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Greek banks eye prosperous Cyprus market March 29, 2008

Posted by grhomeboy in Business & Economy.
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Cyprus’s stable economic environment, accompanied by a strong growth rate of over 3.5 percent, growing mortgage demand and an increase in foreign deposits are the primary elements drawing the attention of Greek bankers who wish to enter the Cyprus market.

An Alpha Bank team is planning to visit Cyprus in the coming days for the opening of its new, privately owned building, and is expected to announce further plans to boost activities on the island. Last week, a National Bank delegation was also in Cyprus for business matters.

Greek banking groups are now renewing their interest in the Cyprus market, attracted by the large foreign deposits coming into the country, as well as by the momentum offered by business initiatives assisted by foreign funds. At present, Russia and Ukraine play a leading role in such business moves, facilitated by an especially favorable tax system. Other highly promising areas are the housing and real estate markets.

Significant aid to foreign companies wishing to operate in Cyprus is offered by a favorable tax system, which translates into corporate taxation of 10 percent, as well as the country’s double taxation avoidance agreements. The country’s admission into the eurozone is another positive aspect that comes into play.

Over the past two years, deposits in foreign exchange by non-EU residents rose as much as 59 percent to 18.5 billion, according to data from the Cyprus Central Bank. Bank officials explain that despite Cyprus’s limited population, interest from banks is high, considering the excellent potential for growth in both corporate and retail banking.

The dominance of local banks is not seen as obstructing the profitable operation of Greek banks. Alpha Bank’s Cyprus operations are its most profitable in SE Europe, allowing the Greek bank to plan an increase in the number of its branches from 35 to 50. In the Cyprus market, Alpha has a 9.6 percent share in loans and 6.6 percent in deposits.

Strong interest in the Cyprus market has also been also shown by Piraeus Bank, following its takeover of Arab Bank, which has been incorporated into the bank’s network and has plans to open another 10 branches. Piraeus group’s business plan forecasts an increase in loans from 30 million to 800 million, as well as a growth in deposits from 20 million to 1.5 billion.

National Bank, which already operates 15 branches in Cyprus, is highly active in business credit, with a 4 percent share of the specific segment. EFG Eurobank does more corporate banking and plans to establish three new business centers within 2008.

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Greece’s Alpha Bank to buy Ukraine’s Astra Bank March 28, 2008

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Alpha Bank, Greece’s third-largest lender, said yesterday it had reached a deal to buy a majority stake in newly established OJSC Astra Bank in Ukraine as part of plans to expand in the region.

Alpha Bank said it had agreed to buy 90 percent of Astra Bank at a price reflecting Astra’s equity capital of 9 million euros ($14.2 million). “With this acquisition, Alpha Bank gains a presence in a fast-growing market in one of the largest countries in Southeastern Europe,” the lender said.

Astra Bank plans to set up a nationwide branch network by 2010, targeting 50 branches by the end of this year, which will mean an investment of 130 million euros. Ukraine’s banking market has been on the radar screen of other Greek banks as well.

Athens International Airport gains rise March 27, 2008

Posted by grhomeboy in Business & Economy, Transport Air Sea Land.
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Athens International Airport, Greece’s busiest, said pretax profit surged 33 percent last year as its terminals handled record traffic.

Pretax profit rose to 125.7 million euros from 94.6 million euros a year earlier, the company said in a faxed statement today.

Passenger numbers rose 10 percent to 16.5 million travelers as airlines added flights and more people took vacations in Greece.

The airport, majority-owned by the Greek state and managed by German construction company Hochtief AG, may sell shares to the public under a government asset-disposal plan.

Piraeus port poised to tap benefits March 26, 2008

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Piraeus port poised to tap benefits of Greek shipowners’ flight from British capital > More than 1,200 shipping companies, employing more than 12,000 highly specialized staff, were based in the port of Piraeus in 2007, compared to 900 in 2005.

At a time when efforts are being made to ensure that Piraeus, Greece’s main port city, gains a leading place among international shipping centers by enhancing both infrastructure and services, London-based Greek shipowners are seriously considering whether to stay or move as a result of tax reforms planned by the British government.

For decades, income generated off British soil by non-British residents enjoyed tax-free treatment. More than 100 Greek shipowning families based in London are now thinking of moving to Piraeus, primarily for two reasons: significant infrastructure improvement projects have been carried out in the past six years, while the government has taken certain measures to guarantee a stable and competitive institutional environment for shipping companies.

During a recent visit to London, Merchant Marine Minister Giorgos Voulgarakis gave assurances to Greek shipowners that the government intends to maintain the favorable tax regime applicable for the Greek shipping community, which controls 8.7 percent of the world fleet, with 4,173 vessels. This translates into a capacity of 260,929,221 dwt (deadweight tons), which represents 16.4 percent of overall world shipping.

