When the Cyclops in Greek mythology produced thunderbolts, a helmet of invisibility or a trident for clients such as Zeus, Hades and Poseidon – who then went on to use these innovative products to successfully beat the Titans – they didn’t need external financing to do so. But that was a myth. In Greece as everywhere else, reality is rather a different story.
In the summer of 2015 EFSI (the European Fund for Strategic Investments for long) was launched, a part of the Investment Plan for Europe, to help overcome the investment gap in the EU. Greece benefitted immediately. Resting on EUR 21 billion in guarantees and allocations from the EU budget and the European Investment Bank, the initiative allows increased lending to address the market failure in risk-taking, with the aim of mobilizing EUR 315 billion in investment across the EU. Sound like all Greek to you? Here’s what it means in real-economy terms for people from Athens to Thessaloniki.
The Investment Plan for Europe has unlocked investments into many small- and medium-sized Greek enterprises. In May, the European Investment Fund, part of the EIB Group, signed a guarantee agreement with ProCredit to provide EUR 20 million of loans to innovative companies in Greece over the next two years. This was followed by two deals with the National Bank of Greece, one from the EIB, the other from the EIF, providing over EUR 1 billion to small businesses . In addition, the EIB invested EUR 20 million into the Diorama Hellenic Growth Fund, which makes private equity investments in Greek SMEs with high growth potential.
Greece EFSI for climate action
Approved projects also include the construction and operation of three wind farms in Greece, with a total output of 50MW. This will help meet the EIB Climate Action target of ensuring that at least 25% of its lending supports climate-related investment, and also the European energy security policy objectives of reducing reliance on energy produced outside EU borders. The bank also approved EUR 300 million for the urgently required refurbishment and upgrade works at 14 regional airports that are being privatized in well-known tourism destinations such as the islands of Rhodes, Santorini, Kos, Crete and many others.
This is all in addition to the work EIB has been doing in the country for years. In fact the EIB this year set up its first dedicated team for a country, called the Investment Team for Greece. The team consists of 30 EIB Group officials, about half of whom are based in the EU bank’s Athens office.
Greece EFSI in good time and bad
“No economy, no people, has suffered more than Greece,” Werner Hoyer, president of the EIB said at an event in late September where he spoke alongside Greek Finance Minister Euclid Tsakalotos.
“Greece has faced challenging times in recent years, but the EU bank has been and will continue to be by its side. The EU bank was here before the crisis erupted, has stayed during difficult times, and even strengthened its commitment since, providing investment in the real economy when it was most needed.”
At the same event, Minister Tsakalotos, a former economics professor, explained the importance of the role the EIB plays in Greece: “Commercial banks have a tendency to lend pro-cyclically, meaning they lend a lot of money when times are good, and when times are not good, they turn the tap off. But the EIB has been with Greece in good times and bad times.”
The investments have indeed continued. In northern Greece, a part of the country that has been particularly hard hit by the economic crisis, farmers and young unemployed borrowers, as well as micro-businesses active in the green economy, can more easily get a loan with a local bank there, benefiting from a guarantee with the EIF. Similarly on the island of Crete, where young people have to deal with high levels of unemployment, the EIB invested EUR 40 million with a local bank there to pass on to tourism companies and others specifically creating jobs for young people.
Greece EFSI for competitiveness
The EIB extended a EUR 500 million trade and export finance facility for Greece earlier this year, to help improve the competitiveness of Greek companies and support their international trading role. Erecting a different column, or rather a plinth for the base of the column to support the Greek economy, the EIB contributed EUR 180 million to the Hellenic Foundation for Research and Innovation. The foundation aims to fund the work of talented young Greek scientists over the next three years, to make sure potential for research and innovation stays in the country. It’s issuing its first call for research proposals this autumn.
We know the country that gave us democracy, mathematics and a pantheon of Gods in ancient times has a lot more to give in the future. So it is worthwhile to build Greece’s ability to develop innovative ideas to inspire and shape Europe. Since 2008 the EIB has provided over EUR 12 billion in loans and guarantees to Greece, with outstanding EIB loans totaling around EUR 18 billion, approximately 10% of the country’s GDP. The EIB aims to be there to see the big, fat Greek recovery.