BERLIN (MNI) – Foreign investment to bolster the Greek economy may
look good like a good strategy on paper, but in practice there are many
obstacles to be overcome, suggest two reports published Wednesday by the
German business daily Handelsblatt.

“A broad-based investment and modernization program for Greece is
in many respects a win-win alternative,” the head of international
economic policy at the German Economics Institute (IW), Juergen Matthes,
told the newspaper.

“Short-term impulses that can help pull the Greek economy out of
its deep recession go hand-in-hand with a longer-term strategy to
strengthen the growth and competitiveness of local production
infrastructure,” Matthes argued.

German Economics Minister Philipp Roesler has organized a
conference today with industry associations to explore ways for Germany
to make a lasting contribution to the Greek economy.

However, a survey of more than 120 firms by the German Chamber of
Industry and Commerce (DIHK) showed investors complaining about a lack
of credit from banks. The list of hurdles continues with high local
taxes and financing costs, weak domestic demand, rising payment defaults
and a lack of legal security, notably for property rights.

The Economics Ministry is discussing ways to overcome the lack of
credit with the public Bank KfW, Handelsblatt reported, citing banking
circles. One option would be for the KfW to provide back-up lending for
firms that invest in Greece.

The IW economist suggested tapping the EU’s structural funds and
the European Investment Bank to reach a critical mass of investment
credit. “The focus should be on sunrise niches for Greek firms,” Matthes
argued, citing upscale tourism and solar energy exports for an expanded
European electricity network.

“Above all, the emphasis should be placed, as in the past decade,
on Greece’s role as a bridge head for maritime trade between Europe and
Asia through the Suez canal,” Matthes said, noting that this trade
already accounts for more than a third of total export revenues. This
would require an expansion of port facilities and infrastructure for
road and air transport, he said.

There is also an “urgent need” to modernize Greece’s administrative
structures, the economist noted, suggesting that Germany’s experience in
developing its eastern states, as well as expertise from other EU
countries could be helpful.

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