Repatriation is not enough; investment facilitation crucial
The government’s decision to allow the repatriation of capital deposited abroad, (almost) no questions asked, will be beneficial to the economy, provided that it is followed up by an effort specifically designed to encourage investment. Indeed, the decision to allow repatriation was made by the government with the sole objective of allowing capital back in quickly at a time when inflows of foreign capital have almost dried up and the domestic market is showing the first signs of a lack of liquidity. Thus, the measure itself could have a crucial impact, considering that government officials estimate the sums deposited by local residents abroad at about 20 billion euros. Even if just 40 or 50 percent of this amount is repatriated, it will provide a big boost to the economy. This move by the Karamanlis government is timely, given that the new EU members, some of whom – such as the Czech Republic, Slovakia and Hungary – are Greece’s likeliest economic competitors, are dramatically cutting their tax rates in order to attract foreign capital. The growing competition among EU countries for capital is what led French Prime Minister Jean-Pierre Raffarin to announce his own repatriation scheme almost at the same time as Karamanlis. It is not the first time that the repatriation issue has come up. Eighteen month ago, Piraeus Bank chairman Michalis Sallas made a proposal on behalf of the Hellenic Banks’ Association. Then-PM Costas Simitis had been convinced about the advantages of the measure but could not convince the hardliners within his Socialist party and was unable to carry out the measure. Sallas’s plan was submitted again, in an updated form, to the Ministry of Economy and Finance two months ago. What is needed now is a plan to channel the funds that will be repatriated to productive investments that will boost the production of goods and services, help import new technologies and create jobs.