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GREECE
Region: Western Europe
Edition: November 2009

DB3c
This "DB" Rating Indicates:
Slight risk
Enough uncertainty over expected returns to warrant close monitoring of country risk. Customers should actively manage their risk exposures.
Trend:
Deteriorating
The country's overall risk profile is deteriorating owing to adverse political, commercial, economic and/or external developments

The 'DB' risk indicator provides a comparative, cross-border assessment of the risk of doing business in a country and encapsulates the risk that country-wide factors pose to the predictability of export payments and investment returns over a two year time horizon. The 'DB' risk indicator is a composite index of four over-arching country risk categories:  

Political risk - internal and external security situation, policy competency and consistency, and other such factors that determine whether a country fosters an enabling business environment;

Commercial risk - the sanctity of contract, judicial competence, regulatory transparency, degree of systemic corruption, and other such factors that determine whether the business environment facilitates the conduct of commercial transactions;

External risk - the current account balance, capital flows, FX reserves, size of external debt and all such factors that determine whether a country can generate enough FX to meet its trade and foreign investment liabilities;

Macroeconomic risk - the inflation rate, government balance, money supply growth and all such macroeconomic factors that determine whether a country is able to deliver sustainable economic growth to provide further expansion in business opportunities.

The DB risk indicator is divided into seven bands, ranging from DB1 through DB7. Each band is subdivided into quartiles (a-d), with an 'a' designation representing slightly less risk than a 'b' designation and so on. Only the DB7 indicator is not divided into quartiles. 

Population: 10.7m
Surface area (sq km): 131,957
Capital: Athens
Timezone: GMT +02:00
Official language: Greek
Head of government: Prime Minister George PAPANDREOU
GDP (USD): 357.2bn
GDP per capita (USD): 33,386
Life expectancy (years): 80
Literacy (% of adult pop.): 96.0
Country Overview:

Greece is a Mediterranean country between Europe, Asia and Africa. The country has land borders with Albania, Bulgaria, Macedonia and Turkey. It joined the EU in 1981, and is working to improve relations with Turkey, with which it has had a troubled relationship in the past.  

Since the restoration of democracy in 1974, politics has been dominated by a socialist and a centre-right party. The parties are controlled by several family dynasties, which has tended to encourage patronage and cronyism. The trade union movement, which has Socialist Party ties, and the Greek Orthodox Church are also highly influential.  

Tourism and shipping are among the most important sectors of the economy. Structural reforms, the introduction of the euro, and the organisation of the Olympic Games in Athens in 2004 have contributed to support buoyant economic growth until 2008, which has helped to close the income gap with Western European countries. However, economic activity has weakened again in the wake of the global financial crisis and the global economic slowdown.

Trade Terms

Minimum Terms: SD

The minimum form of documentation or trading method that D&B advises its customers to consider when pursuing export trade with the stated country.

Recommended Terms: SD

D&B's recommended means of payment. The use of recommended terms, which are generally more stringent than minimum terms, is appropriate when a customer's payment performance cannot be easily assessed or when an exporter may wish to limit the risk associated with a transaction made on minimum terms.

Usual Terms: 30-120 days

Normal period of credit associated with transactions with companies in the stated country.

Transfer Situation

Local Delays: 1-2 months

The time taken beyond agreed terms for a customer to deposit money in their local bank as payment for imports.

FX/Bank Delays: 1-2 months

The average time between the placement of payment by the importer in the local banking system and the receipt of funds by the exporter. Such delays may be dependent on FX controls, FX availability and the efficiency of the local banking system.

Trade & Commercial Environment

According to D&B’s latest proprietary cross-border payments performance data, 30.3% of payments arrived 30 or more days over terms in the year to end-Q3 2009. Around 60.1% of payments were paid promptly in the same period, while 18.8% of payments were paid 60 or more days over terms. Some 4.9% of payments were paid after a delay of 120 days or longer. In view of the payments performance of companies operating in Greece, D&B recommends the use of SD terms when trading with counterparties in the country. Meanwhile, the Mediterranean Shipping Company, the world’s second-largest operator of container ships, has cancelled its exclusive, long-running contract with the Piraeus Port Authority and is expected to renegotiate a similar deal with Cosco. 

 
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  2006 2007 2008 2009f 2010f
Real GDP growth, % 4.5 4.0 2.9 -1.0 0.2
Inflation, annual ave, % 3.3 3.0 4.2 1.5 2.3
Govt balance, % GDP -2.8 -3.7 -7.7 -12.5 -12.1
Unemployment, % 8.9 8.3 7.7 9.3 9.7
C/A balance, % GDP -11.1 -14.3 -14.4 -12.0 -13.1

The "Long-Term Interest Rate" chart tracks ten-year government bond yields.

