Weblog KPAG Kosmidis & Partner – die deutschsprachige Anwaltskanzlei in Griechenland

Greece’s Budget Surplus Sparks More Controversy

Publiziert am 13.Mai.2014 von Abraam Kosmidis

With the May 2014 European and local elections looming, the conservative-led coalition government has already embarked on the process of making political capital out of the first primary budget surplus recorded in a generation. Predicting a figure of around €2.5 billion, more than three times the government’s original estimate of €800 million, Prime Minister Antonis Samaras has stated: ‘We must help those most affected by the crisis, in order to give them a second chance. Our goal is to exit the crisis without leaving anyone behind.’ To this end, he has vowed to return 70% of the surplus to the people hit hardest by the austerity measures. This will go some way to addressing the problems of low-earners, and includes a €500 bonus to pensioners and members of the police and security services, who along with the majority of public sector employees have borne the brunt of drastic cuts over the past four years. By the end of April, more than a quarter of a million people had already applied for these ‘social dividends’.

The opposition, led by the radical-left Syriza party, immediately went on the attack, arguing that the idea of a primary surplus was the invention of a government that had not only drastically cut spending but failed to include in their calculations factors such as debts to state suppliers, which it had neglected in favour of a transparent attempt to buy votes from the casualties of austerity. Syriza argued that any budget surplus had been achieved only with the creation of a surplus of the unemployed and poverty-stricken. Meanwhile, the German Chancellor Angela Merkel still insists that in return for Germany’s backing, Greek austerity measures should continue.

Syriza issued a statement declaring that Greece clearly still had a long way to go before coming out of austerity, and that a new Memorandum of Understanding between Greece and the Troika would only lead to further cuts and job losses in the public sector, despite the country preparing a bond issue to raise money on the markets for the first time since the international bailout began. The statement concluded: ‘The celebrations about the primary, pre-election surplus… cannot hide the future that Mr Samaras and Mrs Merkel have in store for the Greek people.’

Public sector protests

The Troika’s austerity measures had included a demand for 25,000 public sector workers to go through the government’s ‘mobility scheme’, whereby workers are suspended on 75% wages while waiting to be transferred to another job. The scheme has been called a ‘precursor to layoffs’ because unless another job was found within a year the worker would be dismissed. The agreement caused a rash of protests and demonstrations by workers and unions, the preferred method being the occupation of local government offices rather than strikes, which would have only resulted in more lost wages.

The European Commission stated that the suspensions were a necessary part of the government’s restructuring programme, aimed at bringing the high public sector wages bill in line with the euro-zone average. For decades, Greece’s main political parties have traditionally rewarded loyal supporters with public sector positions, causing it to grow rapidly and become ever more expensive to maintain, although only 22.6% of Greeks work in the public sector compared to the EU average of 25%. The problem is commonly seen as more a matter of productivity than size. According to the opinion polls, Greece, out of all the EU countries, is the least satisfied with its public administration service. In a country where the security of public sector jobs has traditionally been inviolable, this was a recipe for conflict, which brought more workers onto the streets in protest in March 2014 ahead of resumed talks between the government and the Troika.

The coalition government has not held back from hailing an end in sight for the economic crisis, although austerity will have to continue as part of the loan agreement. It is committed by the end of 2014 to cutting 11,000 civil servants, reducing supplementary pensions and eventually to reducing the main pension. The Memorandum of Understanding puts a freeze on wages until 2018.

Run-up to the election

Despite the huge numbers of applicants for the social dividend, Prime Minister Samaras had to wait until the EU Statistics agency Eurostat had certified the actual amount of the budget surplus before proceeding with any payouts. The figure of €1.5 billion or 0.8% of annual GDP was confirmed in a press conference on 23 April by European Commission spokesman Simon O’Connor, who said it was ‘well ahead of the 2013 target, which was for a balanced budget.’ Meanwhile, the bond issue of €3 billion, which took place on 10 April, attracted orders for nearly seven times this amount. Greece has the highest unemployment figure in Europe and is still blighted by deflation, but this sign of growing confidence among its EU partners in its prospects for recovery has sent one positive message to voters who may doubt that the recovery is real, and has helped to counteract the stigma attached to a country that is blamed for starting the financial crisis in Europe.

On 28 April, in a meeting chaired by Alternate Finance Minister Christos Staikouras, representatives of the two coalition parties agreed on how the €525 million social dividend would be distributed, the main aim being to provide healthcare coverage to a large sector of the population who are uninsured. A bill will be tabled in parliament this week, with measures agreed between the Greek government and its creditors. The bill will be hastened through the parliamentary process in the hope of beginning distribution of the dividend by 9 May. Means testing will be based mainly on 2012 incomes, although the government is anxious not to leave out people who became unemployed in 2013.

€430 million will go to vulnerable groups such as pensioners and people on low salaries. The starting income level to qualify for the one-off benefit will be €4,000 per annum, rising to between €10,000 and €11,000, depending on the number of children in the family. A base figure for the award will be €500, with an added €150 per child, so that a family with two children should receive €800. A further €20 million will go to people who became unemployed in 2013, and between 68,000 and 70,000 in the police force or the military will be awarded a total of €35 million. In addition, services for feeding and housing the homeless will receive €20 million.

