New investment incentives law offers subsidy up to 60 percent

A new investment incentives law will apply from January 1, 2007, offering considerable subsidies of from 40 to 60 percent for each investment for enterprises based in Eastern Macedonia, Thrace, Epirus and the Peloponnese. The law, which will apply from 2007 to 2013, introduces a new form of subsidy for newly founded small businesses. It provides for grants of 1 or 2 million euros for operational expenses connected with the setup of those companies. This subsidy will apply for the companies’ first five years, while that amount is to increase by 5 percent for enterprises established on small islands. The aim of this draft law, combined with interventions in the labor market, is to become an effective instrument for the creation of jobs and cutting unemployment. The bill, to be tabled in Parliament soon, has required long and arduous negotiation between the General Secretariat for Investment and Development of the Economy and Finance Ministry and the European Commission. They have come up with a chart of subsidies for allocation for the period that coincides with the EU-subsidized Fourth Community Support Framework investment program. This chart, called «Guidelines for Regional Subsidies» (GRS), reflects to a great extent the adoption of Greece’s positions. This is very important as it will allow for the maintenance of these high subsidy rates for private investment in the 2007-2013 period, while many Greek prefectures have exceeded the limit of 75 percent of EU average gross domestic product, joining the category of wealthy regions. The chart determines the subsidy each region receives, and this is where the Greek side fought its battle. The main points of the draft law are the following: – Investments in all regions remain eligible for subsidy, with a maximum rate of 30 or 40 percent for large enterprise investments and an additional 10 percent for medium-sized and 20 percent for small enterprises. – Investments in the manufacture and trade of agricultural products now enter the region subsidies, no longer requiring the time-consuming process of creating separate status. – The regional subsidy chart determines the areas meriting subsidies and the maximum rate of subsidy per region. The existing regional subsidy chart (for the 2000-2006 period) had been drawn up in such a way that in many cases it did not provide for the maximum allowed subsidy according to the GRS in place. The new chart will even include increases in subsidy rates. The investment incentives law that is valid at present, voted into law in 2004, seems to be bringing good results so far. The investment plans submitted for subsidy are increasing at a rapid rate, creating optimism in the government. According to data until mid-June 2006, more than 2000 investment plans had been submitted, at a total budget of 3.8 billion euros. More than half of them (1,180 plans) have been approved for subsidization, running a total of 1.8 billion euros. The Economy Ministry expects that by the end of 2007 the plans approved will exceed 2.5 billion euros in the budget. Investment increase Bank of Greece data for the January-April 2006 period is also very encouraging: It shows a 141 percent rise in the net influx of foreign direct investments. The total amount of 374 million euros stems from subtracting the 227 million euros of investment outflows from the 601 million euros of influx. Further optimism comes from the estimates of the National Statistics Service (NSS) for 2006. Its data shows that in the first quarter of the year investment grew by 6.9 percent. This is expected to be maintained and possibly rise in the following quarters. Investment and domestic demand are the two main pillars of growth, which for the time being remains strong in the post-Olympic period.