Policies Towards Foreign Direct Investment

The Greek government continues to state its desire to increase foreign investment, though the country remains a challenging climate for investment, both foreign and domestic.  Despite the most recent EUR86 billion bailout agreement signed in August 2015 between the Greek government and its international creditors, under the auspices of the ESM, economic uncertainty remains widespread, though sentiment has been broadly improving since 2017.

Numerous additional structural reforms, undertaken as part of the country’s 2015-2018 international bailout program, aim to welcome and facilitate foreign investment, and the government has publicly messaged its dedication to attracting foreign investment.  The Trans Adriatic Pipeline (TAP) is one example of the government’s commitment in this area.  In November 2015, the Greek government and TAP investors agreed on measures and began construction on the largest investment project since the start of the financial crisis, with the pipeline set to begin operations in 2020.  Nevertheless, many structural reforms have created greater challenges to investors and established businesses in Greece.  The country has undergone one of the most significant fiscal consolidations in modern history, with broad and deep cuts to public expenditures and significant increases in labor and social security tax rates, which have offset improved labor market competitiveness achieved through significant wage devaluation.  Moreover, corruption and burdensome bureaucracy continue to create barriers to market entry for new firms, permitting incumbents to maintain oligopolies in different sectors, and creating scope for arbitrary decisions and rent seeking by public servants.

Limits on Foreign Control and Right to Private Ownership and Establishment

As a member of the EU and the European Monetary Union (the “Eurozone”), Greece is required to meet EU and Eurozone investment regulations.  Foreign and domestic private entities have the legal right to establish and own businesses in Greece; however, the country places restrictions on foreign equity ownership higher than the average imposed on the other 17 high-income OECD economies.  The government has undertaken EU-mandated reforms in its energy sector, opening much of it up to foreign equity ownership.  Restrictions exist on land purchases in border regions and on certain islands because of national security considerations.  Foreign investors can buy or sell shares on the Athens Stock Exchange on the same basis as local investors.

Other Investment Policy Reviews

The government has not undergone an investment policy review by the Organization for Economic Cooperation and Development (OECD), the World Trade Organization (WTO), or United Nations Committee on Trade and Development (UNCTAD), or cooperated with any other international institution to produce a public report on the general investment climate.  Nonetheless, in March 2018, the OECD published an economic survey describing the state of the economy and addressing foreign direct investment concerns.  The government has sought the OECD’s counsel and technical assistance to carry out select reforms from the recommendations and develop additional reforms in line with the government’s emphasis on the social welfare state.

Business Facilitation

Greece’s business registration entity GEMI (General Commercial Register) has the basic responsibility for digitizing and automating the registration and monitoring procedures of commercial enterprises.  More information about GEMI can be found at http://www.businessportal.gr/home/index_en .  The online business registration process is relatively clear, and although foreign companies can use it, the registration steps are currently available only in Greek.  In general, a company must register with the business chamber, tax registry, social security, and local municipality.  Business creation without a notary can be done for specific cases (small/personal businesses, etc.).  For the establishment of larger companies, a notary is mandatory.

The country has investment promotion agencies to facilitate foreign investments.  “Enterprise Greece” is the official agency of the Greek state.  Under the supervision of the Ministry of Economy and Development, it is responsible for promoting investment in Greece, exports from Greece, and with making Greece more attractive as an international business partner.  Enterprise Greece provides the full spectrum of services related to international business relationships and domestic business development for the international market.  Enterprise Greece offers an Investor Ombudsman program for investment projects exceedingEUR2 million.  The Ombudsman is available to assist with specific bureaucratic obstacles, delays, disputes or other difficulties that impede an investment project.  As reported by some business, Enterprise Greece, even with its ombudsman service for investments, is not very effective at moving investments projects forward.

The General Secretariat for Strategic and Private Investments streamlines the licensing procedure for strategic investments, aiming to make the process easier and more attractive to investors.

Greece has adopted the following EU definition regarding micro, small, and medium size enterprises:

Micro Enterprises:  Fewer than 10 employees and an annual turnover or balance sheet belowEUR2 million.

