is scheduled to commence at the end of November 2007. Our 50 percent joint venture in Egypt, following the award by Egypt's Industrial Development Authority of the relevant license, is starting a 150-millioneuro investment to expand by 1.5 million tons per annum the capacity of the Beni Suef plant. Construction of the new line and supply of engineering and electrical equipment has been assigned to the French group FCB. Furthermore, the construction of the new plant in the area of Boka e Kuqe in Albania is progressing at a fast pace. We expect both cement plants to be operational at the end of 2009, enhancing our geographical diversification and increasing the Group's presence in these emerging markets.

Forthnet

Unbundling ratio improves n the third quarter Forthnet accelerated the pace of unbundling significantly as evidenced by the steadily improving unbundling ratio. At the beginning of June, the unbundled active customers stood at 15,280 while at the end of September that number was more than 42,580. In terms of new additions, Forthnet increased its market share to approximately 42 percent of total unbundling in the third quarter. More importantly the pace accelerated further in October. The activations in October reached about 14,000 setting a new record for activations in a single month. As the pace of unbundling increases the company shifts further its attention from wholesale products to ULL products & services. In a seasonally weak quarter, Forthnet added 26,427 new Broadband subscribers1 reaching a total of 189,267 as of the end of Septembe. Forthnet 2Play continuous its strong uptake, constituting - of Forthnet's active ULL subscriber base with ARPU at 46 euros (excluding VAT). Demand for Broadband, 2play and other ULL services is expected to remain strong. In an effort to increase its appeal to the consumer market, Forthnet launched a retail network of Forthnet branded shops. In October 07, Forthnet opened 31 Broadband shops, through a mix of mainly franchised, owned, and shop-in-a-shop stores. This number is expected to grow over time.

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Hellenic Petroleum

Third quarter income up 109 pct hird quarter 2007 reported consolidated net income increased 109 percent yearon-year to 84 million euros and ninemonth (9M) net income grew 23 percent to 265 million euros, corresponding to 0.27 euros and 0.87 euros per share (EPS) respectively. Adjusting for inventory effects, ‘clean’ net income was up 3 percent y-o-y to 226 million euros in 9M, but down 18 percent to 82 million euros in Q3. Reported Group earnings before interest, tax, depreciation and amortization (EBITDA) increased 3 percent to 444 million euros in 9M; on a comparable, ‘clean’ basis, they were lower by 11 percent to 392 million euros. Key financials for the nine-month period to 30 September, 2007, and comparisons to last year's results, are: ñ Sales revenue: 5.9 billion euros, down 3 percent (Q3: 2.1 billion euros, up 5 percent). ñ Net income: 265 million euros, up 23 percent (Q3: 84 million euros, up 109 percent). ñ Earnings per share: 0.87 euros, up 23 percent (Q3: 0.27 euros, up 109 percent). ñ ‘Clean’ EBITDA: 392 million euros, down 11 percent (Q3: 132 million euros, down 30 percent). ñ ‘Clean’ net income: 226 million euros, up 3 percent (Q3: 82 million euros, down 18 percent). ñ RO∞CE: (12-mth trailing) 10 percent. ñ ROE: (12-mth trailing) 11 percent. Key themes for Q3/9M results were: a) Weakening refining environment – After the exceptional strength in May, Mediterranean benchmark refining margins weakened significantly, with the Q3 blended benchmark refining margin down by $2.5/bbl over the previous quarter and $0.8/bbl lower versus Q3 2006. However, in 9M 2007 the blended benchmark refining margin was 2 percent higher y-o-y. – During Q3, the euro strengthened further against the US dollar, with an adverse translation effect on refining margins and, thus, profitability. However, weakness in the dollar positively affected the revaluation of US$-denominated loans, resulting in 16 million euros currency gains. – The Greek products market grew (excluding seasonal heating gasoil sales) by 0.9 percent, on the back of strong automotive diesel and aviation fuel sales. Heating

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b) –

gasoil sales were down 14 percent due to the warmer winter, while gasoline sales were flat. In Q3, crude oil prices continued their ascent, moving by an average $6/bbl over Q207, leading to a positive inventory effect. In contrast, the sharp fall in crude oil prices led to inventory losses of 85 million euros in Q306. Improving profitability In the absence of last year's inventory losses, 9M reported EBITDA increased by 3 percent to 444 million euros (Q3 at 135 million euros, up 32 percent); ‘clean’ EBITDA was down 11 percent to 392 million euros (Q3 at 132 million euros, 30 percent lower). Net income grew 23 percent to 265 million euros in 9M (Q3 at 84 million euros, up 109 percent). On a comparable, ‘clean’ basis, net income increased by 3 percent y-o-y to 226 million euros in the respective period. Free cash flow reached 282 million euros, driven by improvements in working capital needs. Net income boosted by FX gains, stronger DEPA-related income and a lower tax rate; 9M reported EPS increased by 23 percent to 0.87 euros (Q3 at 0.27 euros, up 109 percent), while ‘clean’ EPS was up 3 percent to 0.74 euros (Q3 at 0.26 euros, down 18 percent).

