On March 3, the European Bank for Reconstruction and Development approved a request from Athens to invest directly in Greece.
Investment operations will remain active only until 2020 and are occurring in conjunction with the work of the “Troika” (the European Central Bank, European Commission and IMF). Greece and Cyprus, which are closely linked, particularly in terms of their financial sectors, are the only European economies, aside from formerly communist ones, to get recipient country status from the EBRD, which was established in 1991 to help foster Central and Eastern European economies’ transition to a free market.
“A strong and stable Greece is very important for a lot of the countries where we operate, particularly those close to it, so bringing in our expertise makes perfect sense,” says Anthony Williams, head of external relations at the EBRD in London.
Greece, whose Finance minister Yanis Varoufakis described it in March as “the most bankrupt country on earth,” is engaged in bitter negotiations with the Troika over its €240 billion ($252 billion) bailout, with Athens’s leftist Syriza government keen to soften the terms in exchange for more reforms. As Global Finance went to press, these negotiations had yet to reach any concrete conclusion.
Although some modest growth may resume this year, the Greek economy is some 27% smaller than five years ago, while its €322 billion of foreign debt has risen correspondingly as a percentage of GDP. In such a difficult environment, EBRD-led investment will be very welcome. Williams says no overall target sum has been set but he maintains that the focus will be on channeling capital into Greece’s cash-strapped small and medium-size enterprises, as well as energy and infrastructure and those sectors that impact other parts of the Balkans.
“We’ve already had a team out there looking at potential projects, and our intention is to get an Athens office up and running as soon as possible,” says Williams. The EBRD stresses that its main focus will be on the private sector and on supporting recovery at the micro level. However, the bank has already supported the subsidiaries of Greek banks under the 2010 Vienna Initiative, which was launched at the height of the 2009 global financial crisis to prevent the withdrawal of cross-border banking groups. It also has a major interest in ensuring that Greek banks and companies remain financially healthy, as they have co-invested some $2.3 billion with the EBRD in other EBRD recipient countries.