Small Enterprises:  Fewer than 50 employees and an annual turnover or balance sheet belowEUR10 million.

Medium-Sized Enterprises:  Fewer than 250 employees and annual turnover belowEUR50 million or balance sheet belowEUR43 million.

Outward Investment

The Greek government does not have any known outward investment incentive programs.  Ongoing capital controls, though partially lifted, still impose restrictions or additional procedures for any entity seeking to remove pre-existing large sums of cash from Greek financial institutions.

Enterprise Greece supports the international expansion of Greek companies.  While no incentives are offered, Enterprise Greece has been supportive of Greek companies attending the U.S. Government’s Annual SelectUSA Investment Summit, which promotes inbound investment to the United States, and similar industry trade events internationally.

Greece and the United States signed the 1954 Treaty of Friendship, Commerce, and Navigation, which provides certain investment protection, such as acquisition and protection of property and impairment of legally acquired rights or interests.

Greece has Bilateral Investment Treaties (BITs) with:

*Signed, but not in force

Bilateral Taxation Treaties:

Greece and the United States signed a Treaty for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income in 1950.  Greece does not have a bilateral Free Trade Agreement (FTA) with the United States, but an EU member state it is party to all U.S.-EU agreements.  Greece reached an agreement in substance on November 30, 2014 on the terms of an intergovernmental agreement with the United States to implement the Foreign Account Tax Compliance Act (FATCA), which was signed January 2017.

Investment Incentives

Investment incentives are available on an equal basis for both foreign and domestic investors in productive enterprises.  The investment laws in Greece aim to increase liquidity, accelerate investment processes, and ensure transparency.  They provide an efficient institutional framework for all investors and speed the approval process for pending investment projects.  The basic investment incentives law 4146/2013, “Creation of a Development Friendly Environment for Strategic and Private Investments,” aims to modernize and improve the institutional and legal framework to attract private investment.  Separately, Law 3908/2011 (which replaced Law 3299/2004) provides incentives in the form of tax relief, cash grants, leasing subsidies, and soft loans on qualifying investments in all economic sectors with some exceptions.

In evaluating applications for tax and other financial incentives for investment, Greek authorities consider several criteria, including the viability of the planned investment; the expected impact on the economy and regional development (job creation, export orientation, local content use, energy conservation, environmental protection); the use of innovative technology; and the creditworthiness and capacity of the investor.  Progress assessments are conducted on projects receiving incentives, and companies that fail to implement projects as planned may be forced to give up incentives initially granted to them.  All information transmitted to the government for the approval process is to be treated confidentially by law.

Investment categories are:

• General Entrepreneurship
• Regional Cohesion
• Technological development
• Youth Entrepreneurship (18-40 years old)
• Large Investment Plans (above EUR50 million)
• Integrated, Multi-Annual Business Plans
• Partnership & Networking

The entire application and evaluation process shall not exceed six months (more information can be found at https://www.ependyseis.gr ).

Research and Development

Offset agreements, co-production, and technology transfers are commonplace in Greece’s procurement of defense items.  Although the most recent Greek defense procurement law eliminated offset requirements, there are some remaining ongoing active offset contracts, as well as expired offset contracts with U.S. firms that are potentially subject to non-performance penalties.  Defense procurements are still subject to economic development requirements, which are, in effect, similar to offsets.  In 2014, the government committed to resolving offset contract disputes in a way that would satisfy both parties and avoid the imposition of penalties or fines.

In general, 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 formal inhibiting requirements.  However, many potential and actual foreign investors assert the complexity of Greek regulations, the need to deal with many layers of bureaucracy and the involvement of multiple government agencies all discourage investment.

Foreign Trade Zones/Free Ports/Trade Facilitation

Greece has three free-trade zones, located at the Piraeus, Thessaloniki, and Heraklion port areas.  Greek and foreign-owned firms enjoy the same advantages in these zones.  Goods of foreign origin may be brought into these zones without payment of customs duties or other taxes and may 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 2504/1988 and 2562/1990.  Transit goods may be held in the zones free of bond.  These zones also may be used for repackaging, sorting, and re-labeling 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 rents are paid every six months.