The largest single group to receive the dividend will be the 350,000 to 4000,000 people without social security, who will receive a total of €20 million worth of healthcare coverage. This group includes the long-term unemployed, people who are retired and uninsured, and unemployed professionals who have not kept up with insurance payments or suffer chronic health problems. It remains to be seen how these measures will affect the election results.



Mergers and Acquisitions in Greece

Publiziert am 16.September.2013 von Abraam Kosmidis

Mergers and acquisitions are one way that companies looking to expand internationally can break into overseas markets. Greece welcomes investment from overseas companies and has lawyers ready to help and advise interested parties on how to carry out a merger or acquisition in this country.

Benefits of mergers

As a business expansion technique, mergers and acquisitions (M&A) can offer companies a number of advantages:

  • The company acquires or joins with an existing business that already has its own skilled and experienced staff and therefore boosts the acquiring company’s knowledge base.
  • It increases the acquiring company’s customer base and provides easy access to a new market.
  • The new company may have new technologies or patented products that the acquiring company might not be able to access other than through a merger or acquisition.
  • The target company often conducts the same type of business as the acquiring company, and so the acquisition or merger can help to reduce competition and increase the company’s market share.

Consulting with local lawyers is essential

However, although mergers and acquisitions can be an effective way of expanding a business, they are not to be entered into lightly. They can be very complex legal arrangements with many potential pitfalls or roadblocks to catch out an unprepared company, particularly if they involve overseas companies. Problems that could potentially arise and may need specialist legal advice to resolve include:

  • What to do with existing staff of the acquired company? There may be a duplication of roles as a result of the merger or acquisition and as a result some staff may become surplus to requirements. However there are European laws, such as the Transfer of Undertakings (Protection of Employment) Directive, that govern how staff in this situation must be treated.
  • Failure to fully understand and comply with the different rules governing business operations in a foreign country.
  • Failure to fully research the economic viability of the target company, including all its assets and liabilities.

The rules governing the merger will depend on the countries involved. Any company considering a merger or acquisition with a company based in Greece is strongly advised to seek professional advice from local lawyers. It can be difficult for any company to try and do business in an overseas market – they need to understand and adapt to local rules and customs, and also be able to identify the right entry strategy into the country. Law firm Kosmidis & Partners has lawyers who are fully experienced in all aspects of Greek merger and acquisition law and will be able to guide any overseas company through the process.

Positive signs for mergers and acquisitions

As with many countries, merger and acquisition activity in Greece has been subdued over the past few years as a result of the global economic downturn. However, recent improvements in the global economy have led to increased confidence amongst businesses, and as a result they are more willing to consider the possibility of mergers again.

Recent figures from business advisors EY have revealed that 87% of companies now consider the global economy to be either stable or improving. The figures also show that 51% believe the global economy to be improving outright – more than twice the 22% that reported the same in October last year.

In addition, this rising confidence has led to many global companies now believing that M&A activity will increase over the next 12 months – as many as 72% expect to see an increase in the volume of global deals over the next year.

However, EY also found that this increased confidence has yet to translate into action. Its survey found that although 52% of major companies cite growth as a priority, only 29% say they expected to actually make an acquisition over the next year.

Despite this lack of planned action, many companies acknowledge that now is probably a good time to conduct a merger or acquisition. EY found that 39% of companies believe there to be quality acquisition opportunities currently available, which is an increase over the 30% that believed the same six months ago. In addition, 50% report feeling more confident about the volume of merger opportunities available, compared to 37% six months ago.

The fact that there is a growing number and higher quality of merger and acquisition opportunities leads EY to suggest that now is a good time to conduct a deal, and that companies that are the first to act will reap the rewards.

“There are signs of improvement but caution remains,” explained Pip McCrostie, EY’s Global Vice-Chair, Transaction Advisory Services. “While almost three quarters of corporates expect deal activity in the market to increase over the next year, far fewer have an intention to buy. This could actually create a first mover advantage opportunity for those willing to take action and secure assets ahead of the competition.”

Greece as a M&A destination

For companies already based within the European Union (EU) or the European Economic Area (EEA), Greece offers an ideal destination for international merger activity, as companies will be able to take advantage of the preferential trade conditions that exist between EU and EEA countries. Laws already exist to facilitate cross border operations between EU countries, including rules relating to the transfer and employment of workers, debt recovery and dispute resolution.

Professional services provider KPMG has also found positive economic signs regarding M&A. Its latest global M&A predictor found that confidence amongst the world’s largest companies was 14% higher than it was at the same time last year.

“The evidence from the top 1,000 companies is that while confidence is fragile, it is there, and this is reflected in average (as opposed to total) deal values, which continue to increase.” commented Tom Franks, Global Head of Corporate Finance at KPMG.

Although the surveys conducted by the business advisory firms were focused on the larger global corporations, the favorable market conditions are equally applicable to smaller and medium size businesses.

Mergers can be particularly beneficial for these companies, as they are less likely to already have an international presence. M&A can offer a potential solution for firms that are keen to take advantage of a wider international customer base but have not yet been able to find the right way to break into the cross border market.

If your company is ready to take advantage of the current favorable conditions for mergers and acquisitions, then contact Kosmidis & Partners today and let our lawyers advise you on the appropriate requirements of Greek law.