37


Companies

OPAP S.A.

Revenues rise by five pct on strong KINO performance PAP, the leading gaming operator in Greece, announced interim financial results for the nine-month period ending September 30, 2007, prepared in accordance with International Financial Reporting Standards (IFRS). OPAP's revenues for the nine month 2007 increased by 5.0 percent amounting to 3.5 billion euros compared to 3.3 billion euros in nine mont 2006, primarily due to KINO's very strong performance, which more than offset a decline in Stihima revenues, itself a reflection of incremental revenues in the comparable period during the 2006 World Cup which took place in June and July 2006.

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Revenues for third quarter 2007 grew by 7.8 percent to 1.16 billion euros, compared to 1.08 billion euros for the same period in 2006. The Company's EBITDA, adjusted for the first out of the two one off payments of 25.0 million euros made towards the victims of the recent forest fires in Greece, reached 589.1 million euros, up 14.6 percent year-on-year, due to reduced costs following the undertaking of the organisation and operation of the Stihima game and despite the increase in distribution costs and payout to the winners of Stihima, which was mainly recorded in the third quarter compared to the same period in 2006.

The adjusted EBITDA margin increased to 16.6 percent versus 15.2 percent for the same period in 2006. Adjusted EBITDA for third quarter 2007 increased by 4.0 percent to 192.2 million euros, while the EBITDA margin stood at 16.5 percent versus 17.0 percent for the same period in 2006. Adjusted net profit for nine month 2007 amounted to 416.2 million euros, an increase of 17.1 percent year-on-year, while for the third quarter it increased by 2.8 percent, and amounted to 130.8 million euros, reflecting the above mentioned factors, as well as the lower corporate tax rate.

PPC

Revenues hit 3.8 bln euros otal revenues amounted to 3.84 billion euros versus 3.58 billion euros in nine month 2006, an increase of 7.4 percent. During the third quarter of 2007, the negative impact to hydro generation, due to the very low snow and rain fall levels of the first four months of the year continued, albeit at a lower pace, causing a severe decrease in hydro generation by 53.1 percent in nine month 2007, compared to nine month 2006. This decrease, resulted in a expenditure of 178 million euros that impacted the nine month in 2007 financial results, compared to the financial results of the corresponding period of 2006, as a consequence of the substitution of almost the entire reduction of hydro generation by “expensive fuels� (natural gas and energy purchases). Other operating expenses, including lignite, amounted to 410.2 million euros, from 439.8 million euros in nine month 2006, a decrease of 6.7 percent. EBITDA amounted to 610.8 million euros, compared to 631.2 million euros in nine month 2006, a

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decrease of 3.2 percent. Pre-tax profits in nine month 2007 amounted to 76.6 million euros compared to 105 million euros in nine months 2006, a decrease of 28.4 million europs (27 percent), while net income amounted to 60.2 million euros, compared to 71.2 million euros, respectively, a decrease of 15.4 percent. Capital expenditure amounted to 584.8 million euros compared to 493 million euros in nine months 2006, an increase of 18.6 percent. This increase is mainly attributed to capital expenditures for the development of mines and for electricity generation projects. Under especially difficult conditions, PPC managed successfully the consequences from the intensive and of a long duration summer heat waves, that tested the country's electricity system, while succeeding, as well, in the quick restoration of damages caused by the catastrophic fires that resulted in numerous and significant electrification problems. These factors, impacted on the financial results of 3Q 2007.


