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Investment Climate

Openness to Foreign Investment

The Greek government encourages private foreign investment as a matter of policy. Investments are screened only when the investor wants to take advantage of government provided tax and investment incentives. In such cases, foreign and domestic investors face the same screening criteria. Greece restricts foreign and domestic private investment in public utilities (with the exception of cellular telephony and energy from renewable sources). There are also restrictions on land purchases in border regions and on certain islands (on national security grounds). U.S. and other non-EU investors receive less advantageous treatment than domestic or EU investors in the banking, mining, broadcasting, maritime, and air transport sectors.

Major investment laws are:

- Legislative Decree 2687 of 1953 which, in conjunction with Article 112 of the Constitution, gives approved foreign "productive investments" (basically manufacturing and tourism enterprises) property rights, preferential tax treatment, work permits for foreign managerial and technical staff, and permission for the export of capital, dividends, interest, and other current payments. The Decree also provides a constitutional guarantee against unilateral changes in the terms of a foreign investor's agreement with the Greek government. (This does not include taxation regime changes).

- Law 2601/98 revised the investment incentives regime replacing Law 1892/90 and its subsequent amendment 2234/94. Under the new law, new businesses (with less than five years of operation) may choose any of the following combinations of incentives: a) grants and interest subsidies as well as subsidies for leasing equipment, b) tax exemptions and interest subsidies. The emphasis of the new law is on assistance for large projects, mergers of small and medium size manufacturing companies and on the development of new products.

- Laws 89/67, 378/68, 27/75 and 814/78 provide special benefits (such as tax and import duty exemptions) for offshore operations of foreign companies established in Greece.

- Law 468/76 governs oil exploration and development in Greece. Law 2289/95, amending this legislation, allows private participation in oil exploration and development.

Greece's privatization plans are limited to the sale or partial flotation of 12 state corporations, the sale of three banks and the sale of the three remaining companies under the supervision of the state Industrial Reconstruction Organization (IRO). The Greek Government's plans include the sale of minority holdings of the Public Power Corporation, the Telecommunications Organization (OTE), and Olympic Airways Catering. The state banks also plan to rid their portfolios of shares of companies that are not in the financial services sector. The stage at which foreign or domestic investors participate in privatization programs is not restricted.

Conversion and Transfer Policies

Receipts from productive investments can be repatriated freely at market exchange rates. Remittance of investment returns is made without delays or limitations. Most of the remaining capital controls were abolished in August 1997.

On March 16, 1998, the Greek currency was included in the European Union's Exchange Rate Mechanism (ERM). This was preceded by a drachma devaluation of 12.3 percent. The government plans to maintain drachma/ECU parity throughout 1998 and 1999.

Expropriation and Compensation

Private property may be expropriated for public purposes, but only in a nondiscriminatory manner and with prompt, adequate and effective compensation. Due process and transparency are mandatory, and investors and lenders receive compensation in accordance with international norms. There have been no expropriatory actions involving the real property of foreign investments in recent history. However, a 1996 government decision to revoke a casino license for Athens has generated lawsuits in Greece and the United States, seeking compensation for the loss of the lucrative license.

Dispute Settlement

Investment disputes involving U.S. companies have been related to the Greek government's proclivity to change the terms of negotiated contracts (e.g., casino licenses).

Greece has an independent judiciary. The court system is a highly time-consuming means for enforcing property and contractual rights. Foreign companies report their experience that Greek courts do not always provide unbiased and effective recourse. This is clearly the case regarding U.S. copyright holders. Although an investment agreement could be drafted subject to foreign legal jurisdiction, this is highly unlikely, particularly if one of the contracting parties is the Greek state. Foreign court judgments are accepted and enforced by the local courts.

Greece accepts binding international arbitration of investment disputes between foreign investors and the Greek state. Both these arbitrations and European Court of Justice judgments supersede local court decisions. Commercial and bankruptcy laws in Greece are in accordance with international norms. Under Greek bankruptcy law, private creditors receive compensation after claims from the state and insurance funds have been satisfied. Monetary judgments are usually made in local currency unless explicitly stipulated otherwise. Greece has a reliable system of recording security interests in property.

Greece is a member of the International Center for the Settlement of Investment Disputes, but no new cases have been forwarded to the Center for settlement since 1982. Greece is also a member of the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

Performance Requirements/Incentives

Investment incentives are available on an equal basis for foreign and domestic investors in productive enterprises. The monetary value of an incentive is inversely proportional to the level of development of a given region; in other words, the less developed the region where the investment will occur, the more generous the incentive. Under the new investment incentives law 2601/98, new businesses (with less than five years of operation) may choose any of the following combinations of incentives:

-- Grants and interest subsidies, as well as subsidies for leasing equipment.

