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Despite the progress made and the positive steps taken over the past two years, significant challenges and uncertainties await us, notes the president of the Greek Banking Union, Mr Nikos Karamouzis, during the meeting. a speech made at the Athens Investment Forum 2018.
We still have a long way to go to regain total consistency, unhindered access to international markets at a competitive cost, create an attractive production and investment environment, and achieve high and sustainable growth rates, "he said. he.
According to Mr. Karamouzis, "the big challenge we face is that the crisis has caused us (high unemployment, over-indebtedness of individuals, public sector debt, large non-performing loans, poverty, under-investment, declining productivity, aging demographic migration, technological stagnation) require very high growth rates, over 3% per year.
"However, given the current conditions of the country 's economy and the fiscal austerity pledges of the coming years, such high growth rates require an unprecedented increase in exports and a shock to the economy. investment, with a double-digit investment growth rate every year for many years in a country where private investment has collapsed, "he adds.
The unreliability of the private sector, combined with the negative image of the Greek government, creates an explosive mix, notes Nikos Karamouzis, while emphasizing that the law on corporate governance must be changed immediately because of damage suffered today in the country. its credibility is nothing less than the harm caused to the multi-year negative image of the state.
Adjustment errors
One of the mistakes in the design and implementation of adjustment programs is that they have not sought to combine the necessary budget adjustments and wage cuts, building on trust, strengthening private and foreign investment and liberalizing product markets. and services to make them more competitive by mitigating the economic impact of adaptation measures.
In addition, the banking sector was not immune to the transmission of the crisis, so that instead of operating in a stabilizing way, it suffered its own crisis, thus contributing to worsen the problem. Thus, he became a destabilizing multiplier.
At the same time, private investment plummeted from 49.2 billion euros a year in 2007 to 14.4 billion euros in 2017, or 8% of the total. GDP, the lowest in the eurozone today, while household savings plummeted 4.8% of GDP. 2009 to -5.3% of GDP in 2017 (negative savings), developments that have exacerbated the problem and its impact.
What we need to do to invest
Now that the country's economic situation has stabilized, what should we do to live a great investment spring? A tremendous momentum for growth and investment? What do Greek and foreign companies need to become active in the country in order to invest, to internationalize and to develop? The big problem today is to face the difficulties faced by an investor, a company in Greece, ensuring that his investment intention does not turn into investment "Odyssey". We do not have to rediscover the wheel. What we must all do to create an attractive modern environment for investment and economic activity, and for the country to reach the difficult goal of double the growth rate of investment required each year while fueling GDP growth at a higher rate than the domestic market. from 3% per year.
The conditions for a significant resumption of investment and activation of the private enterprise sector are simple and specific:
1. Consistent implementation of reforms
Today, as always, major reforms are imposed in the state, the economy, institutions and markets. First of all, it is necessary to formulate and implement an investment and development policy that we need in an uncertain, international and European environment.
2. Become ideological realism and convergence
Let's finally agree on the realism and national consciousness that we ended up with the state entrepreneur, who defeated Greece, the protectionist economy of competition and targeted preferential subsidies, the opacity and the preferential relations of the interests of the state and companies. We need a new social, productive, dynamic and competitive development and development model, creating growth, jobs, wealth and opportunity, as well as a dynamic and inclusive market economy. .
3. Political stability and consensus on development policies
Investors need, first and foremost, political stability. Uncertainty and risk kill investments. To form a broader political and social majority by consensus, which will adopt and adopt the new growth perspective of an open market economy, clearly geared towards export and investment, where public, private and foreign investment and Exports will drive innovation growth and entrepreneurial spirit.
The State will provide, with economic and social efficiency, social goods (security, justice, education), modern services and stable market institutions, economic and social infrastructure, modern social policy and the protection of the weak.
The challenge is to translate the painful experiences and the enormous economic and social costs of the crisis into caution and political and social cooperation, into political stability, into a common course on crucial issues of reform and change of institutions so that Greece become an attractive pole. investment, stability and prosperity.
4. Predictable and reliable policies, stable institutions
Investors evaluate and applaud positively a credible and predictable economic policy, stable institutions and a coherent economic policy, whose fundamental axes bind all the parties in power. The goal is to finally gain market confidence, attract investment and fuel growth prospects.
Experiments, failed recipes and populism do not contribute to the formation of the higher climate. It is no coincidence that, despite the progress made, access to reluctant international markets is not uninterrupted and that our borrowing costs are 2.5% higher than those in Portugal, and that the situation in the euro zone due to Italy does not help.
5. Constitutional reform
In this context, consistent behavior over time and the agreement of all parties in a more general context of economic and social policy principles should also benefit from a legal basis, and this, at the next constitutional reform.
It is necessary to modernize the constitution by ensuring economic liberalism, fiscal stability and discipline, the private market economy as a central economic system and lever of development, redefining a more limited economic and productive role for the state and opening up higher education to private competition.