Coca-Cola HBC

Business momentum continues guidance upgrade olume of 1,554 million unit cases, 14 percent above 2006; strong operating profit (EBIT) momentum to 616 million euros, 20 percent above last year on a comparable basis; net profit of 435 million euros, 18 percent above 2006 on a comparable basis, EPS of 1.80 euros, 18 percent above the prior year on a comparable basis. Volume of 584 million unit cases, 12 percent above 2006; solid improvement in operating profit (EBIT) to 285 million euros, up 21 percent on last year; net profit of 213 million euros, up 22 percent on the prior year; EPS of 0.88 euros, up 21 percent year-on-year. Note: Comparable financial indicators (previously referred to as ‘underlying’) exclude in 2006 the recognition of pre-acquisition tax losses, significant restructuring costs and nonrecurring items. Doros Constantinou, managing director of the Coca-Cola Hellenic Bottling Company (CCHBC), commented: ‘Our performance in the third quarter has built on the strong momentum achieved at the half year with the continued successful execution of our strategy across our geographies and product categories. We delivered another quarter of robust volume growth, together with strong operating margin expansion and as a result we are upgrading our guidance on our full-year financial targets. We are in the process of completing our business planning cycle and believe that our in-country strategic initiatives, coupled with the positive momentum we are witnessing across our territories, will support CCHBC's vision of being the undisputed leader in every market in which we compete.’ CCHBC is one of the world's largest bottlers of products of The Coca-Cola Company (TCCC) and has operations in 28 countries serving a population of over 540 million people. CCHBC shares are listed on the Athens Exchange (ATHEX:EEEK), with secondary listings on the London (LSE:CCB) and Australian (ASX:CHB) stock exchanges. CCHBC's American depositary receipts (ADRs) are listed on the New York Stock Exchange (NYSE:CCH). Financial information in this announcement is presented on the basis of International Financial Reporting Standards (IFRS). The

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company also prepares financial information under accounting principles generally accepted in the United States (US GAAP), which are available on our website (www.coca-colahbc.com).

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Companies The port of Piraeus is in a phase of development and improvement. Financial results achieved so far as well as traffic growth reported in almost all business activities certify this belief. However, a number of critical decisions in the short term will determine the future of the country’s largest port.

Piraeus port on development route as financial results improve he year 2007 has been one of recuperation for Piraeus port, the leading container and car trans-shipment hub in the Eastern Mediterranean. The nearly two months’ work dispute at the end of 2006 had its consequences within 2007. Nevertheless, despite this setback, the year ending finds Piraeus port strengthened in both financial and traffic terms, thus proving that the country’s main port has undertaken significant structural and organizational changes during the last three years, setting the foundations that predetermine future growth. The majority of Greek citizens have come to know Piraeus as a busy passenger port — with nearly 20 million passengers per year heading to the Greek islands and another million visiting the port and its facilities on cruise vessels, it comes as no surprise. Indeed, in the cruise area Piraeus port has seen an unprecedented increase in demand during the last two years, reaching rates of close to 30 percent. This success was not out of luck though. Since 2005 passenger services have been substantially improved through the use of modern information technology as well as through the expansion of the passenger terminals. No matter how strong the increase in demand in the cruise area is, the heart of the port still beats at its container and car terminals.

T

Container terminal projects

μechrakis Dionysios President of Piraeus Port Authority www.olp.gr

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With an annual throughput of 1.4 million TEU and with more than 53 percent of the annual traffic attributed to trans-shipment, Piraeus's container terminal is considered to be the regional trans-shipment hub of the Eastern Mediterranean and the main gate to the Black Sea. The Black Sea economic area is already rapidly expanding. The Black Sea hinterland, covering six nations, is home to almost 300 million people, with buying power of $9,000 per capita and a GDP growth rate ranging from 6-9 percent. Given these facts, it comes as no surprise that the Black Sea is considered to be the European trade powerhouse for the next decade and Piraeus port can be the main trans-shipment hub for cargoes toward this growing market. The Piraeus Port Authority (PPA) operates the Eleftherios Venizelos Container Terminal (EVCT) at Neo Ikonio. It is located a short distance from the center of Piraeus, comprises Piers I and II, occupying 90 hectares, with a total capacity close to 1.8 million TEU and can accommodate the most

advanced types of container ships up to 16m draft. Pier I, situated at the eastern side of the Container Terminal, is currently under expansion and is expected to be operational by 2009. This expansion will add 1.0 million TEU capacity and is only the first step of an ambitious investment plan set into motion by PPA in order to capture the traffic increase which is expected from the continuous growth of China's exports and economic development in the Black Sea and Balkan area. This investment plan has a time span of seven year and encompasses both infrastructure and superstructure works that will ultimately provide a capacity of 4.5 million TEU. With the application of the strategic investment plan, Piraeus port will have the necessary capacity to capitalize on its advantageous geographical