Performance and Data Localization Requirements

The Greek government does not follow a policy of forced localization, designed to require foreign investors to use domestic content in goods or technology, with the exception of economic development requirements in many defense contracts (see Research and Development, above).  Some foreign investors partner with local companies or hire local staff/experts as a way to facilitate their entry into the market.  In 2019, the government enacted a new tourism amendment, which obligates tour operators from third countries who do not own a travel agency in Greece to collaborate with a local travel agency established in the country to do business locally.  The government has not taken steps to require foreign investors to store collected data within Greek national borders.

Capital Markets and Portfolio Investment

Following EU regulations, Greece is open to foreign portfolio investment.  Law 3371/2005 sets an effective legal framework to encourage and facilitate portfolio investment.  Law 3283/2004 incorporates the European Council’s Directive 2001/107, setting the legal framework for the operation of mutual funds.  Until June 2015, although liquidity in the markets was tight, sizeable positions could enter and exit.  With the imposition of capital controls on June 29, 2015, for a period of six months (July 2015 – December 2015), domestic investors could only acquire shares with the injection of “fresh money” and could not use existing funds.  Short selling of banking shares was not allowed.  As a result, FTSE downgraded the Athens Stock Exchange from “advanced” to “advanced emerging markets” in March 2016.  The Bank of Greece complies with its IMF Article VIII obligations and does not generally impose restrictions on payments.  Transfers for current international transactions are allowed, but are subject to specific conditions for approval.  The lack of liquidity in the market along with the challenging economic environment have made the allocation of credit very tight, but is accessible to foreign investors on the local market, who also have access to a variety of credit instruments.

Money and Banking System

The implementation of a broad-based bank recapitalization program in 2012 and 2013, and a rapid consolidation of institutions in the sector, largely stabilized the banking sector by early 2014.  However, following the election of the current government in January 2015, bank deposit flight accelerated.  By June 2015, total deposits in the Greek banking system had fallen toEUR134 billion, down fromEUR164 billion in October 2014.  Uncertainty caused by the controversial negotiations with Greece’s creditors led to the June 2015 imposition of capital controls and a complete closure of the banks for two weeks, which, though necessary to prevent the banking sector’s collapse, weakened the banks’ capital positions.

In November 2015, following an Asset Quality Review and Stress Test conducted by the ECB as a requirement of the new ESM agreement, a third recapitalization of Greece’s four systemic banks (National Bank of Greece, Piraeus Bank, Alpha Bank, and Eurobank) took place.  The recapitalization concluded by the end of November with the banks remaining in private hands, after raisingEUR6.5 billion from foreign investors, mostly hedge funds.  The ratio of non-performing exposures (NPEs) reached 43.1percent at the end of December 2017, down 10percent compared to December 2016.  More broadly, NPEs declined toEUR95.7 billion fromEUR108.4.  Compared to March 2016, when the stock of NPEs reached the peak, the reduction is 12percent (€13 billion).  Similarly, non-performing loans (NPLs) – loans that have not been serviced or repaid for more than 90 days – dropped to belowEUR50 billion at the end of December 2018.  Banks estimate that about 20percent of these NPEs are owned by so-called “strategic defaulters” – borrowers who refrain from paying their debts to lenders to take advantage of the laws enacted during the financial crisis to protect borrowers from foreclosure or creditors collection even though they are able to pay their obligations.

Developing an effective NPL management strategy is among the most difficult components of the government’s negotiations with its creditors.  Under the terms of the ESM agreement, Greece must create an NPL market through which the loans could, over time, be sold or transferred for servicing purposes to foreign investors.  Much of this work has now been completed, and the Bank of Greece has licensed more than ten servicers.  The sale and securitization environment for non-performing loans continues to mature, with all of Greece’s systemic banks having conducted portfolio sales of secured and unsecured loan tranches since mid-2017.  The potential sale and/or transfer of Greek NPLs continues to receive interest by a large number of Greek and foreign companies and funds, signaling a viable market.  After several regulatory and political delays in 2017, the Greek state’s electronic auction platform for collateral and foreclosed assets is functioning, and auction expanded to more than 20,000 per year by the end of 2018.  The bulk of auctions still conclude with the selling bank as the purchaser of the assets.  The government seeks to exclude loans linked with mortgages for primary residencies (at least through the end of 2018 under existing law) and preventing aggressive collection on business as part of the NPL secondary market activity.