-- Tax exemptions and interest subsidies.

Businesses with more than five years of operation qualify only for interest subsidies and tax exemptions. Additional tax incentives are extended to foreign investors if they establish export-oriented businesses, or if they save foreign exchange through import substitution (Law 2687/53). The Hellenic Center for Investment (ELKE) or "One-Stop Shop" is responsible for reviewing projects valued over 3 billion drachmas ($10 million), or 1.5 billion drachmas ($5 million) if there is foreign participation, for which government incentives are sought.

There are no performance requirements imposed as conditions for establishing, maintaining, or expanding an investment. However, performance requirements do exist when an investor wants to take advantage of tax and/or investment incentives. Local content, import substitution, export orientation, and technology transfers are taken into consideration by the Greek authorities in evaluating applications for investment incentives. Companies that fail to meet the specified performance requirements may be forced to give up the incentives they were initially granted. All information transmitted to the government for the approval process is treated confidentially.

U.S. and other foreign firms may participate in government-financed and/or subsidized research and development programs. Foreign investors do not face discriminatory or other de jure inhibiting requirements. However, many potential and actual foreign investors assert that the complexity of Greek regulations, the need to deal with many layers of bureaucracy, and the involvement of various government agencies discourage investment.

There are no restrictions on the entry of foreigners into Greece. Foreigners from EU countries may freely work in Greece. Foreigners from non-EU countries may work in Greece after receiving a residence and work permit. There are no discriminatory or preferential export/import policies affecting foreign investors, as EU regulations govern import and export policy, and increasingly, many other aspects of investment in Greece.

Right to Private Ownership and Establishment

Foreign and domestic private entities have the right to establish and own business enterprises. They may engage in all forms of remunerative activity, including the right to establish, acquire, and dispose of interests in businesses. Greece restricts foreign as well as domestic private investment in public utilities. Recent privatization plans are limited to the sale of minority holdings in public utilities (e.g., Telecommunications Organization, Athens and Thessaloniki Water and Sewage Companies). Private power production for sale to the national grid is currently limited to "non-traditional" energy sources (e.g., wind and solar). There are also restrictions on land purchases in border regions and certain islands (on national security grounds). Some restrictions exist for U.S. and other non-EU investors in: (1) mining, (2) banking, (3) maritime and air transport, and (4) broadcasting.

Private enterprises enjoy the same treatment as public enterprises with respect to access to markets and other business operations, such as licenses and supplies. Access to credit has traditionally been easier for public enterprises, which could borrow easily from state-controlled banks. Liberalization of the banking system and increased compliance with EU norms, however, have gradually forced state banks to operate in a more market-oriented manner, making it easier for the private sector to obtain credit.

Protection of Property Rights

Greek laws extend protection of property rights to both foreign and Greek nationals. At least on paper, the Greek legal system protects and facilitates acquisition and disposition of all property rights. As for intellectual property, Greece is a member of the Paris Convention for the Protection of Industrial Property, the European Patent Convention, the World Intellectual Property Organization, the Washington Patent Cooperation Treaty, and the Berne Copyright Convention. As a member of the EU, Greece has harmonized its legislation with EU rules and regulations. The WTO-TRIPS agreement has been incorporated into Greek legislation as of February 28, 1995 (Law 2290/95).

Despite Greece's legal framework for and voiced commitment to copyright protection, piracy of copyrighted material, especially audio-visual works for television, remains widespread. Greece took an important step toward addressing this problem by enacting a new copyright law in February 1993 (Law 2121/93), which contains a high standard of protection for all copyrighted works. Furthermore, Law 2328/95 (media law) establishes a new systematic legal framework for the radio-television market, whose anarchic development encouraged copyright piracy. However, that law it is not yet fully implemented.

The inability of rights holders to obtain effective action against TV stations pirating copyrighted works resulted in Greece being elevated to the USTR's "Priority Watch List" under the "Special 301" provision of the 1988 Trade Act, in December 1994. Just prior to an out-of cycle review by USTR in December 1996, the Greek government presented an "Action Plan" of specific steps it would take by April 1997 to reduce audio-visual piracy. While some of these steps were taken, the Greek government lagged behind severely in licensing television stations in accordance with the provisions of the 1995 media law; the process, while finally underway, is less than half-way through as of June 1998. As a result, the U.S. Government has launched a WTO TRIPS non-enforcement challenge. Consultations under WTO auspices were started in June 1998.