Piraeus port will have the necessary capacity to capitalize on its advantageous geographical position for serving the expanding Balkan and Black Sea markets. position for serving the expanding Balkan and Black Sea markets. However, Piraeus is not the only port in the area eyeing the expanding demand in the East Mediterranean. Competing ports in the area are also realizing expansion plans and because of that the timing of the completion of the investment for Piraeus is of crucial importance. What’s more, the capacity expansion requires funds close to 500 million euros. This budget is beyond the financial capabilities of PPA as well too risky to undertake single-handedly. Within this view, the Piraeus Port Authority is searching for a strategic partner that through a concession will undertake part of the investment in infrastructure and superstructure and will assume operations under a build-operate-transfer (BOT) agreement. These plans have attracted the interest of most of the major world port operators who are displaying an initial willingness to undertake such an endeavor. Thus PPA is preparing an international call for tenders that will probably be announced within the coming months. The move of PPA SA to bring in a strategic partner will undoubtedly ensure the materialization of its


vision for the container terminal — i.e. to achieve the undisputed hub position in the Eastern Mediterranean — while at the same time creating new job opportunities at the port and the surrounding municipalities and also enhancing services provided both to local cargo port users and shipping companies engaged in trans-shipment activities at Piraeus.

Car terminals flourishing The advantageous geographical position of Piraeus for serving the Black Sea and Balkan markets holds true for the car terminals as well. Piraeus is already believed by some to be the most important hub for car trans-shipment in the Mediterranean. However, the port’s management is not resting on its laurels and, following the inauguration of a new car terminal in 2005, has already taken steps to increase the capacity by another 36,000 square meters and one more berthing spot. The new area just recently became operational and further expansion plans are under way that will undoubtedly further enhance the competitive position of Piraeus. These capacity expansion projects, together with

important operational improvements like the adoption of a bar-coding system that enables better logistics services as well as personnel training and improved safety standards are the main reasons for the considerable demand increase of 30 percent faced by Piraeus port. The improved operation of the Piraeus car terminals has been evident for some time and is probably the reason why the world’s leading car manufacturer Toyota is considering the inclusion of Piraeus port in its European and Black sea logistics network. Without doubt this move will boost Piraeus's status in the relevant market and will also provide scope for further operational improvements since the car manufacturer is considered to be a leader in logistics operations and Piraeus is one of the few hubs worldwide where the car company will not assume independent operations, thus accepting Piraeus's operational status as being up to the required standards.

Increased financial results The port of Piraeus is currently making a start on a significant improvement. Managerial measures to

enhance service quality as well as the good timing of investments are mirrored in the improved financial results. It is worth noting that in the first half of 2007, Piraeus port’s turnover increased by 9.1 percent amounting to 81.28 million euros, against 74.47 million in the relevant period of the previous year. Furthermore, earnings before taxes amounted to 16.48 million euros, against 10.05 million in 2006, presenting an increase of 63.96 percent. The port of Piraeus is undoubtedly in a phase of development and improvement. The financial results achieved so far as well as the traffic growth reported in almost all business activities are testimony to this belief. However, there are a number of critical decisions to be made in the short term that will determine the future of the port at least for the coming decades. Neither the port's management nor the main shareholder (the Greek state) are willing to miss out on the significant opportunities that lie ahead. Without doubt the necessary decisions will be taken shortly and will allow the port to embark on a new phase of development.

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Markets FTSE and ATHEX select Alpha Bank to create an ETF based on the FTSE/ATHEX 20 Index. The product will be launched in January 2008 with an initial net asset value of 140 million euros.

Alpha Bank to launch first ETF based on blue chip index ollowing the call for tender announced by the FTSE Group (FTSE) and the Athens Exchange on September 13 for the creation of the first Exchange Traded Fund (ETF) to be listed on the ATHEX, the FTSE and ATHEX are pleased to announce that Alpha Bank Group has been selected to create an ETF based on the FTSE/ATHEX 20 Index. The product comes to market in January 2008 with an initial net asset value of 140 million euros. The licensee has been selected from 7 candidates based on the following main criteria: – Starting Net Asset Value and expected growth of the ETF; – Marketing budget and plan; – Management and custody fees; – Distribution network to both institutional and retail investors; – Speed of introduction of the ETF; – Issuer's interest in developing and launching ETFs on other indices. In a joint statement, Imogen Dillon Hatcher, managing director of FTSE Europe Middle East and Africa, and Spyros Capralos, ATHEX chairman, said, 'We are delighted to be involved in the launch of this first ETF on the ATHEX and are confident that this will be the first of a series of domestic, regional, sectoral and thematic indices that the FTSE and ATHEX plan to introduce to the Greek market.' Through a joint venture cooperation, the FTSE and the Athens Exchange have created the FTSE/ATHEX 20 Index, which is widely regarded as the performance benchmark of the Greek market, comprising companies with the biggest capitalization traded on the Athens Exchange.