“We are considering taking additional measures in favor of shipowners who might move their base to Greece,” Voulgarakis is said to have told a gathering of Greek shipowners. “We are going ahead with the creation of a cluster arrangement, based on international standards and Greek features, aimed at promoting Piraeus as a shipping center with global linkages.”

In Greece, shipping companies are not taxed either on income earned abroad or on property purchases and income from capital denominated in US dollars. In 2007, foreign exchange inflows to Greece from shipping amounted to 17 billion, a figure that accounts for 7 percent of the country’s GDP.

The contribution of Greek companies to the British economy is estimated at some $10 billion annually. A study by the British Chamber of Shipping showed that if Greek shipowners decided to leave the city, the economy will lose almost one billion pounds, not to mention some 120,000 professionals in medium and high-ranking executive posts, who will have to move out with their families.

The British government is planning certain changes for non-citizens living in the country, who in the coming years would have to pay 30,000 pounds ($62,000) if they want to avoid paying tax on income from abroad.

But London’s losses could be Piraeus’s gain, in the framework of legislation that is supportive of shipping operations. In the past six years, 30 shipping firms have set sail for Piraeus and Athens. London-based shipowners believe that a significant upgrade of Piraeus port could result in a large influx of companies from the British capital.

Peace deal seen to boost Cyprus tourism industry March 21, 2008

Posted by grhomeboy in Business & Economy, Cyprus Occupied, Politics, Tourism.
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Cyprus’s tourism industry would benefit from $300 million a year in additional revenues if a peace deal was hammered out, economists said yesterday.

Economists from the Greek and Turkish Cypriot sides of the island said the sector would also stand to benefit from greater cooperation and economies of scale.

“Ninety-eight percent of the Turkish Cypriot respondents and 79 percent of the Greek Cypriot respondents see a win-win situation with a joint tourism industry,” The Management Center, an independent think tank, said in a news release.

Tourism is an important component of the economies of both Cypriot sides; it represents 14 percent of gross national product of Turkish Cypriots, and 12 percent of Greek Cypriots’ gross domestic product. Tourism revenues in the Greek-Cypriot part of the divided island were $2.73 billion last year. Revenues in the Turkish-Cypriot part were $328.8 million in 2005, the last year for which figures are available.

The survey, funded by the British Embassy in Cyprus, said Greek and Turkish Cypriot industry professionals regard the division as a negative factor for their businesses.

“Tourism professionals of the two sides believe that the continuation of the current political situation results in lost business opportunities, and is perceived as a lose situation, at least for their side,” the research team said.

Greek government’s vehicle-leasing plan March 17, 2008

Posted by grhomeboy in Business & Economy, Transport Air Sea Land.
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The Greek government expects to save millions of euros by selling its current fleet of vehicles, and replacing it with a new fleet under leasing contracts.

Finance Ministry officials are to follow the lead of Parliament, which has introduced a program under which MPs have already been given leased cars. A scheme for the replacement of conventional technology cars with new, greener vehicles has been worked out by Economy and Finance Deputy Minister Nikolaos Legas.

The move is envisaged to cut excessive state spending, i.e. wasted tax-payers’ money, on maintenance and fuel, as well as on certain “costly irregularities.” Interestingly, the 2008 state budget earmarks 8.8 million euro under the heading of maintenance and repair of state-use land transport means, in addition to 35.4 million for procurement of spare parts. The above amounts do not include insurance outlays.

Rather more complicated is the issue of police car insurance, on account of the special specifications and use of such vehicles under tough conditions. Car companies offering such leasing solutions would also help the state save on service and maintenance, tires, insurance premiums and road tax. For spare parts alone, the Greek police currently spend an annual 11.5 million.

Some special-purpose army vehicles and fire-engines are to be excluded from the leasing solution. The existing state fleet is to be auctioned by the Public Property Management Organization (ODDY). Ministry officials say that the leasing solution would also help cut fuel and lubricant costs, currently standing at 225 million annually.

Finance Ministry inspection services have also found extensive unlawful use of state fuel, estimated to be costing the state some 60 million each year. To prevent state fuel from being unlawfully pumped into private vehicles, the Ministry plans to install pump nozzles of a different size that will not fit in the tanks of private cars. Officials say this would make it impossible for private vehicles to be supplied with fuel from state stations.

European countries have also been facing similar problems with fuel misappropriation, but have recently managed to cut the phenomenon by as much as 30 percent. How? Simply by utilizing advanced technology. In Greece, too, special microchips are to be placed not only in pump nozzles but also in the gas tanks of state vehicles, in an effort to curb the unlawful supply of private vehicles with state fuel and keep track of the fuel used by state vehicles.

