Emilios Markou and Alexis Pantazis of insurer Hellas Direct
The founders of insurer Hellas Direct bucked the trend of not investing during a crisis

Emilios Markou and Alexis Pantazis, two Cypriot businessmen, defied conventional logic in 2013 and launched an online insurance company in Greece amid the turbulence of the eurozone’s sovereign debt and banking sector crises. “At that time the people who invested in Greece were contrarian investors. For us, it was a case of ‘because of the crisis, let’s come here’,” recalls Pantazis.

The success of Hellas Direct, which specialises in car insurance, illustrates that Greece can be a rewarding market for those who invest shrewdly and with an eye to the long term. “After a period of mishandling of the economy at different levels, there’s been more political stability over the past three years. We keep joking: ‘Greece is a re-emerging market’,” says Markou.

The nation’s overall investment picture is mixed. Company executives, investors and government officials speak of an improving domestic business climate and a change for the better in international perceptions of Greece as an investment destination. However, the fragility of Greek banks, the semi-reformed condition of the nation’s cumbersome public administration and the inefficiency of the legal system weigh on investors’ minds.

In a report published in April under the title 10 Years of Crisis: Smaller but Unreformed Corporate Economy, the accounting group PwC estimated that Greece’s investment rate was at 45 per cent of the level recorded in 2009, when the government and private sector began to sink under the rapidly intensifying debt emergency. “The reduction in investment during the crisis has been dramatic, with a direct negative effect on technology integration and undermining the potential for expansion with new products and new markets,” the PwC report says. For many companies, the high cost of credit deters big investment. “The return on capital employed is systematically and considerably below the corresponding cost of capital, creating a huge obstacle for companies to make large and long-term investment,” the report says.

Chart on Greece FDI

However, Nicos Koulis, chief executive of fund manager Deca Investments, says that not all companies are starved of credit. “The market is divided. If you are a good company, you can get credit at attractive rates,” he explains.

Over the past three years, Deca has acquired stakes in seven medium-sized Greek businesses, in areas ranging from adhesive tapes and tomato processing to plastic utensils and women’s accessories. The group began operations in Greece in 2014, then was obliged to put everything on hold because of the political and economic turmoil that rocked the country in 2015.

Since then, however, business has looked up. “Now our pipeline is by far the strongest we have ever had. If we were to do all the deals that are potentially there, we wouldn’t have enough money to invest in them all,” says Koulis. “It’s absolutely clear that we have more attractive investment opportunities than we had two to three years ago.”

Chart on Greece FDI

Comparing investment conditions in 2012 with conditions today, Koulis says that it is not a straightforward story of “bad then, better now”. In 2012, the main difficulties facing Greek companies were excessive bureaucracy, a mass of badly drafted — often confusing — laws on business, high unit labour costs, relatively high corporate tax, a severe lack of bank credit, a shortage of modern infrastructure, and a deterioration in the “made in Greece” brand.

Today, some of these difficulties have eased. Labour costs are significantly lower, credit is available to strong companies and Greece’s brand is improving. However, corporate taxes have risen, and the bureaucratic and legal regime remains heavy-handed, if not quite as clumsy and suffocating as in the past. Moreover, transport costs for businesses are rising, although this in part reflects the revival in exports and the overall economic upturn.

Chart on Greece FDI

Koulis identifies the slow, inefficient and sometimes politicised legal system as a big barrier to investment, especially from abroad. “If I had a magic wand and could change one thing, I would change the speed of the justice system,” he says.

When this point is put to Stergios Pitsiorlas, a deputy economy minister responsible for investment, the response is swift. Foreign direct investment rose last year to €3.64bn, the highest since 2005, he says. This year’s figure will probably be lower, he concedes, but this disguises a change for the better in the investment mix. Whereas pre-crisis investments (gross fixed capital formation) focused on real estate, construction and shipping, now mechanical equipment accounts for one-third of the total. “It is true that there is a problem with the speed of court decisions. This demands a reorganisation of the courts, which is difficult from a political point of view,” Pitsiorlas says. “However, the government is reviewing the legal codes and streamlining legislation for business. This hasn’t been done for decades. Many laws are still in force that contradict each other.”

Chart on Greece FDI

Christos Harpantidis, chief executive of Papastratos, the Greek subsidiary of Philip Morris International, says the legal system’s shortcomings and the banks’ troubles have not disrupted his company’s activities. PMI invested €300m in Papastratos in 2017, enabling the subsidiary to stop making cigarettes and switch to heated tobacco products, mainly for export. Japan is his biggest market.

“The Greek bank crisis hasn’t affected us because we do our investment through internal financing,” he says. “As regards bureaucracy and the legal system, I see very good intentions and some changes in some areas. These are the two things holding back Greece. But as a local operator with experience in this market, you learn how to deal with the environment. You find a way out.”

Papastratos’s chief Christos Harpantidis
Papastratos’s chief, Christos Harpantidis, sees the Hellinikon project as one that could show investors that 'big projects can move ahead in Greece' © Getty

Like other Greek and non-Greek businessmen, Harpantidis says that a litmus test of the post-crisis investment climate will be whether the Hellinikon project — an €8bn initiative to redevelop the area around the former Athens international airport — gets off to a smooth start. “Something needs to happen to Hellinikon to show investors that big projects can move ahead in Greece,” says Harpantidis.

For many years, bureaucratic obstacles and political opposition from leftwing radicals in the ruling Syriza party have held up a project that is supposed to highlight the new, investment-friendly face of Greece. However, the government aims to complete the tender for the project’s casino by the end of May and promises that the project as a whole will be fully in motion by the year-end. “We’re pretty much there,” says Aris Xenofos, who runs the Greek privatisation agency.

In the view of Vaggelis Kteniadis, president of real estate company V2 Development, Greece should play to its strengths, traditional and more recently acquired. “We should look at ourselves in the mirror. We should recognise that we are a pole of stability in south-eastern Europe. We can be a country that offers great services, including tourism and real estate.”

He adds: “What Greece has to show the rest of the world is that we were taught a lesson by the crisis and we learnt it. We have to show that Greece works and that investors can trust it. Anywhere you look, Greeks abroad thrive. So this is nothing to do with national character. We need a system and a structure that work.”

This story has been amended to clarify what type of investments focused on real estate, construction and shipping before the crisis.

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About this Special Report

The Mediterranean nation is emerging from an unprecedented economic crisis and is looking to pull off a sustained recovery — a prospect that was buoyed by a return to international capital markets. We analyse the challenges and opportunities presented by Greece’s revival

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