F

The FTSE/ATHEX 20 index represents a market capitalization of approximately 92 billion euros, or about 50 percent of the total market cap of the Greek stock market (prices as of 20/11/07). ETFs are essentially index-tracking funds that are listed and trade on exchanges like stocks. They enable investors to gain exposure to entire market segments in specific geographical areas and/or sectors through a simple transaction, on a real-time basis and at a lower cost than many other forms of investing. ETFs appeal to both individual and institutional investors and can be used as: ➢ A core holding in a portfolio with

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the aim of reducing risk; ➢ A tool for implementing a diverge range of investment allocation strategies; ➢ An attractive alternative to futures and swaps; ➢ A performance enhancement tool through securities lending. In fact, ETFs are one of the fastestgrowing segments in the investment industry and have opened a whole new panorama of investment opportunities to both individual and institutional investors. The first ETF was launched in the US in 1993, and there are now more than 950 ETFs worldwide with assets close to US$700 billion, managed by 66 managers. It is worth not-

ing that 239 new ETFs have been launched in the first half of 2007 alone, while there are plans to launch an additional 524 ETFs in Europe, the US and the rest of the world. Through its competitive proposal, Alpha Bank Group has shown its commitment to the success of this first Greek ETF, as the Group wishes to maintain and expand its leading position in the Greek equity market and continue its tradition in offering innovative products. Alpha Asset Management AEDAK, the fund manager (issuer) of the ETF, is one of the major institutional asset managers in Greece with approximately 6.5 billion euros in assets under management. In addition,

Alpha Asset Management AEDAK is the leading institutional manager of domestic equities with about 1.2 billion euros in Greek equities under management. The company was the first to introduce in Greece in 1996 a passively managed, index-tracking fund. Alpha Asset Management AEDAK along with Alpha Finance, who will act as a primary market maker of the product, have the expertise and the size for a successful product. The potential success of this first ETF could open the way for the creation of other regional ETFs, an opportunity that exists given the global investment interest in the Greek and Southeastern European markets.


10 Greek companies in a new Balkan index en of the largest Greek companies have been listed in the new Dow Jones STOXX Balkan 50 Equal Weighted Index. They include Alpha Bank, Coca-Cola HBC, Cosmote, EFG Eurobank, National Bank of Greece, OPAP, OTE, Piraeus Bank, Public Power Corporation and Titan Cement. STOXX Ltd, a joint venture of the Deutsche Boerse, the Dow Jones & Company and the SWX Group, launched the new index on November 5. It is a blue chip index measuring the performance of the 50 largest and most liquid stocks traded in the Balkan region. The Balkan countries comprise growing economies with developed competitive returns in recent years, which makes the index an appealing tool for financial institutions. The Dow Jones STOXX Balkan 50 is designed to underlie investment products such as mutual funds, exchange-traded funds and structured products. The countries currently included in the Dow Jones STOXX Balkan 50 are Bulgaria, Croatia, Greece, the Former Yugoslav Republic of Macedonia (FYROM), Romania, Serbia, Slovenia and Turkey. To ensure a significant and balanced representation of all eligible countries, the index comprises the 10 largest companies of Greece and Turkey and the five largest companies of the other countries. The criteria for the inclusion is for the company to have a relatively high free float, with each share in the index participating with about 2 percent of the value. The number of components is fixed at 50. Components are selected based on free-float market capitalization and liquidity. The composition of the Dow Jones STOXX Balkan 50 Equal Weighted Index is reviewed annually in September. Price and total return indices are calculated in euros and US dollars. Daily historical index values of the Dow Jones STOXX Balkan 50 Equal Weighted Index are available back to December 31, 2006. The year-to-date performance through October 31, 2007 of the Dow Jones STOXX Balkan 50 Equal Weighted Index is 38.7 percent. Dow Jones licenses the index to banks and financial institutions and they in return issue financial products on it which investors can invest in. Investors can only ‘buy’ from the index when investing in a financial product that uses this index as the underlying product.

Δ

Supersector weighting (%)

Country weight in index (%)

