Athens News Agency: News in English (AM), 98-03-20

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From: The Athens News Agency at <http://www.ana.gr>

NEWS IN ENGLISH

Athens, Greece, 20/03/1998 (ANA)

MAIN HEADLINES

• Gov't unveils new plan to save embattled Olympic Airways
• Premier calls for intensification of DEKO restructuring
• Greek economy to absorb drachma devaluation jolt
• Greek rates expected to drop in coming months
• Cyprus defence minister on official Athens visit
• Pangalos holds talks in Washington today
• Pangalos response to Cem plan conveyed
• Report on Greece's hashish users
• DEH loan worth $500 million
• Greek money markets still high on ERM entry, rates drop
• Gov't welcomes market reaction to ERM entry
• HEPO conference on Greek-Algerian trade relations
• Weather
• Foreign exchange

NEWS IN DETAIL

The government yesterday launched a new five-year plan to save loss-making Olympic Airways (OA) from closure.

Transport Minister Tassos Mantelis told a news conference that a restructuring programme for 1998-2002 aims to save 50 billion drachmas a year from the national carrier's operating costs.

Due to European Union directives, the state could no longer subsidise the ailing state-run airline and no other funds were available, Mr. Mantelis stressed.

"If we extend the airline's operation for five years, a 50-billion-drachma deficit will emerge without taking into account necessary investments, which would take the deficit to 150 billion," he said.

He blasted the former OA boards of directors for what he called overspending, especially on labour. OA's board will present its final decisions on cost- cutting to employees' representatives tomorrow.

An evaluation of the national airline's first revitalisation plan showed a failure to meet targets, with labour costs in 1997 alone jumping to 25 billion drachmas, Mr. Mantelis said.

The figure represented 48 per cent of the airline's total spending against 25-29 per cent in other such companies, or around 51 per cent in 1995-1997, he said.

"The government has decided that there is a final chance for OA to be saved. Therefore, we all have to make the right decisions for structural changes and good industrial relations."

Elaborating on what must follow, Mr. Mantelis said the attitude of employees towards the citizen/client must change, routes must be restructured on the basis of customers' demands, flight timetables must be strictly adhered to, while commercial policy must change and a strategic investor- ally must be found soon.

In addition, Olympic must exploit subsidiaries, he noted.

Moreover, alliances must be found for catering-fuel, handling and repairs units.

Additionally, OA employees will be called to discussions to find ways of saving the 50 billion a year from the restructuring programme.

If all this is done and after the value of the company is assessed, the government intends to give a 6 per cent share to employees during an initial phase and on Dec. 31, 2000, while an additional 4 per cent will be given if the plan goes smoothly.

Mr. Mantelis clarified that these measures are being taken exclusively for Olympic Airways, which is considered an exceptional case, and has nothing to do with other public utilities.

Replying to press questions, Mr. Mantelis explained that the government does not intend to dismiss any employee. Moreover, the state will immediately pay nine billion drachmas it owes to the national carrier, while it will also call on other parties to pay their debts. It estimated the deficit to amount to 6-6.5 billion drachmas in 1997.

He also replied that at this phase there is no strategic investor interested in the company. He again recognised the government's responsibilities for Olympic's deficits, adding that entry to the Athens Stock Exchange is not anticipated at this period.

According to initial reactions by employees, the company's future is considered ominous following the announcements made by the minister.

Premier calls for intensification of DEKO restructuring

Prime Minister Costas Simitis yesterday called for an intensification of government's efforts for restructuring public utilities and enterprises in order to both slash their deficits and to provide upgraded services at a more competitive cost.

Addressing inner Cabinet members yesterday, Mr. Simitis stressed that new taxation measures will not be taken to find additional revenues, saying that what must continue is the strict and accurate carrying out of the budget.

According to reports, he said both the downward trend in the deficit and the inflation rate must continue, adding that participation in Economic and Monetary Union (EMU) will depend on these two main indicators - which will also pull interest rates down and have a positive effect on investments.

Referring to the issue of the drachma joining the EU's Exchange Rate Mechanism, Mr. Simitis commented on its positive repercussions in local and international markets. He also replied to criticism against the government.

Mr. Simitis said that the allegation that the income of working people will decrease by 14 per cent, a claim repeated by opposition parties, is not tenable. He added that it is untrue, inaccurate and groundless.

He said that in the short term the impact on income will be such as the impact on inflation, which will be small to minimal and will be absorbed during the year.

In the long term, he added, the improving robustness of the Greek economy will lead to better economic conditions to the benefit of all working people.

The conclusion drawn by the premier is that considerable additional incomes will be achieved with positive repercussions in the investments and development sectors and, consequently, employment with the creation of new jobs.

