Transport and infrastructure projects have always been a driver of growth in Greece, but many crucial projects were delayed for years because of the prolonged recession. But as the country emerges from the crisis, a new, business-friendly government is racing to unblock highway, railway and airport projects. Minister Kostas Karamanlis discusses the numerous investment opportunities opening up as Greece embarks on an ambitious drive to become a southern European logistics hub whose economic model is based on productivity rather than consumption
Why are transport and infrastructure projects so important in Greece?
Over the last 10 years, for various reasons but mainly due to one of the worst depressions in our entire history. We lost 25% of our GDP in the space of a decade, while unemployment exploded to over 30%, and youth unemployment at some stages was above 60%. Infrastructure and transport are huge drivers of the Greek economy, but because of the crisis, several projects never got off the ground.
The crisis has delayed the development of Greece’s infrastructure. What progress have you achieved since your appointment?
Greece today looks very different than it did when this government took over, and if you walk down the streets of Athens you will notice the change. The change is not only psychological, but also has a spillover effect in the real economy. In terms of our main achievements, I am proud of the fact that within the first six months we have managed to unblock a number of projects. A very good example is the Patras-Pyrgos highway, which has been stalled for several years and where foreign investors are involved. We have already signed with a concessionaire and have agreed on the main terms, so this project will become a reality, which is very important, since in this particular highway the death toll is quite high
What other projects is the government pushing forward?
A second very important project involving several ministries is the tendering process for Athens International Airport. The government is privatizing 30% of the facility and companies from all over the world have shown an immense interest in it. I think that in a few months this is going to create headlines in the business media, and show that Greece is back on the map when it comes to investment.
What can you tell us about the Hellinikon real estate project?
Another one of our goals is unblocking the Hellinikon project, a landmark initiative for Greece and the biggest real estate development project in Europe right now. Our ministry is heavily involved in construction projects and we are planning to connect Attiki Odos, our ringroad in Athens, with Hellinikon, We are also developing the new Line 4 of the subway system, which will have access to Hellinikon. So we are trying to promote specific infrastructure and transport projects targeted to facilitate big, landmark investments such as Hellinikon.
Are there any other major projects in the pipeline?
One of our biggest assets now as a country is Egnatia Odos, which is a very important 900km highway connecting the west with the east. In 2014 we had the obligation to begin a tendering process to privatize this motorway, but the process was stalled for years. This government has unblocked it quickly: we have a specific road map so that all toll stations can be in place by May, and we are working on all the necessary licenses for the tunnels. Failure to move forward with the Egnatia project had sent the wrong signal to investors for years and created frustration among the lenders, the European Commission and so on. We guarantee that by June there is going to be a tendering process for Egnatia and we invite foreign companies to participate in a highway that is of strategic importance for Greece.
What is the overarching vision for all these initiatives?
We need to think out of the box and consider the next generation of projects that we need in Greece: connecting ports with railroads, industrial centers, logistics hubs, and to make Greece what we started doing in 2008 with the arrival of Cosco, the state-owned Chinese multinational port and shipping giant, in the port of Piraeus. We are trying to make Greece a huge logistics hub for southern Europe, but in order to achieve that there has to be political consensus as to what specific projects to focus on.
Are you seeing any changes at the political level?
I think that slowly and steadily we are seeing a consensus between the business community and the political class, who realize that we have to leave politics out of these projects and take advantage of Greece’s competitive advantages. This is the huge task we have in front of us: to ensure that Greece’s growth is no longer based on economic models that produce deficits and are based on consumption, but on productivity, which means tourism, ports, shipping, energy and logistics. These are the areas where Greece has a competitive advantage and where these projects play a key role.
What are the new-generation projects you mentioned, and what do they mean for the country?
We are talking about projects that take into account the fact that climate change poses huge challenges in the coming years. For instance we have already signed with the European Investment Bank (EIB) for €450 million in projects to do with renewables. In terms of transport, we are renewing our very old and not very environmentally friendly bus fleets in Athens and Thessaloniki. The EIB is a huge supporter of this project, and will help ensure that at least a third of the fleet will be electric. The development of underground rail in Athens and Thessaloniki are some of these projects, prompting citizens to use public transport instead of the car. Greece has to start following best practices from abroad, and we are inviting private investors to participate in these projects.
Urban transportation is a challenge in these two cities. How will you enact change?
There is a huge debate now in Europe, and Greece has to be present in major issues, such as inter-mobility and connecting smart cities. We have to start by doing the basic things first, and the first thing is not having fewer than 1,000 buses in Athens when we need 1,800, or having 16-year-old vehicles. We need an environmentally friendly fleet and connections to an underground system, railway and other modes of transport. We need to move very quickly in that direction because the goal of zero CO2 emissions by 2050 in Europe is not that far away. In a year or so people will see a significant change in urban transportation in Athens and Thessaloniki.
Railway lines, especially in the north, are very important for trade. What are your plans?
One of our major goals is to connect our ports with modern rail so Greece can play an important role as a logistics center. Pireaus is a transit port, you have most products coming from Southeast Asia, and from there to other ports of the EU. Thessaloniki on the other hand can play a big role as a getaway port for products from the Balkans. The main thing is to connect the ports of Thessaloniki with Kavala and Alexandroupoli, and these with modern highway and railroad systems. It is also very important to connect the port of Alexandroupoli to the Black Sea region, as this gives us an alternative route to the Bosphorus, which is important for Greece and also for our allies. These projects are at an embryonic stage, so we need to move very quickly with planning and finding the right tools.
Infrastructure projects are huge financial undertakings. How will you fund them and what level of cooperation are you seeking from the EU?
One extremely important tool we have is the Connecting Europe Facility (CEF), which is a European funding mechanism, and we are in very close cooperation with European authorities in order to unblock funds and make those projects a reality. We have a government that understands that the only means to finance these projects are private investment and EU funds. What we are doing now is using tools like private-public partnerships (PPPs), which were never used in the last six years. We also want to use availability payments, concessions, Unsolicited Proposals and other tools that involve private investment.
Germany has been an important partner for Greece. How can German investors get involved in these projects?
Germany has played a very important role in huge landmark projects like the new Athens International Airport, which was built by Hochtief, or major highways that attracted German concessionaires. But we don’t want a relationship where Greece just gets a handout: we want investors to invest in projects that make sense for both parties. If Germany was committed during very difficult times, taking a huge risk with a country going through one of the biggest economic crises of the century, then in today’s Greece investors should feel much more confident about the projects in the pipeline: in construction, rail, the remaining 23 airports, tourism projects, energy, waste management and more. German companies have the know-how, they are familiar with the Greek culture, and everything is going to be much easier than it was five years ago.
How can Greece change the perception of foreign investors at this critical moment for the country?
2020 is the year of delivery. If you look at the numbers, they show that Greece will have a very dynamic comeback. We’ve had a depression, years of stagnation, and asset prices are low. The new government is business-friendly and willing to move forward with necessary reforms, and public opinion is not as skeptical about private investment as it once was. I think Greece can become a success story in Europe. The government is made up of a very good combination of politicians and technocrats who understand how the markets work and want to facilitate private investors to take part in the success story of Greece in 2030 or 2040.