October 2, 2011
As a general rule, with the exception of Russia and China, few developed countries have a geo-economic agenda of their own. This, after all, is the task of multinational or global corporations. The latter can benefit from logistical state support, but to a much more limited extent than in the past.
The situation is somewhat different for weaker southern members of the EU, like Greece or Spain. The core businesses there have been known to act in concert and expand in geographical areas of the world in which competitive pressures are mitigated by the pre-existence of religious, cultural and/or historical ties. Thus, since the 1990’s, Spanish banking conglomerates and telecommunication operators have been aggressively pursuing an expansion strategy in Latin America, where a common language and former political ties has given them an edge over their North American counterparts.
Up until the debt crisis derailed the country, Greek businessmen were similarly following a geo-economic agenda in the Balkans, which enjoyed the full support of the Greek state, and even that of the Greek Orthodox Church. Accordingly, Greek expansion took place in weaker markets that were undercapitalised, new to competition rules and fairly corrupt. The target countries all happened to be Orthodox, as well, and Greek diplomacy has attempted over the past ten years to become this group’s spokesman and leader within the EU.
To be sure, the minuscule size of Greece’s home market had made such economic expansion plans imperative. Like Spain in Latin America, Greek banks and telecommunication operator OTE / Cosmote opened offices and acquired stakes in companies in Romania, Bulgaria, Serbia or Albania. Until 2010, Piraeus, Alpha or the National Bank of Greece became household names in the Balkans, and attracted a large share of deposits in the region. Their market share increased steadily, sometimes at the expense of better-capitalised Central European competitors with similar expansion plans, notably from Austria. OTE’s purchase of Romtelecom in Romania, for example, and the expansion of Cosmote mobile phone operator could be considered a regional success story.
Alas, the Greek economic expansion bonanza came to an abrupt halt once the true situation of Greece’s state finances became known. It is not that the geo-economic strategy was wrong, or that Greek companies operating abroad were poorly managed. Nothing of the sort. Rather, their carefully laid out expansion plans were first torpedoed, and then thwarted, by the doings of their home government. In some respects, the dire situation of Greek businesses operating abroad is similar to that of profitable Japanese companies operating globally, whose credit rating, public image and economic performance started being affected, at the turn of the millennium, by the Japanese government’s huge sovereign debt, which now stands at 225 % of GDP. In an effort to escape being overtaxed by a Tokyo administration desperate for cash, companies like Toyota, Sony and others had at one point even considered shifting most taxable assets overseas.
Nowadays, most Greek banks operating in Romania, for example, are posting losses, as depositors are fleeing them for safer banking operators Although relatively small in size, Greek banks are considered by financial analysts as conservative and well-managed, but, at the same time, saddled with quite a big chunk of the country’s treasury bonds. In the months and years to come, this might lead to some bank failures, as a result of the Greek state’s inability to honour its debts. Lending to Greek businesses operating abroad has also diminished considerably, further jeopardizing Greece’s expansion strategy adopted some fifteen years ago. Thus, deleveraging in Greece will not only affect the country’s public servants, but also its business community with operations abroad.