Deutsche Telekom buys MIG’s shares in Greece’s OTE March 17, 2008

Posted by grhomeboy in Business & Economy, Telecoms.
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It was possibly meant to happen. Last week’s rumors, spread fast in business circles, while the old saying “where there is smoke, then there’s a fire” which suits well Deutsche Telekom’s case. The possible sale of MIG’s shares in Hellenic Telecommunications Organisation [OTE] could solve a major problem > If it buys, Deutsche Telekom may be the strategic partner the government was looking for.

According to various sources, MIG (Marfin Investment Group) has clinched a deal to sell all or part of its minority stake in OTE, about less than 20%, to German telecoms operator, Deutsche Telekom, at an unspecified price. The latter will be at a premium compared to the share price of OTE at Friday’s close on the Athens bourse.

OTE shares closed at 19.14 euro, up 3.35 percent on Friday, and Deutsche Telekom will most likely pay more than 24 per share to buy the stake. MIG’s average acquisition cost of OTE shares is estimated between 23 and 24 without including the cost of swaps the investment company has entered into with banks to buy the stake.

This deal is important for both MIG and the Greek government. The investment company, which will be able to raise more than 2 billion if it sells its entire stake, estimated at 19.6 percent, to the German telecoms operator. In addition, it will get some capital gains at a time bourses and credit markets are under pressure as evidenced by the Fed’s extraordinary decision to bail out Bear Stearns, the second largest underwriter in US mortgage bonds on Friday.

It is worth noting that Marvin Investment Group (MIG), an investment holding company whose biggest shareholder is Dubai Group, raised more than 5 billion last summer at more than 6 per share in the biggest IPO ever by a European company of its kind but has seen its share fall dramatically since then. It gained 8.04 percent to 4.30 on Friday on speculation about the deal with Deutsche Telekom.

The likely sale of OTE shares to Deutsche Telekom by MIG is even more important for the government, although it comes at a difficult time. The government has repeatedly said it would prefer a major Western European telecoms organization to become OTE’s strategic partner and has discouraged financial investors such as Private Equity Funds from attempting to gain control of the organization.

Deutsche Telekom (DT) was among the European operators that expressed interest in OTE in the second half of 2006 but the change of CEO at the time and DT’s other priorities at home seemed to have played a role in putting the project on hold.

It is known that the government had appointed three advisers, namely Credit Suisse, UBS and Eurobank EFG, to find a strategic investor for OTE in the last quarter of 2006 and 2007 but their efforts did not bear fruit.

It is ironic that the same company, that is MIG, which defied the government’s repeated warnings to raise its stake in OTE, is becoming the catalyst for finding a strategic partner for the country’s telecoms incumbent. The government in December last year passed legislation prohibiting investors from acquiring more than 20 percent in companies of strategic importance to the country without its approval.

By all accounts, this is a protectionist piece of legislation and the government would have had a difficult time defending it before the European Court of Justice, where it would most likely have ended up.

So, the MIG-Deutsche Telekom deal will save the government face because it will not have to go to court. Even if the case is taken to the European Court, it will have no problem doing away with the law since DT will – de facto – have become OTE’s foreign strategic partner.

The government will also be able to sell a deal with Deutsche Telekom to the international investment community as a sign that its privatization program is still on track. This may not be appreciated so much at a time when international stock markets are suffering but will be later on.

It should be noted though that how this deal will be structured is another story and will not happen tomorrow. After all, Deutsche Telekom will have to justify the deal to its shareholders. The latter must be fully aware of the Greek government’s restrictive law with regard to the shareholding of domestic corporations of strategic importance, so they will ask for clarification on that particular point.

After all, it is not popular with shareholders nowadays when their companies spend billions of euros to buy minority stakes in other companies, even if they are regarded as good assets, such as OTE mainly on account of its operations in Southeastern Europe, without having secured a road map to full control down the road. In turn, this means the government must have been informed of the deliberations between MIG and Deutsche Telekom and must have given its blessing even if it does not advertise it or even denies it in public.

It is very likely DT will ask the Greek government at some point to buy part of its 28.7 percent stake in OTE and the latter will consent to it along with the signing of a shareholders agreement. DT may even proceed with a public offering to buy the remaining OTE shares from the market and enhance its equity stake in the Greek telecoms organization.

Aside from what DT will or will not do in coming weeks and months, it is safe to say Deutsche Telekom is most likely OTE’s foreign strategic partner and this cannot escape the attention of trade unions and opposition political parties. So, the government will likely face stiffer resistance and will have to prepare for that.