Economic growth set to last

Economic and other reforms must be accelerated, believes Bank of Piraeus Chairman and CEO Michalis Sallas. In an interview with Kathimerini, he lays down the basic requirements for further growth: an efficient state administration and education system and, more importantly, the capacity to facilitate coming changes. Sallas remains determinedly optimistic about Greece’s prospects, and, more specifically, the prospects of the Greek banking sector. He says that his own bank, Piraeus, has highly qualified personnel, modern infrastructure and management practices, and that it fulfils its growth potential on a daily basis. Sallas does not agree with the oft-repeated speculation about the desirability of further bank mergers, which he deems pointless. «Greece has a highly concentrated banking sector… An interest in joining forces would be legitimate if it served to expand presence in wider markets,» he says. He also disagrees with the criticism leveled at banks for allegedly exorbitant profits. «Is it in the interest of the Greek consumer for the banks not to have profitable activities?» he asks, adding that a significant and increasing part of the profits comes from activities abroad. Sallas also uses his background in academics and politics – he taught econometrics and economic forecasting at Panteion University from 1983 to 1997 and was a founding member of the Panhellenic Socialist Movement in 1974 – to make observations about the international economy and future policy requirements in Greece. On the former, he is optimistic, at least over the next couple of years. On the latter, he says Greece must focus on culture and knowledge. Education must be strengthened, he says, to add a qualitative dimension to economic indicators. He is worried that first-year students at the state universities are welcomed by party hacks and not by their teachers and insists that many of the issues affecting our everyday lives, such as corruption, are a matter of education. Do you agree with the overall optimism about the economy? The world economy is growing fast. The eurozone, where growth remains below 2 percent, is an exception. The Greek economy, which is growing at an annual rate of over 3.5 percent, is doing well, as are the Balkan countries, where growth is around 5 percent. Like Greece, these countries are growing fast, while, at the same time, going through fiscal adjustment. It has been proven that the prevalent worry of two or three years ago, that an economic slowdown would follow the Athens Olympics, was unfounded. The economy continued to grow at a fast clip and I think it will continue to do so over the next years. We believe in the economy’s positive course and that is why we invest in it. The Greek economy’s growth is due, to a large degree, to the EU’s Community Support Framework (CSF) programs. As you know, we must absorb some 10 billion euros (from CSFIII) by the end of 2008. If we are effective in doing that, the growth rate will get a boost. At the same time, keeping interest rates low facilitates investment and the growth of private consumption, which is also a significant factor of GDP growth. The positive global environment, capital inflows and the improvement of demand in neighboring countries will also help keep Greek growth high over the next two years. There is, though, a criticism claiming this growth is skin-deep and that only banks post big profits. It’s not only banks that are profitable. All indicators are improving. Even the traditionally stagnant competitiveness index is increasing. We are not leaping ahead; there is, however, a small improvement which, we hope, will accelerate. Within this context, it is normal for banks to invest domestically and abroad. We hope that growth in Balkan countries will continue in the future. Banks are investing heavily and will continue to do so. This way we create jobs and are able to provide decent salaries. In Greece, there has existed, and still does, a prejudice against corporate profits. What good would it do to Greeks to have their banks sustaining losses? A significant part of bank profits come from their foreign subsidiaries. This was just 5 percent a few years ago, now it is closer to 15-20 percent and still growing. I must also remark that service charges and commissions are far lower than at the time that the system was state-regulated. There are rumors about a new wave of bank mergers… Greece is one of the countries with great concentration in the banking sector. Mergers and acquisitions will take place if we get economies of scale, save on resources and, therefore, have significant profits for shareholders. Interest for a concentration of forces would mostly exist in order to create greater presence in wider markets. What do you think the country is moving toward? In the recent past, we had an emphasis on improving infrastructure and big projects. Policy emphasis must now shift to culture and knowledge. We must overcome our anxiety over economic indicators, and the sooner the better. We must focus on indicators of quality involving education and culture. The two biggest priorities must be to improve the state administration and the education system. The state administration must have a higher quality, in order to fulfill its mission. Education must promote knowledge to society as a whole. The issue is not only about managerial efficiency but about values. Unfortunately, even today, first-year university students are welcomed to the universities by party organizations, rather than their professors. Many important issues, even those of corruption, that currently occupy Greek society are issues of education and culture. I believe the country’s place in a globalized environment will depend, to a large extent, on the changes in these fields.