ECONOMY

State-controlled defense firms are victims of neglect

The state-owned defense industries are facing severe financial problems, similar to those of other state-controlled firms. Early in its term, which began in March 2004, the current center-right government had said it was going to effect significant changes in the defense industries, mainly through privatizations. An interministerial committee composed of Economy and Finance Minister Giorgos Alogoskoufis, Development Minister Dimitris Sioufas and then-Defense Minister Spilios Spiliotopoulos had convened on the subject. The reformist intentions were made public but were forgotten along the way. As a result, the government continued to manage the situation so as to avoid problems spiraling out of control. A look at the introductory report of the 2007 budget, which includes the main financial data of the two state-controlled defense companies – Hellenic Aerospace (EAB) and Hellenic Defense Systems, the company that resulted from the merger of Hellenic Armaments Industry (EVO) and munitions firm PYRKAL – makes it clear that the two companies lack the necessary means to grow and develop. In the case of Hellenic Defense Systems, the two component firms have not actually been integrated. Talking to the managers from the two state defense firms, one gets the impression that they are extremely disappointed and demoralized. Their most common complaint: the difficulty of securing funds to pay suppliers and even their employees’ wages. Their only client is the state, which in recent years has drastically limited its procurement program for a variety of reasons. As a result, their turnover has shrunk. To this, one must add that successive governments have used these companies to hire people, not because they were needed, but in order to buy votes. On December 23, 2004, Spiliotopoulos had told Parliament that «concerning the domestic defense industry, both state- and privately owned, we paid -178 million for procurements in 2004 and we plan to spend -220 million in 2005 and a total of -1.6 billion in the period 2006-2010.» He went on to mention specific programs that the domestic firms would implement in cooperation with big foreign companies such as the US’s Lockheed Martin and engine-building giant Pratt & Whitney. The two latter partnerships, according to Spiliotopoulos, would help create an additional 500 jobs. None of this has taken place. A tender to build a new 5.56mm rifle drew only one bid, which was judged too expensive by international standards. The rifle was supposed to be built at a Hellenic Defense Systems factory. A plan to build a telecommunications network through EAB has been delayed and the company has undertaken no new activities in the past two years. The state has delayed armaments procurement programs worth -2.5 billion and vehicle procurement programs worth -2.8 billion, part of which could be undertaken by the Hellenic Vehicle Industry (ELVO), a privatized company now controlled by the Mytilineos Group.