DOW JONES STOXX® BALKAN 50 EQUAL WEIGHTED INDEX Components Company

Supersector

Country

Adris Grupa Pref. Agrobanka Beograd AIK Banka Nis Akbank Alkaloid AD Skopje Alpha Bank Atlantska Plovidba Balgarska Telekomunikacionna Kompanija Banca Transilvania BRD-Groupe Societe Generale Coca-Cola HBC Cosmote EFG Eurobank Ergasias Energoprojekt Holding a.d. Beograd Eregli Demir ve Celik Fabrikalari Ericsson Nikola Tesla Granit AD Skopje Haci Omer Sabanci Himimport INA - Industrija Nafte Industrialen Holding Balgarija KOC Holding Komercijalna Banka a.d. Beograd Komercijalna Banka AD Skopje KRKA Redne Luka Koper Makpetrol AD Skopje Metals Banka a.d. Novi Sad National Bank of Greece OPAP OTE Petrol d.d. Redne Piraeus Bank Podravka Prehrambena Industrija Public Power Corp Rompetrol Rafinare SA Constanta SNP Petrom Sofarma SSIF Broker TB Centralna Kooperativna Banka Telekom Slovenije Titan Cement Co Toplifikacija Skopje Turkcell Iletisim Hizmetleri Turkiye Garanti Bankasi Turkiye Is Bankasi Turkiye Petrol Rafinerileri Turkiye Vakiflar Bankasi Yapi ve Kredi Bankasi Zito Prehrambena Industrija

Financial Services Banks Banks Banks Health Care Banks Industrial Goods & Services Telecommunications

Croatia Serbia Serbia Turkey FYROM Greece Croatia Bulgaria

Banks Banks Food & Beverage Telecommunications Banks Industrial Goods & Services Basic Resources Telecommunications Construction & Materials Holding Financial Services Financial Services Oil & Gas Financial Services Financial Services Banks Banks Health Care Industrial Goods & Services Oil & Gas Banks Banks Travel & Leisure Telecommunications Oil & Gas Banks Food & Beverage Utilities Oil & Gas Oil & Gas Health Care Financial Services Banks Telecommunications Construction & Materials Utilities Telecommunications Banks Banks Oil & Gas Banks Banks Food & Beverages

Romania Romania Greece Greece Greece Serbia Turkey Croatia FYROM Turkey Bulgaria Croatia Bulgaria Turkey Serbia FYROM Slovenia Slovenia FYROM Serbia Greece Greece Greece Slovenia Greece Croatia Greece Romania Romania Bulgaria Romania Bulgaria Slovenia Greece FYROM Turkey Turkey Turkey Turkey Turkey Turkey Slovenia

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Themes The Hellenic Center for Investment (ELKE) is promoting the numerous investment opportunities that Greece offers and is proactively supporting the path of economic growth that emanates from Greece. Record foreign direct investments figures in 2006 indicategrowing confidence in economy.

Greece to build on record year as inflows reach 4.2 bln euros s Greece establishes itself as a significant player in the global economy and pursues an outward-looking economic position, the country's investment climate is taking on a positive, dynamic and confident character. Foreign direct investment has increased significantly during the last three years and Greece has recorded record levels of inflows for 2006. In addition, Greek companies have led an impressive surge of investment activity throughout Southeast Europe and have a commanding presence in the entire region. The Hellenic Center for Investment (ELKE) is vigorously promoting the numerous investment opportunities that Greece offers and is proactively supporting the path of economic growth that emanates from Greece.

A

An outward-looking economy

Dr Dimitrios Pazaitis CEO Hellenic Center for Investments www.elke.gr / info@elke.gr

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The outward-looking nature of the Greek economy is best exemplified by the dominant position that Greek enterprises enjoy in Southeast Europe. Today, approximately 4,000 Greek companies are active in Southeast Europe and the Eastern Mediterranean. Each of these businesses is driving economic growth and expansion in a market of more than 140 million residents. In fact, Greece is among the leading investors in Albania, Bulgaria, Serbia, Montenegro, Romania and the Former Yugoslav Republic of Macedonia (FYROM), with investment stock totaling more than 4 billion euros in 2006. The vast majority of these investments (about 75 percent) is directed toward establishing new businesses and mergers or acquisitions, and these companies in 2006 alone have provided net inflows back to Greece totaling 760 million euros. Greek banks have taken a leadership position in the modernization process of the region's banking sector. Over 2,000 branches of Greek banks operate in Southeast Europe, introducing innovative, new products to emerging economies and providing a host of B2C and B2B services. Other sectors have also established themselves solidly, including telecommunications, food and beverages, textiles, construction, and a diverse number of services. The multiplier effect of these activities is considerable, leading to healthy economic growth across the board and a stronger business base. On the domestic front, Greece is continuing its well-designed policy of reform, with emphasis on further reducing taxes, creating strong incentives for private investment and employment, taking full

advantage of the EU's Third and Fourth Community Support Frameworks, promoting exports, strengthening public-private partnerships (PPPs) to build infrastructure, and continuing with privatizations. These reforms are proving to be highly effective, as we have seen through the very positive course of the economy over the last three years. The Greek economy has outperformed the EU average for more than five years. Economic growth was 4.1 percent in the second quarter of 2007,

In addition, 700 million euros of this total represents reinvested earnings, a sure sign of confidence among investors and a strong message of their intent to remain in Greece for the long term. compared with 2.5 percent in the eurozone and 1.7 percent in the United States, and is expected to maintain a 4 percent rate in 2008.