Although Greek trademark legislation is fully harmonized with that of the EU, another intellectual property protection problem is the lack of effective protection of trademarks, particularly in the apparel sector. Claims by U.S. companies of counterfeiting appear to be on the increase.

Intellectual property appears to be adequately protected in the field of patents. Patents are available for all areas of technology. Compulsory licensing is not used. Patents and trade secrets are protected by law for a period of twenty years. There is a potential problem concerning the protection of test data relating to non-patented products. Violations of trade secrets and semiconductor chip layout design are not problems in Greece.

Transparency of the Regulatory System

As an EU member, Greece is required to have transparent policies and effective laws for fostering competition. In practice, however, the process is not transparent due to overlapping laws and confusion in their application. Foreign companies consider the complexity of government regulations and procedures -- and their inconsistent implementation by the Greek civil administration -- to be the greatest impediment to operating in Greece.

In order to simplify and expedite the investment process, a quasi-state investment promotion agency, the Hellenic Center for Investment (ELKE), was established in 1996. ELKE functions as a one-stop shop for assisting investors in cutting through red tape and acquiring the numerous permits needed to proceed with investments. It also advises the government on ways to streamline the investment process and generally to improve the investment climate in Greece.

Greek government laws and policies generally do not negatively affect the efficient mobilization and allocation of investment. However, labor laws remain quite restrictive regarding the dismissal of personnel. Under current regulations, both private and public companies are prohibited from firing or laying-off more than 2 percent of their total workforce per month without a special prior dispensation from the government. Reforms in labor legislation are planned for 1998.

Foreign investors often complain about frequent changes in tax policies (there is a new tax law practically every year). Tax laws sometimes include discriminatory provisions, e.g., the 1998 tax bill increased corporate tax rate from 35 to 40 percent for all corporations that have registered shares but do not trade them on the Athens Stock Exchange (ASE). Though in principle this change would not violate Most Favored Nation or National Treatment obligations, one practical result is to provide a tax subsidy to Greek firms based on their utilization of the ASE.

Efficient Capital Markets and Portfolio Investment

Greece has an efficient capital market and the private sector has access to a variety of credit instruments. Credit is allocated by private banks -- and increasingly by public ones too -- on market terms, and is equally accessible by private Greek and foreign investors. A number of American banks operate in Greece, serving both the local and international business community.

An independent regulatory body, known as the Capital Market Committee, supervises the Athens Stock Exchange and encourages and facilitates portfolio investments. Both owner-registered, and bearer bonds and shares are traded in the Athens Stock Exchange. It is mandatory for the shares of banking, insurance and public utility companies to be registered. Greek corporations listed on the Athens Stock Exchange that are also state contractors are required to have all their shares registered.

A few state-controlled banks dominate the Greek banking industry. Private Greek and foreign banks do, however, comprise an increasingly competitive and generally profitable private sector, holding about one third of the banking system's assets. Private banks in Greece are in good financial health and are expanding their market share. State banks have a large exposure to public enterprises of questionable financial health. Total combined assets of the five largest banks are estimated at $80 billion.

There is a limited number of cross-shareholding arrangements in the Greek market. To date, the objective of such arrangements has not been to restrict foreign investment. In sectors open to private investment, foreign investment is not prohibited or restricted, by either law or regulation or by private sector efforts or practices.

Political Violence

Greece is a stable parliamentary democracy currently governed by a socialist government. There are, however, several indigenous terrorist groups that regularly denounce American capitalism and "imperialism." The most notorious are "17 November" and "ELA", which have a history of committing murders and bombings directed against American (including killing five U.S. government employees), Turkish and Greek government targets. There have been several terrorist attacks against the property of American and other foreign businesses in recent years but no private American businessman has been the victim of a terrorist attack. American businesses keep a generally lower profile in Greece compared to other EU countries. In 1998 (through May), six U.S. businesses have been attacked.


Bribery is considered a criminal act and the law provides severe penalties for infractions. However, diligent implementation and enforcement of the law remains an issue. The problem is most acute in the area of government procurement. It is a widely-held belief that political influence and other considerations, such as loyalty to old suppliers, plays a significant role in the evaluation of bids. Bribery cannot be deducted from taxes, but "facilitative payments" by companies of up to 3 billion drachmas ($10 million) or one percent of gross revenues (whichever is less) received abroad can be deducted from taxable income. This provision will be terminated by legislation currently being drafted which will implement the OECD Convention on the Fight against Bribery of Foreign Government Officials.

The judicial authorities are responsible for investigating and prosecuting corruption cases. In cases where politicians are involved, the Greek Parliament decides whether parliamentary immunity should be lifted to allow a special court action to follow. In recent years, there have been a number of investigations of alleged corruption; there was even a special court action against politicians, including the then-Prime Minister, in 1989. However, nobody has been convicted to date.

