It was just past 10 a.m. on Wednesday, June 15, and Syntagma Square’s benches were packed; the koulouri stands and knockoff-purse displays bustling. For the previous three weeks, the square had been dotted with colorful tents and posters, and even more colorfully phrased chants. The so-called “Indignant Protests” had had the air of a street fair. But this day’s protest would coincide with a general strike and union rallies. And for a few hours, the square broke out into outbursts of violence between riot police and groups of hooded protesters with more than 40 injuries.
What the news didn’t show took place a few meters away at the Grande Bretagne Hotel. Here, leaders from around the world were meeting behind locked conference doors for the second day of the first Greek Power Summit, organized by Honeystone Limited, publishers of Greek Rich List magazine, and international consulting firm IAC. Businessmen and women from the Greek diaspora had come together not only to debate how Greece could attract foreign investments, kick-start growth and create jobs, but also to ponder greater issues related to Greek society.
President and CEO of Forbes Magazine Steve Forbes headlined the event, which also included government and business leaders from the USA, the United Kingdom, Cyprus, Switzerland, Poland, Canada and the Philippines. Participants agreed on issues such as a flat tax, debt restructuring, privatizations, the need to address tax evasion and corruption, and the opening of the economy. But as the outside protests turned louder, speakers didn’t need to emphasize why economic change couldn’t take place without public support and social change.
“We were overwhelmed by the response from successful Greeks from around the world,” said Honeystone’s CEO Savvas Pavlou, who added that he expected the summit to become an annual event that would aim “to attract industry leaders globally to share their knowledge and ideas.”
This year’s summit, however, took place only a shuttered-window away from chants, rocks and teargas. It was hardly the secluded, quiet locale usually chosen for industry leader meetings.
The anger heard outside, however, made the topics on the table inside seem even more urgent—and those in attendance had plenty of ideas on ways to bring Greece out of its debt doldrums. Panos Krokos, CEO of Green Capital Investment Bank, laid out the case, for example, for green energy and how this untapped resource could help Greece out of the current situation.
“Greece can produce enough energy that can satisfy the EU’s energy needs nine times over,” Krokos said, adding that the opportunity is there because Greece is “blessed” with wind, solar and geothermal energy.
The EU mandates that 20 percent of its energy must come from renewable sources, but currently only 3 to 4 percent of it does. “We have another 16 percent to fulfill in the upcoming years,” he said.
Krokos even suggested a Marshall Plan-type program for Greece [Editor’s Note: this was a prophecy of sorts, because the eurozone announced something similar more than a month later]. In Krokos’ view, some 100 billion euros are needed. “Greece has potential,” said Krokos. “It involves money but money well spent.” It is a profit opportunity for the EU and for Greece too, he added, because it is less expensive to place wind turbines on uninhabitable islands where there are fewer nearby residents to complain about noise.
Moving beyond green energy, Poland’s Treasury Ministry’s Undersecretary of State Krzysztof Walenczak offered his insight on what Greece can learn about how Poland privatized its state assets in the post-communism era. He stressed that in both countries it is a social and political process.
“Every process has its enemies; every process will be met with rejection,” he said.
Despite opposition, he said, Poles understood their government’s motives, because the government defined the beneficiaries of the changes—private retail investors, local institutional investors, foreign investors, employees of the privatized companies and Polish families. Company employees in Poland, for example, were given 15 percent of the newly privatized company’s shares, which created “a quick and instant spread of ownership,” making employees feel as if they were co-players in the privatization process.
Poland aimed to turn the Warsaw Stock Exchange into a regional center with an international scope. “You need to plug into global sources of capital,” said Walenczak. “It is important to balance the transition.”
And in Poland, he added, “there was a massive transfer of wealth from government to citizens — an exchange Poles found positive.”
Changing the mindset
But some panelists suggested reform in Greece had to go even further. John Calamos, of Calamos Investments, for example, said what Greece really needs is a sweeping change in the cultural mindset to attract more investment and encourage growth.
“Greece needs a New Deal,” he said. “If all they do is restructure debt they haven’t done anything. In three to four years there will be the same problem.” He continued, “We need to focus on the other side of the equation, change the culture. Culture trumps strategy every time.”
Among the changes he suggested: said the creation of a more capital-friendly framework, a flat tax and eliminating layers in the bureaucracy.
“Capital goes where it is treated best,” he responded when audience members asked why Greek Americans were not coming to rescue Greece.
“Don’t give people a gift they’ll misuse,” Calamos said. “First, Greece must set up a framework for investment.”
Incentives for concessions
In his comments to the summit, CEO of Admirals Bank Nick Lazares drew on his own experience to illustrate parallels between Wall Street and the auto industry and Greece. Lazares was CEO of Capital Crossing when it was acquired by Lehman Brothers in 2007 so he got to witness the US financial crisis from the inside.
The problem then — and a problem he sees in Greece as well, was a realization that acknowledging the state of the company’s portfolios and its deteriorating assets would mean a loss of business and jobs. Everyone held off until it was too late, like Greece, to their own interests.
“If you have a system that allows vested interests to be protected, it doesn’t go well,” he warned.
In the same way that Lehman was connected to the entire banking system, Greece is “hyper-connected to the EU,’ said Lazares, which explains why Greece is so crucial to the euro, despite only contributing 2 percent to Europe’s GDP.