FDI — an impressive achievement One of the most impressive achievements of the significant reforms has been the dynamic increase in foreign direct investment. Gross FDI inflows in 2006 totaled more than 6.99 billion euros, a 100 percent increase over 2005. More significantly, net inflows reached 4.275 billion euros, up from 487 million in 2005, a noteworthy 10-fold increase. It is important to underline that a large share — about 60 percent of the FDI total — was directed toward new business establishment, mergers and acquisitions, and the remainder toward loans and the purchase of real estate. In addition, 700 million euros of this total represents reinvested earnings, a sure sign of confidence among investors and a strong message of their intent to remain in Greece for the long term. Of the total, the amount of loans, at 1.899 billion euros, is a positive sign of investor confidence, indicating a strong willingness to commit funds for projected revenues and growth.

Investor confidence Investor confidence in Greece is demonstrated by the all-important markets of the EU and the US. Table 1 shows the gross FDI inflows for 2006 by country. Recent initiatives by Greece in Russia and


Table 1 Country France Great Britain Germany Netherlands Luxembourg Italy Spain Portugal Sweden Ireland Austria Belgium Denmark Finland Cyprus USA TOTAL

Amount (million euros) 2,486 1,071 1,069 330 330 325 26 14 32 9 101 154 3 1 170 150 6,995

Source: Bank of Greece

Eastern Europe, the Middle East, and Asia bode well for FDI in the near future from these regions, which are showing a strong interest in energy, telecommunications, tourism, transportation and manufacturing. These advances are creating a new identity for Greece in the eyes of investors worldwide. The significant increases in FDI over the last three years clearly demonstrate that reforms have met with the approval of the global investor community. And the role of Greece as a regional hub, in energy, commerce and transit, is one of the most positive features that investors recognize today. Multinational parents based in Greece totaled 240 in 2005 and foreign subsidiaries totaled 790. The total stock of foreign investment totaled $37 billion in 2006, up from $14 billion in 2000 and $5.6 billion in 1990.

The sectors in which FDI is concentrated are varied and range from mining to tourism (Table 2).

funds are expected to reach a total of 35 billion US dollars through 2013. Public investments in a variety of infrastructure projects will reach 13 billion dollars, and private investments likewise total approximately 13 billion. PPP projects, which began in 2006, will exceed 4.3 billion dollars in value in 2008. These advances are creating a new identity for Greece in the eyes of investors worldwide. Greece's position as a gateway to Europe, an important tourism market, and a base for R&D is being noticed by investors who look for stability, opportunity, location, and growth markets.

Reform and growth

ELKE’s role

Supporting investor interest in Greece are the bold initiatives that are providing confidence and optimism. The reduction of corporate taxation rates, from 35 to 25 percent, has sent clear signals that business growth is a high priority. Time-consuming processes are being eliminated, especially in the important areas of licenses and permits. And the labor force in Greece, with a high percentage of well-educated and English-speaking talent, offers investors high-caliber human resources at highly competitive costs. In addition, the investment incentives in Greece are the highest allowed under EU legislation, reaching up to 60 percent of a project's value. Whether in cash grants, leasing, wage subsidies or tax allowances, incentives in Greece are convincing investors that the Greek government is providing a business environment that is second to none. Among the most convincing signs that Greece is adapting its business environment to today's global marketplace is the recent privatization history. Partial or full privatizations since 2004 have raised more than 5.79 billion euros, introducing a dynamic and competitive spirit in formerly state-owned enterprises. Hellenic Petroleum, National Bank of Greece, the OPAP state lottery company, the Hellenic Telecommunications Company (OTE), Agricultural Bank of Greece (ATEbank), the Greek Postal Services (ELTA), Greek Postal Savings Bank and Emporiki Bank are successful examples. Continued economic development and growth is being ensured by policies that pursue reform, wisely utilize EU funding, promote investment through the revised Investment Incentives Law of 2006, and benefit from the implementation of the successful PPP (Private-Public Partnerships) framework. EU Fourth Community Support Framework

The Hellenic Center for Investment is dedicated to supporting the international investor with superior services to facilitate new and expanding business activity in Greece. ELKE is positioned as a catalyst to implement Greece's new investment promotion policy by proactively seeking investors from around the globe. Unique investment opportunities in areas like tourism, energy, technology, logistics, and light manufacturing are unprecedented.