Exchange Rates
(London, 02 Nov 09)
GBP 1.1172
JPY* 0.7487
USD 0.6778
*(x100)  


Local Currency
(Euro [EUR]:USD)

 
Local Currency
(Euro [EUR]:USD)
Jun 09 Jul 09 Aug 09 Sep 09 Oct 09 Nov 09
Week 1
Week 2
Week 3
Week 4
Week 5
0.706 0.714 0.705 0.703 0.685 0.678
0.714 0.717 0.704 0.684 0.678
0.714 0.709 0.702 0.679 0.672
0.718 0.704 0.699 0.681 0.666
0.711 0.697

Long-Term Interest Rate
(%, per annum)

Data Table
Q1 08Q2 08Q3 08Q4 08Q1 09Q2 09Q3 09
4.394.824.975.035.725.354.66
3.934.254.263.53.073.323.3

The newly elected centre-left Pan-Hellenic Socialist Movement (PASOK) government, led by George Papandreou, faces mounting challenges arising from the adverse socio-political and economic environment. Domestic terrorist groups planted incendiary devices outside a foreign-owned business, as well as the offices and private houses of ministers and deputies of the ruling and leading opposition parties, and opened fire against a police station (injuring six officers and a citizen). In addition, the government is confronted by further industrial action by dockworkers at the country’s main port of Piraeus; the dockworkers are demanding the annulment of the concession deal made with the Chinese shipping company Cosco to expand and manage the port’s Pier II and construct a new Pier III. They argue that the deal weakens employment rights and may cause job cuts, while it includes tax breaks considered harmful to the national economy and the sustainability of the Piraeus Port Authority. The two-and-a-half-week strike (which has been suspended temporarily after the government’s promise to renegotiate the deal with Cosco) seriously disrupted operations at the port and is believed to have cost Greek businesses some EUR30m and the state an estimated EUR3m per day in revenues; export firms have also been hit hard. 

Meanwhile, according to Eurostat, Greece’s budget deficit in 2008 stood at 7.7% of GDP, but the figures could worsen as the data are still being reviewed by officials in Brussels. The country’s budget data credibility was brought into further disrepute in late October after the recently appointed finance minister more than doubled the expected budget deficit for 2009 to 12.5% of GDP. As a result of the considerable deterioration of the government’s fiscal figures, ratings agency Fitch downgraded its credit rating on Greece to A- from A, while Moody’s placed the country under close supervision, adversely affecting the Greek bonds market and the Athens stock exchange.  

The government has pledged to improve the quality of statistical reporting, by boosting the national statistics office’s independence and reducing the influence of policy-makers on it, and to create a new committee to assess the real state of the domestic economy. More importantly, the government is compiling an ambitious plan worth EUR10.0bn (or 4.0% of GDP) to support the public coffers, aimed at lowering the deficit to below 10.0% of GDP in 2010 and (at the same time) providing a EUR2.5bn support package in a bid to boost economic growth. To this end and in order to bolster revenues, a new bill will be submitted to parliament that will include a rise in the special consumption tax on fuel, alcohol and tobacco, as well as the imposition of an extraordinary levy on major profitable enterprises. 

DEFINITIONS 

Minimum Terms: 

The minimum form of documentation or trading method that D&B advises its customers to consider when pursuing export trade with the stated country. 

Recommended Terms: 

D&B's recommended means of payment. The use of recommended terms, which are generally more stringent than minimum terms, is appropriate when a customer's payment performance cannot be easily assessed or when an exporter may wish to limit the risk associated with a transaction made on minimum terms.  

Usual Terms: 

Normal period of credit associated with transactions with companies in the stated country. 

Local Delays: 

The time taken beyond agreed terms for a customer to deposit money in their local bank as payment for imports. 

F/X Bank Delays: 

The average time between the placement of payment by the importer in the local banking system and the receipt of funds by the exporter. Such delays may be dependent on FX controls, FX availability and the efficiency of the local banking system. 

C/A (current account) balance, % GDP: 

Part of the balance of payments that records a nation's exports and imports of goods and services, and income and transfer payments. 

DSR (debt service ratio), %: 

Annual interest and principal payments on a country's external debts as a percentage of exports of goods and services. 

Govt balance, % GDP: 

The balance of government expenditure and receipts. 

Real GDP growth, %: 

GDP adjusted for inflation. 

Inflation, %: 

The increase in prices over a given period. 

 

GLOSSARY 

CiA        Cash in Advance

CLC        Confirmed Letter of Credit

CWP        Claims Waiting Period

FX        Foreign Exchange

LC        Letter of Credit

LT        Long term

MT        Medium term

OA        Open Account

SD        Sight Draft

ST        Short term

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