By Dina Kyriakidou

Greece needs to cut bureaucracy and push through languishing investment projects, not sell its islands to attract funds crucial for its struggling economy to return to growth, a Deputy Development Minister told Reuters on Wednesday.

Seven major investment projects, ranging from tourism to energy and worth half a billion euros in total, have been stuck for months awaiting parliamentary approval instead of drawing cash into an economy stuck in its fifth year of recession.

"I don't understand it. The fact that we have seven investments that are just waiting to happen is reason not to sleep at night for me,» said Notis Mitarakis in an interview.

"We plan to ratify them within the year,» he added, pointing at the neo-classical parliament building through the windows of his office on the central Syntagma square.

Appointed to the coalition government formed in June by conservative Prime Minister Antonis Samaras, Mitarakis, 39, said he is now jump-starting these projects, including a major British tourism investment on the island of Crete and a motor-racing track near the western port city of Patras.

They are expected to create 3,000 jobs, a much-needed boost with unemployment at a record high and almost one in four Greeks out of work.

Investors have long complained that red tape and corruption are the main deterrents to doing business in Greece, which fell 7 places to 90th out of 142 countries in the latest World Economic Forum global competitiveness index.

Foreign direct investment was $1.8 billion in 2011, a small fraction of the $420 billion that flowed into the European Union as a whole, according to figures from the Organization for Economic Cooperation and Development.

Mitarakis said he had also inherited a queue of 1,650 smaller projects worth 275 million euros, which he aims to speed through by cutting bureaucracy for approvals, with fewer spot-checks and electronic auditing.

"We are now about to turn around one application every five hours instead of one every two weeks,» said Mitarakis, a former director at Fidelity International in London, who was recruited by Samaras in 2010 as a top party economist.

Asked why this had not been done during the two years that Greece has survived on aid from its EU partners, after igniting a debt crisis that could bring down the euro, he said: «I have no clue ... I don't think Greek governments in the last 30, 40, 50 years had a pro-business approach."

Mitarakis denied press reports that Athens was putting some of its sun-baked islands under the hammer to raise funds, saying outright sale was not on the table but long leases or other ways of commercially exploiting all state properties were possible.

"Greece can become a destination for summer houses. We don't want to create a bubble like other countries but we are completely underdeveloped,» he said, referring to the property busts blamed for crippling the economies of Spain and Ireland.

Talk of Greece leaving the euro is making investors hesitant to put up cash, despite assurances from the government of its commitment to the single European currency.

"Everyone asks, I'm investing in euros today, will I be getting euros in a few years? That is a very fair question and my answer is 'yes',» Mitarakis said.

Improving Greece's competitiveness ranking is a main ministry objective but that will depend largely on whether the country's economy can recover from a recession that is expected to see it shrink by a quarter by 2014.

"We have one of the worst macro outlooks on the planet,» Mitarakis said.

Structural reforms are also needed and Greece's lenders complain progress on that front has been slow. Mitarachi said he was drafting a bill now that would create a «one-stop shop» for investors through state organization Invest In Greece.

Previous efforts on the same lines stumbled because licensing remained complicated, requiring several permits from several state bodies, he said. Now, the whole process will be handled by a single department of his ministry.

"There was a single front office and now there is a single back office,» he said. «There is no need to have any contact with state bureaucracy."

Another draft bill will help clear state assets, especially real estate, for sale through the privatization agency or other commercial exploitation through special purpose vehicles, clearing legal hurdles and preparing licenses.

If Greece is able in time to exit its bailout program and return to international debt markets, Athens could attract investors to a wide spectrum of projects, ranging from tourism to natural resources and motorways.

"Greece is substantially oversold,» Mitarakis said. «Markets can swing from one extreme to the other very quickly. Suddenly, we might be very, very busy.» [Reuters]