Germany, Greece sign agreement to boost investment

October 7, 2011 - 1:45 PM
Greece Financial Crisis

Greek Finance Minister Evangelos Venizelos, left, shakes hands with Germany's economy minister Philipp Roesler before their meeting at the parliament in Athens, Friday, Oct. 7, 2011. Roesler backed calls to get German companies to invest in Greece to get the debt-drowned country's economy growing again. (AP Photo/Thanassis Stavrakis)

VOULIAGMENI, Greece (AP) — Germany and Greece signed an agreement on Friday aimed at boosting investment in the debt-drowned country and getting its economy growing again.

German Economy Minister Philipp Roesler and Greek Development Minister Michalis Chrisohoidis said the agreement was part of a strategy to help Greece deal with its crisis by helping its real economy rebound.

"We believe that Greece can become a very important investment destination," said Roesler, who is on a two-day visit to Greece with a delegation of dozens of German businessmen. "We're sending out the message that we can implement those things that we have decided on."

Roesler said deals worth euro2.5 billion ($3.36 billion) have already been made creating 50 new jobs in Greece, adding that there was additional German interest in investing in major infrastructure projects in the country worth euro1.5 billion, including pipeline construction.

"I believe the energy sector is one that is truly geared towards the future for Greece," Roesler said.

The German official said the investment agreement sets a legal framework and clears administrative hurdles that aim to impart a "sense of security" to businessmen seeking to invest in the country. He said German Development Bank KfW is ready to lend its expertise for the creation of a similar development bank in Greece to support small and mid-size businesses.

Chrisohoidis said a new program will be unveiled next month that would allow small and mid-size businesses more access to funding, while the European Union is working on amending regulations making it easier for Greece to fund large infrastructure projects and other businesses.

The agreement also includes a new financing tool through KfW's "Entrepreneur Loan" program offering official backing to German companies wishing to invest in Greece.

Germany would also help Greece absorb EU support funds geared toward bolstering the Greek economy's competiveness.

"We have to see this as a very positive, very strong message to the markets," said Roesler.

Roesler said he would convey the message to other EU partners that Greece offers good investment opportunities and that an investment in Greece would translate into an investment in Europe. Chrisohoidis said he would travel to the French capital next week to encourage such investment in his country.

Greece's economy is projected to shrink by 5.5 percent this year as the country struggles to meet austerity targets set as a condition for it to continue receiving funds from a euro110 billion ($145 billion) package of international bailout loans that are preventing it from defaulting on its debts.

Finance Minister Evangelos Venizelos has said that Greece has enough money to pay pensions, salaries and bondholders through mid-November. But the country needs the next batch of loans, worth euro8 billion ($10.5 billion), to avoid bankruptcy.

Most investors expect an eventual Greek default which would send shockwaves throughout the slowing world economy, stunting recovery and prolonging recession.

Debt inspectors from the International Monetary Fund, European Central Bank and European Commission, collectively known as the troika, are now in Athens evaluating reforms before the funds are released.

Jean-Claude Juncker, Luxembourg's prime minister who also heads the group of eurozone finance ministers, said he expects the troika evaluation to be ready by Oct. 24.

Speaking after talks with Roesler earlier Friday, Venizelos said eurozone price and currency stability is crucial to generating growth. He said Greeks must be convinced that the deep salary cuts and tax hikes they are enduring will produce results while German taxpayers must be convinced that their assistance will benefit all of Europe in the long run.

"And that is the case because Greece will honor this assistance up to the last euro," Venizelos said.

Roesler acknowledged that Greeks are sacrificing much and that strong public reaction to austerity measures is understandable, but said it shouldn't detract from the goal of implementing reforms. He praised the Greek government for having the will to push through those reforms.