Poor asset quality inhibits banks’ ability to provide systemic financing.  Deposits stood atEUR132.2 billion as of February 2019, up fromEUR124.9 billion a year earlier.  In the eight -year period from September 2009 (when deposits reached their highest level ofEUR237 billion) to September 2017, overall deposits shrunk by a total ofEUR114.5 billion.  According to the latest data, Greece’s systemic banks hold the following assets for 2018:  Piraeus Bank,EUR60.4 billion National Bank of Greece,EUR59.2 billion Alpha Bank,EUR55.2 billion and Eurobank,EUR50.2 billion.

Few U.S. financial institutions have a presence in Greece.  In September 2014, Alpha Bank acquired the retail operations of Citibank, including Diners Club.  Bank of America serves only companies and some special classes of pensioners.

There are a limited number of cross-shareholding arrangements among Greek businesses.  To date, the objective of such arrangements has not been to restrict foreign investment.  The same applies to hostile takeovers, a practice which has been recently introduced in the Greek market.  The government actively encourages foreign portfolio investment.

Greece has a reasonably efficient capital market that offers the private sector a wide variety of credit instruments.  Credit is allocated on market terms prevailing in the Eurozone and credit is equally accessible by Greek and foreign investors.  The Hellenic Capital Market Commission, is a multifaceted independent regulatory body which supervises:  brokerage firms, investment firms, mutual fund management companies, portfolio investment companies, real estate investment trusts, financial intermediation firms, clearing houses and their administrators (e.g. the Athens Stock Exchange), in addition to investor indemnity and transaction security schemes (e.g. the Common Guarantee Fund and the Supplementary Fund), and also encourages and facilitates portfolio investments.

Owner-registered bonds and shares are traded on the Athens Stock Exchange (ASE).  It is mandatory in Greece for the shares of banking, insurance, and public utility companies to be registered.  Greek corporations listed on the ASE that are also state contractors are required to have all their shares registered.  In September 2015, during the annual country classification review, FTSE announced that the Greek exchange would be downgraded from “advanced” to “advanced emerging markets.”  The decision took effect as of March 2016.  In June 2013, equity index provider MSCI downgraded Greece to advanced emerging-market status, a first in the index’s history, citing the ASE’s loss of 90percent of its value since the start of the financial crisis in October 2007 and after Greece failed to meet criteria regarding securities borrowing and lending facilities, short selling, and transferability.

Greece has not explored or announced that it intends to implement or allow the implementation of blockchain technologies in its banking transactions.

Foreign Exchange and Remittances

Foreign Exchange Policies

Greece’s foreign exchange market adheres to EU rules on the free movement of capital.  Until June 2015, receipts from productive investments could be repatriated freely at market exchange rates, and there were no restrictions on, or difficulties with, converting, repatriating, or transferring funds associated with an investment.  In late June 2015, the government declared a bank holiday, during which banks were closed for two weeks, and imposed capital controls.  Capital controls placed a limit on weekly cash withdrawal amounts and restricted the transfer of capital abroad.  Although the government has continued to ease capital controls in 2016 and abolished all capital controls on stock transactions in December 2015, several restrictions still apply.  A five-member “Banking Transaction Approval Committee” was established by the Ministry of Finance and is the competent authority to approve transactions abroad, in coordination with the Bank of Greece.  Currently, the daily limit for commercial payments abroad stands atEUR250,000 (with some exceptions).

Remittance Policies

Remittance of investment returns is also subject to capital controls.  Greece is not engaged in currency manipulation for the purpose of gaining a competitive advantage.  The country is a member of the Eurozone, which employs a freely floating exchange rate.

