As British public opinion solidifies against joining the single market, other countries feel exalted...
As British public opinion solidifies against joining the single market, other countries feel exalted to be included in the Eurozone. At the EU summit in Portugal last month, Greece was formally invited to join, becoming the bloc's 12th member from 1 January, 2001. One of the main concerns of those opposed to EU enlargement is that new members will be a drain on existing resources.
But if Greece's record on accurate EU farm subsidy applications is a little patchy, aggressive regional expansion in several key sectors means it will bring some interesting investment plays to the EU party. Firstly, Greece's own economic credentials have improved dramatically in the last five years, when its failure to meet the Maastricht criteria for joining the founding Euro-11 appeared to exemplify its rather laid-back, "manyana" approach.
Fierce fiscal and monetary discipline has brought inflation down from 10% in 1995 to under 3%, with core inflation just 1.4%, in fact, backing Greece's key interest rate down from the present 8.3% to the eurozone average of around 4%, without provoking runaway growth, will be the one of the government's biggest management tests so far.
More than the rosy statistics is a feeling in Greece that it is ready to trade up from its image as a bucolic idyll and to secure a powerful role in the region. A sweeping privatisation programme is being implemented to the merest of squeaks from the usually vociferous trade unions. The state is still one of the biggest employers, offering some of the best job prospects, but that is changing. The National Bank of Greece (NPG) is now two thirds privately owned. Sporting 1999 pre-tax profits up 90%, it is moving aggressively into the Balkans and the Middle East. It bought 65% of Stoparska Bank, the leading financial institution in Macedonia, early this year; it is now bidding for 90% of the United Bulgarian Bank.
Long-standing political hostility has been set aside for links with promising Turkish ventures, NBG brought in JP Morgan to help set up a private equity fund with Turkey's Garanti Bank. Another fund is planned for Egypt. Other commercial banks are following, with a steady flow of acquisition, distribution or product deals being announced. Substantial Greek interests are to be found in Malta, Cyprus, Croatia, Albania and Israel. The surge in demand for private banking indicates the degree of success of a younger set of entrepreneurs.
Telecoms offer possibly greater potential than the banking sector. The state-run Hellenic Telecommunications Organisation (OTE) is behaving in a most unstately fashion. Its share value has gone up by 50% on the Athens Stock Exchange this year and as more of the company is floated, so its profits rise. The target for this year is a 15% increase in revenue, no-one doubts it is achievable.
Investment in domestic infrastructure is ongoing but mobile telephone penetration is already 42% in Greece. OTE has spent $1.8bn to make itself a regional heavyweight. It now owns 90% of Armenia's tellecom utility Armentel, 35% of Romania's Rom tellecom, 20% of Serb Telecom and 85% of all Armenia's mobile phone network. It is actively soliciting in Bulgaria and Macedonia. For investors, Greece offers the protection of EU membership but the opportunities of emerging market-style growth. Sector leaders like OTE and Intracorn are already popping up in pan European portfolios as cheaper plays than their exotically valued counterparts in Western Europe.
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