What can help Greece, in Lazares view? Incentives for businesses, unions and politicians to make concessions in a clear way that is understandable to everyone. This would be a plus for investors because they would see that Greece has identified its problems and created a level playing field.
“Creating openness is the only way,” he said. “I would appoint a commission and create a manifesto — not 1,000 pages — so that every Greek can understand.”
Reaching a turning point
Greece needs radical changes, even beyond just articulating clear, open strategies, argues Stephen J. Cucchiaro of Windward Investment, which manages over $6 billion dollars in assets.
“Investors hate uncertainty, and the 150 percent debt ratio is outstanding,” he said. “Dignity and solvency are basic problems that keep investors away.”
However, according to Cucchiaro, investors in Europe have kept Greece on their radar, they are simply waiting for the right moment to invest—and Greece should seek those investors out. “Many US based companies have cash in Europe which they want to use. Find these companies and take advantage of them,” he argued. “Investors are looking for a turning point, a point of maximum pessimism.”
In Brazil during the hyperinflation that occurred in the 1980s, investors wait until the government spelled out specific changes. In Latvia in 2008, leaders zeroed in on turning around the country’s debt-to-GDP ratio, a simple improvement that changed the markets. In Greece’s case, he identified two areas that could be targeted: an increase in exports and improving the debt to GDP ratio.
“You don’t need to solve all problems to get capital back in,” Cucchiaro said. “Everyone wants Greece to succeed. Use the crisis as the best opportunity to make the radical, structural changes which are required.”
Elena Ambrosiadou, president and CEO of the consulting IKOS Group, urged the summit to come up with practical, concrete solutions rather than just point out the problems Greece faces.
“It is very easy to criticize,” she argued. “But growth is a process that needs to start in each of us.”
Specifically, she recommended that the summit participants come up with think tanks and project task forces to push for reform of the public sector, manage risk to avoid default and regain market access. She also suggested creating a new NGO to deliver a restructuring plan for Greece that would help abolish the archaic, as she put it, structures that companies here have adopted and she specifically pushed for a renewed look at the IT plan for the public sector to make it more efficient.
Abmrosiadou worries about Greece’s continued loss of people and capital—and the tendency of Greeks to place the blame on others. But she’s optimistic, she said, because the “Greek people are adaptable, problem solvers, and great survivors.”
A return to integrity
Switzerland-based George Koukis, founder and chairman of Temenos Group didn’t mince words when it came to the question of investing in Greece. “I wouldn’t pay this government a drachma,” he said. “I’m a proud Greek but I would go insane these past few years.”
Hailing from the island of Evia, Koukis argued passionately that Greece needed, more than anything else to restore its integrity—and get rid of corruption.
“We’ve lost our pride,” he said. “Internally, intellectually we are bankrupt. It’s a symptom of a very sick society worldwide.”
To fight what he saw as a lack of ethics in the modern business world, the CEO had begun an integrity course for future leaders —and said he was currently looking for young Greek students to take part.
Creating regional hubs
Another practical solution came from Michael Pagidas, the president of the Association of Chief Executive Officers in Greece (EASE). Pagidas advocated developing fast tracks for investment by building regional industrial and agricultural hubs in Halkidiki, Crete, the Aegean islands and Messinia.
Pagidas also argued, like the IKOS group’s Ambrosiadou, that think tanks to deal with ways to simplify government procedures and reform the public sector are needed.
“We have no sense of direction,” said Pagidas. “There is no doubt in this country that there is a lack of leadership.”
All is not dire in Greece, in Pagidas’ view. He cited the clean, fast and calm Athens metro — a sharp contrast to the noisy city streets above it — as well as the new Acropolis museum as examples of successful projects Greeks were proud of. “When Greeks see beauty,” Pagidas said, “they respect it.”
Learning from classical times
Steve Forbes, like Pagidas, sees hope in Greece’s nature and history. Modern Greece could learn lessons from the country’s ancient past, said Forbes, citing Xenophon. Xenophon knew, Forbes reminded the audience, that he needed to “persuade his soldiers each step of the way.” Keeping people informed is the mark of a successful leader today, he said, and governments today would do well to show similar “humility, keeping in touch with the people and recognizing when circumstances were beyond one’s control.”
He believes Greece can turn its situation around with the right leadership. “Cultures can change when leadership changes,” he said. “Greece needed “people who can accept failure and move on; an environment where new leadership rises.”
Greece has the culture and brains, he said. What it needed now was an environment that facilitated growth.
The summit’s second day produced a sense of optimism that solutions for Greece were possible, but at least one participant expressed dismay that Greek politicians had not taken part.
It was hard to ignore the situation outside the hotel either. As the outside banging on the shuttered windows grew louder, a Greek reporter brought up the elephant in the room. “How can you bridge the gap between the angry protesters outside and yourselves?” he asked the speakers as uneasy participants left the room to attend a cocktail party.
But outside clouds of tear gas had grown thick and the hotel’s metal entrance grate had been lowered as the gas seeped in under the doors. Summit attendees were closed into an interior room, so Steve Forbes sat down to sign books. It looked like any cocktail party, except that a television screen tuned to CNN had video shots of the hotel’s rock-pelted outside walls as its headline story.
By Julia Panayotou — Athens, July 5, 2011
Click here for more on Day 1 of the Summit from another of our Athens correspondents.