The Financial Action Task Force (FATF), in its latest report on Greece (October 2011), recognized that the country had made significant progress in addressing the deficiencies identified in the 2007 Mutual Evaluation Report.  All Core and all Key Recommendations are at a level essentially equivalent to compliant (C) or largely compliant (LC) under FATF definitions.  In 2011, the FATF removed Greece from its regular follow-up process in recognition of this progress.  The fourth round of mutual evaluation of Greece began in October 2018, with the Plenary discussion scheduled for June 2019.

Sovereign Wealth Funds

There are no sovereign wealth funds in Greece.  Public pension funds may invest up to 20percent of their reserves in state or corporate bonds.

Greek state-owned enterprises (SOEs) are active in utilities, transportation, energy, media, health, and the defense industry.  A private non-government affiliated website maintains an online list of SOEs.  The uniform legal definition of an SOE is a company/organization that belongs to or is controlled and managed by the state.  Most Greek SOEs are structured under the auspices of the Hellenic Corporation for Assets and Participations (HCAP), an independent holding company for state assets mandated by Greece’s most recent bailout and formally launched in 2016.  HCAP’s supervisory board is independent from the Greek state and is appointed in part by Greece’s creditor institutions.  Some SOEs are still supervised by the Finance Ministry’s Special Secretariat for Public Enterprises and Organizations, established by Law 3429/2005.  Private companies previously were unable to enter the market in sectors where the SOE functioned as a monopoly, for example, water, sewage, or urban transportation.  However, several of these SOEs are planned to privatize as a requirement of the country’s bailout programs, intended to liberalize markets and raise revenues for the state.

Official government statements on privatization since 2015 have sometimes led to confusion among investors.  Some senior officials have declared their opposition to previously approved privatization projects, while other officials have maintained the stance that the government remains committed to the sale of SOEs.  Under the bailout agreement, Greece has moved forward with the deregulation of the electricity market.  In sectors opened to private investment, such as the telecommunications market, private enterprises compete with public enterprises under the same nominal terms and conditions with respect to access to markets, credit, and other business operations, such as licenses and supplies.  Some private sector competitors to SOEs report the government has provided preferential treatment to SOEs in obtaining licenses and leases.  The government actively seeks to end many of these state monopolies and introduce private competition as part of its overall reform of the Greek economy.  Greece – as a member of the EU – participates in the Government Procurement Agreement within the framework of the WTO.  SOEs purchase goods and services from private sector and foreign firms through public tenders.  SOEs are subject to budget constraints, with salary cuts imposed in the past few years on public sector jobs.

Privatization Program

The Hellenic Republic Asset Development Fund (HRADF, or TAIPED, as it is known in Greek), an independent non-governmental privatization fund, was established in 2011 under Greece’s bailout program to manage the sale or concession of major government assets, to raise substantial state revenue, and to bring in new technology and expertise for the commercial development of these assets.  These include listed and unlisted state-owned companies, infrastructure, and commercially valuable buildings and land.  Foreign and domestic investor participation in the privatization program has generally not been subject to restrictions, although the economic environment during the crisis has challenged the domestic private sector’s ability to raise funds to purchase firms slated for privatization.

The August 2015 ESM bailout agreement required Greece to consolidate the HRADF, the Hellenic Financial Stability Fund (HFSF), the Public Properties Company (ETAD) and a new entity that will manage other state-owned enterprises (SOEs) into the Hellenic Corporation of Assets and Participations (or HCAP), was formed by Law 4389/2016.  In March 2017, HCAP received short- and long-term guidelines from the Minister of Finance, and in September 2017, it received strategic guidelines from the Greek state (HCAP’s sole shareholder).