6. Brave tax reform / development budget policy
Significant cuts in tax policy, ending excessive taxes and excessive insurance contributions that dehydrate the Greek economy are needed.
Combine courageous tax cuts, especially in productive activities and income,
I. with large privatizations, including banks,
II. state-of-the-art management of government operations, operations and investments entrusted to trusted private entities (prisons, school buildings, government receivables, regional infrastructure, primary health, garbage collection);
III. rationalize public spending, reduce wastage and loss of public services, introduce modern methods of managing social infrastructure and DEKO, with private economic efficiency criteria,
IV full activation of the PPP & VOT institution, public investments and investments in social infrastructure,
V. exploitation of important public property and land,
VI. an increase in public investment that fell sharply during the crisis.
VII. Fight against tax evasion with innovative initiatives such as the elimination of cash in all commercial transactions and the drastic reduction of cash in private payments.
7. Reinstatement of the Bank of Development and Financial Stability of the Bank
We need to convincingly resolve the significant problem of the high level of NPEs and market uncertainties regarding the robustness of the banking system, so that lower interest rates, higher liquidity, and more financing are prevalent. hindering the Greek and foreign economy.
The long-term extension of the current situation and market uncertainties, despite the successful implementation of stress tests in June 2018, do not allow the banking system to play a role as a financial catalyst for growth prospects, but remain an inhibiting factor.
8. Rational reform of the public administration
The mother of all reforms is the radical reform of the public administration that is sick. It is neither socially nor economically effective and prevents entrepreneurial and investment activities rather than facilitating them.
Combine the reform of public administration with the strengthening of the independence, quality, stability and effectiveness of institutions (such as the judiciary) and independent authorities (such as the Securities and Exchange Commission, Competition), whose leadership should be badured by a majority of the House.
An essential condition for development in this context is the establishment of a modern framework for spatial planning, seaside, forestry and archeology provisions, as well as the licensing of companies.
Traditionally, the Greek government and Greek society were skeptical, if not hostile, to private companies. Today, this notion is changing happily, but there are still bureaucratic structures that stifle development and investment efforts on a daily basis.
9 To shape our own development plan
We need to agree on a national medium-term investment and growth incentive plan for the country, including all the critical reforms mentioned above, but we will also aim to implement targeted economic and sectoral policies around key development axes. c & # 39; is to say,which are either necessary because of international developments, or we have a comparative advantage in terms of development:
1. the digital transformation of the country,
2. the strengthening of modern industry with the fourth industrial revolution,
3. valorization of agricultural production,
4. the modernization of education, research, technology,
5. the transformation of Piraeus into a modern international maritime center of global scope,
6. the recovery in construction activity collapsed below 1% (compared with 11% of GDP in 2007) and through programs to attract foreign investment,
7. a specific framework for attracting foreign direct investment, compatible with Community law,
8. Increase economic visibility so that exports account for more than 40% of GDP in 2021,
9. modern energy policy,
10. the lifting of restrictions on capital movements.
10. Modern corporate governance
The structural responsibilities and weaknesses of the public sector have been badyzed in depth. Nobody denies the need for radical interventions and structural reforms to improve the investment climate and restore confidence in the country.
But this is not enough. Significant adjustments are also needed in the private sector of the economy. Adjustments must be made by the companies themselves. Finally, we have attended events that are not worth the honors for Greek entrepreneurship. Unfortunately, as often, there is a negative event that eclipses many other light attempts. Such phenomena are numerous in the history of world trade.
However, in a country facing a credibility problem such as Greece, the credibility of private companies plays a major role in creating a positive investment climate.
A key criterion for attracting investor interest, unhindered financing and access to international money and finance markets is the substantive rather than formal adopt a modern framework for corporate governance in companies.
No one will invest or lend to anyone whatsoever he is not convinced that his interests are properly protected.
The selection of experienced and independent members of the boards of directors, the selection of the auditors, the appropriate composition of the internal audit committee, the prevention of conflicts of interest, the effective internal control as well as effective functioning of internal risk management rules are critical factors in gaining medium-term credibility and, on the other hand, a regulatory obligation that an organization should meet, not just formally.
Corporate governance can not be treated as a formal regulatory obligation, but we must all understand that it is the most appropriate way to ensure the reliability of the company and the company. Access to international capital and capital markets, while protecting customers, creditors, suppliers and employees.
In my opinion, stricter legislation is needed and banks must take their own initiatives in this direction.
The market economy system should not be the same as a capitalism based on greed, selfless self-interest, the absence of rules and institutions, not ethically entrepreneurial, where everything is sacrificed on the altar of profit, without social references and without respect for the laws and rights of workers, shareholders and creditors.
This is not an indication of the ability of companies to hijack, mislead and harm shareholders, creditors, markets, the state, drive workers out of work, hurt taxpayers, suppliers and expose your country.
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