Table 2 Sectors FDI 2006 Mining Food, Beverages, Tobacco Clothing, Leather Goods Metals, Metallurgy Coal, Petroleum, Refineries Chemicals Electrical Appliances Radio, TV Equipment Vehicles Other Industrial Products Electricity, Gas, Water Supply Construction Real Estate Hotels, Restaurants Wholesale, Retail Post, Telecommunication Banks, Financial Institutions Insurance Consulting Services Education, Healthcare Source: Bank of Greece

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Themes Confidence among family business owners is high. Fifty-eight percent are confident that the markets in which they operate will get better over the coming year. In Greece, this percentage is similar (56 percent), although there's pessimism, since 26 percent expect that the state of the market will deteriorate.

Global business survey on family firms shows high confidence onfidence is high among family business owners, but many are not making adequate provisions for the future, according to the new survey of PricewaterhouseCoopers (PwC). ➢ 49 percent of family firms have no succession plan. ➢ More than two-thirds are optimistic about future growth. ➢ 85 percent call for a simpler tax system and/or paying lower taxes. Almost half of family businesses around the world do not have a plan outlining the future ownership of their business, according to the 2007/2008 Global Family Business Survey released on November 21, 2007, by PricewaterhouseCoopers. This first ever global survey of almost 1,500 family businesses in 28 countries, including Greece, also reveals that this rises to 56 percent when looking at companies with a turnover of less than 50 million euros a year and 60 percent when looking at companies that were founded in the last 20 years. One-quarter of the family firms surveyed are expected to change hands within the next five years and 51 percent of these are expected to remain in family hands. On the other hand, 25 percent of the family businesses in Greece plan to hand over to the next generation, while 50 percent anticipate selling to a private equity investor. Moreover, even in many of the companies that have drawn up a succession plan, some of the most important details have not been worked out. Only 48 percent, for example, have actually chosen a successor. A surprisingly high percentage of family business owners have also failed to gauge their potential tax exposure. Fifty-six percent of respondents state that they have not had their businesses valued domestically, and 84 percent of those with a cross-border presence have not had their companies valued internationally within the last 12 months. While many family businesses have not developed a succession plan or appointed someone to take over the reins when the current head of the company retires, they may be better prepared for other _ less predictable _ contingencies. Sixty-seven percent say that they have made provisions for dealing with both business and family issues, should a key manager or shareholder become incapacitated or die.

C

Outlook Three-quarters of respondents report that demand for their products and services has grown in

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the past 12 months. Many are, however, wary of growing too rapidly. Only half have increased their capital expenditure in the last 12 months, while 41 percent have maintained the same level of investment. Confidence among family business owners is high. Fifty-eight percent are confident that the markets in which they operate will get better over the coming year. In Greece, this percentage is similar (56 percent), although there's pessimism, since 26 percent expect that the state of the market will deteriorate. Executives in emerging economies are especially positive - 84 percent anticipate the value of the

orders they secure to rise in the next 12 months, compared to 70 percent globally and 66 percent in Greece. Most respondents feel that their companies are well placed to capitalize on new opportunities and are ‘somewhat' or ‘very’ competitive, citing ‘product design or quality’ and ‘Customer loyalty’ as their key strengths. Of some concern is that 25 percent of the respondents report that they do not have a business plan. Asked what external challenges they thought would most affect their companies over the coming years, 44 percent cited market conditions, followed by product competition (39 percent) and government policy (33 percent). North American and European executives are more concerned about market conditions than any other external risk (59 percent and 43 percent respectively), while those running companies in the emerging markets see the prospect of changes in government policy as a bigger threat (37 percent). Regarding Greece, competition comes first with 64 percent, next come market conditions with 54 percent, interest rates with 32 percent and government policy with 30 percent. Forty-two percent of executives say that difficulties recruiting skilled staff will be one of the biggest internal obstacles they face. As a result, human resources heads up the list of areas in which they plan to invest over the coming year. A hefty 73 percent say that their first priority is to hire and train good new employees, followed by sales activities (69 percent) and marketing (64 percent). As far as Greece is concerned, priorities are similar, though in lower percentages compared with the global levels (38 percent in all three sectors). Although 34 percent of respondents admit to conflicts over their future strategy and 27 percent have quarreled about the performance of family members employed within the firm, 70 percent have not adopted any procedures for resolving conflicts and two-thirds have no defined criteria for deciding who should be allowed to take an active role in the organization. Eighty-five percent of respondents believe simplification of the tax regime and a reduction of the tax burden should be a top priority of the government over the next three to five years. Regarding Greece, this percentage comes up to 98 percent. They would also welcome help in creating closer links with academia for the purposes of product development, a stronger corporate compliance environment and the provision of more state support for staff training.



Greek Economy & Markets - Issue 6