Privatizations are subject to a public bidding process, which is easy to understand, non-discriminatory, and transparent.  Notable privatizations completed in 2018 include the transfer of the 66percent of Greece’s gas transmission system operator DESFA to Senfluga Energy Infrastructure Holdings, sale of  67percent of the shares of Thessaloniki Port Authority (OLTh), the sale of the remaining 5percent of the largest telecommunications provider (OTE) shares to Deutsche Telecom, and rolling stock maintenance and railroad availability services company Rosco.  In February 2019, the government concluded the 20-year extension of the concession agreement of the Athens International Airport (AIA), worth 1.4 billion euros, and is planning to sell remaining 30percent share in AIA in the upcoming months.  The government plans to privatize 10 regional ports and several marinas across Greece, including Heraklion, Elefsina, and Alexandroupolis.  In addition, the Hellenic Gaming commission announced a tender for a casino licenses slated to run at Hellenikon, an 8 billion euro project to develop Athens former airport into a multi-purpose complex.  Currently, the privatization of Public Power Corporation’s (PPC) two lignite powered units in Melitis and Megalopoli, natural gas company DEPA and the Egnatia motorway in northern Greece (Greece’s biggest highway) are ongoing.

Awareness of corporate social responsibility (CSR) including environmental, social, and governance issues, has been growing over the last decade among both producers and consumers in Greece.  Several enterprises, particularly large ones, in many fields of production and services, have accepted and now promote CSR principles.  A number of non-profit business associations have emerged in the last few years (Hellenic Network for Corporate Social Responsibility, Global Sustain, etc.) to disseminate CSR values and to promote them in the business world and society more broadly.  These groups’ members have incorporated programs that contribute to the sustainable economic development of the communities in which they operate; minimize the impacts of their activities on the environment and natural resources; create healthy and safe working conditions for their employees; provide equal opportunities for employment and professional development; and provide shareholders with satisfactory returns through responsible social and environmental management.  Firms that pursue CSR in Greece enhance the public acceptance and respect that they enjoy.  In 2014, the government drafted a National Action Plan for Corporate Social Responsibility for the 2014-2020 period.  The main goal of the plan is to increase the number of companies that recognize and use CSR to formulate their strategies.

There have been no major terrorist incidents in Greece in recent years; however, domestic groups conduct intermittent small-scale attacks such as targeted package bombs, improvised explosive devices, and unsophisticated incendiary devices (Molotov cocktails) typically targeting properties of political figures, party offices, privately-owned vehicles, ministries, police stations, and businesses. In addition, domestic anarchist groups, such as “Rubicon”, carry out small-scale attacks targeting government buildings and foreign missions. Bilateral counterterrorism cooperation with the Greek government remained strong and Greece has enhanced tools and information exchange to vet undocumented migrants who continue to arrive in significant numbers.  Support from the Greek security services with respect to the protection of American interests is excellent.  While Demonstrations and protests are commonplace in large cities in Greece.  While most of these demonstrations and strikes were peaceful and small-scale, they often caused temporary disruption to essential services and traffic, and anarchist groups are known in some cases to attach themselves to other demonstrations to create mayhem.

The masterminds of Greece’s most notorious terrorist groups, including November 17 and Revolutionary Popular Struggle, active between the 1970s and 1990s and responsible for hundreds of attacks and murders, including of four Americans, are currently behind bars.  Greek authorities largely eliminated these groups in advance of the 2004 Olympic Games.  Following the Olympics, a new wave of organizations emerged, including Revolutionary Struggle (RS), Conspiracy of Fire Nuclei (CFN), Sect of Revolutionaries (SR), though authorities again rounded up these groups in a wave of arrests between 2009 and 2011, and in 2014.

Current, active domestic terrorist groups include ”OLA,” also known as the Group of Popular Fighters or Popular Fighters Group, , which claimed responsibility for the December 2018 bomb outside a private television station, and the December 2017 bomb outside an Athens courthouse.  OLA also claimed responsibility for the November 2015 bomb attack at the offices of the Hellenic Federation of Enterprises, which caused extensive damage to the offices and surrounding buildings, the December 2014 attack on the Israeli embassy in Athens, which resulted in no injuries and minor damage to the building, and the attack on the German Ambassador’s residence in Athens December 2013. OLA also claimed responsibility for an indirect fire attack on a Mercedes-Benz building on January 12, 2014, and an attack in January 2013 against the headquarters of the then-governing New Democracy party in Athens.