Greek law cannot be extended to apply to criminal acts outside the Greek territory, therefore, a bribe to a foreign official would be subject to the laws of the country where the bribery takes place. As a signatory of the OECD Convention on the Fight against Bribery of Foreign Government Officials, the Greek government is committed to penalizing those who commit bribery abroad. The Convention should be ratified by the end of 1998.

Bilateral Investment Agreements

Greece has bilateral investment protection agreements with Armenia, Georgia, Ukraine, Russia, Latvia, Lithuania, Uzbekistan, Croatia, Slovenia, Poland, Hungary, Romania, Bulgaria, Albania, Serbia ("FRY"), the People's Republic of China, Morocco, Tunisia, Zaire, Egypt, and Cuba. An Agreement with Chile has also been signed but has not been ratified by the Greek Parliament. Investments by EU member states are governed and protected by EU regulations.

Greece and the United States have the 1954 Treaty of Friendship, Commerce and Navigation, which covers a few investment protection issues, such as acquisition and protection of property and impairment of legally acquired rights or interests.

Also, Greece and the United States have the 1950 Treaty for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income. Despite the existence of this Treaty, which provides national treatment with respect to all taxes imposed on citizens and subjects of the other contracting state, Greek tax laws sometimes include discriminatory provisions. For example, the 1994 legislation increased the corporate tax rate from 35 to 40 percent for all foreign companies and all Greek corporations not listed in the Athens Stock Exchange. In practice, this meant that U.S. and other foreign bank branches (due to their status as branches rather than locally incorporated subsidiaries) were required to pay a taxation rate of 40 percent, while Greek banks paid only 35 percent.

This discriminatory provision was remedied by the tax law of 1997, which raised the tax rate on profits of all banks to 40 percent. However, the 1998 legislation also included a new discriminatory provision as it increased corporate tax rate from 35 to 40 percent for all corporations which have registered shares but do not trade them on the Athens Stock Exchange (ASE). Though in principle this change would not violate Most Favored Nation or National Treatment obligations, one practical result is to provide a tax subsidy to Greek firms based on their utilization of the ASE.

OPIC and other Investment Insurance Programs

Full OPIC insurance coverage for U.S. investment in Greece is currently available only on an exceptional basis. OPIC and the Greek Export Credit Insurance Organization signed an agreement in April 1994 to exchange information relating to private investment, particularly in the Balkans. Other insurance programs that also offer coverage for investments in Greece include the German investment guarantee program HERMES, the French agency COFACE, the Swedish Export Credits Guarantee Board (EKN), the British Export Credits Guarantee Facility (ECGF), and the Austrian Kontrollbank (OKB). Greece became a member of the Multilateral Investment Guarantee Agency (MIGA) in 1989.

For the purposes of OPIC Currency Inconvertibility insurance, it should be noted that since the Greek drachma was included in the European Union's Exchange Rate Mechanism (ERM) on March 16, 1998, currency inconvertibility is a non-issue for Greece.


There is an adequate supply of skilled, semi-skilled, and unskilled labor in Greece, although some highly technical skills may be lacking. Illegal workers predominate in the unskilled labor sector in many urban areas. Over 350,000 illegal workers took advantage of a recent government program to legalize their residence and work status. The current unemployment rate is between nine and ten percent. Labor-management relations in the private sector are generally good, but difficulties exist in the public sector, as is evidenced by the high level of strikes, labor stoppages, and related job actions by public sector employees.

Greece has ratified ILO Conventions protecting workers' rights. Specific legislation provides for the right of association and the rights to strike, organize, and bargain collectively. Greek labor laws prohibit forced or compulsory labor, set a minimum age (15) for the employment of children, and determine acceptable work conditions and minimum occupational health and safety standards.

Foreign Trade Zones/Free Ports

Greece has three free-trade zones, located at Piraeus, Thessaloniki and Heraklion port areas. Goods of foreign origin may be brought into these zones without payment of customs duties or other taxes and remain free of all duties and taxes if subsequently transshipped or re-exported.

Similarly, documents pertaining to the receipt, storage, or transfer of goods within the zones are free from stamp taxes.

Handling operations are carried out according to EU regulations 2504/88 and 2562/90. Transit goods may be held in the zones free of bond. The zones also may be used for repacking, sorting and relabeling operations. Assembly and manufacture of goods are carried out on a small scale in the Thessaloniki Free Zone. Storage time is unlimited, as long as warehouse charges are promptly paid every six months.

(Source: U. S. Department of Commerce - National Trade Data Bank, May 6, 1999)

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