On the question of the government's overall policy, Mr. Simitis said it was determined to move ahead so as to win the big bet of the country's participation in EMU and in the "tough" nucleus of the European Union's decision-making.

Greek economy to absorb drachma devaluation jolt

The Greek economy will quickly absorb the shock of the drachma's devaluation last weekend, National Economy and Finance Minister Yiannos Papantoniou said yesterday.

Addressing a general assembly of the Union of Greek Banks, Mr. Papantoniou predicted that benefits from the devaluation would begin to emerge rapidly after the summer.

He also expressed his satisfaction at the market's calm reaction to the devaluation, which was linked to the drachma's simultaneous entry into the European Union's exchange rate mechanism.

Mr. Papantoniou said the Greek currency's entry into the ERM, a result of successful government economy policy, had brought the country more than one step closer to EMU.

"We are on the threshold of EMU, the Europeans consider us already as part of the European family," Mr. Papantoniou said.

He urged Greek banks to stand on their own feet and said that the lesson offered by the recent Asian crisis was that a country needed a healthy banking system along with macro-economic stability to prosper.

Mr. Papantoniou said the government will stick to its inflation target of 2.5 per cent by the end of the year, and the Greek economy's main challenge in the next three years was competitiveness.

"I am beginning to worry not about the country's participation in EMU but the economy's condition when we enter. We have to be competitive to exploit the benefits of economic and monetary union," he said.

Mr. Papantoniou urged banks to lower the spread between lending and deposit rates and restructure their portfolios.

Greek rates expected to drop in coming months

Greek interest rates will gradually fall in the next few months following the stabilisation of domestic money markets, the chairman of the Union of Greek Banks, Theodoros Karatzas, told the same assembly.

Mr. Karatzas defended the credit policy implemented by banks, saying that the spread between loan and deposit rates was only seemingly high.

He was responding to criticism by Mr. Papantoniou.

He also rejected criticism that banks' profits were too high.

"Greek banks have often shown lower returns compared with European ones because of lower lending rates in terms of assets, huge portfolios in state securities and higher operating expenses," he said.

Mr. Karatzas said banks were seeking greater transparency in their relations with customers, and they would cooperate with government authorities to improve services.

Referring to the drachma's participation in European economic and monetary union and its final replacement by the euro, Mr. Karatzas said that there would be both positive and negative effects in the country's banking sector.

He urged banks to speed up modernisation and preparations for implementation of a single European currency.

Cyprus defence minister on official Athens visit

Cyprus Defence Minister Yiannakis Omirou began an official two-day visit to Athens yesterday.

In the morning, he visited installations of the Military Academy and later attended the inauguration of the exhibition "Alexandros 2000" along with his Greek counterpart Akis Tsohatzopoulos.

This morning, Mr. Omirou will meet Foreign Undersecretary Yiannos Kranidiotis and then hold talks with Mr. Tsohatzopoulos.

In statements at Larnaca airport before his departure, Mr. Omirou reminded the US and Europe that they should not show selective sensitivity about peace and stability in the region and ignore the continuing occupation of part of Cyprus by Turkey.

In a thinly veiled criticism of those who attempt to persuade the government to abort a planned deployment of Russian anti-aircraft missiles, Mr. Omirou said: "instead of addressing themselves to the Turkish side whose expansionist designs destabilise the region, we are advised to cancel and postpone our arms acquisition programmes, including the defensive missiles system S-300."

Pangalos holds talks in Washington today

Foreign Minister Theodoros Pangalos begins a 10-day US visit today starting talks in Washington with his US counterpart Madeleine Albright late in the afternoon at the State Department on Greek-Turkish relations and the Cyprus problem as well as the crisis in Kosovo.

Later in the day, the Greek foreign minister will meet with US President Bill Clinton's national security adviser Sandy Berger.

Mr. Pangalos will remain here until March 25 and will have meetings with several other US officials.

On Monday, Mr. Pangalos will lunch at the Greek embassy with officials from the US National Security Council, the US State Department and the Pentagon, while later he will attend a dinner hosted by US Senator Ted Stevens (R- Alaska).

Mr. Pangalos will also visit Chicago and will conclude his US visit in New York, where he will observe the annual Greek Independence Day parade along 5th Avenue.

Pangalos response to Cem plan conveyed

Greek foreign ministry official Ilias Klis yesterday summoned Ankara's ambassador to Athens Ali Tuygan and handed him Foreign Minister Theodoros Pangalos' reply to a recent proposal by Turkish Foreign Minister Ismail Cem.

Mr. Pangalos' letter answered a renewed five-point proposal from his Turkish counterpart Ismail Cem, which was subsequently rejected last week by Greece.

According to press reports, the letter states that Turkey did not adhere to a constructive stance in bilateral relations and the Greek proposal that Turkey seek recourse to the International Court at The Hague on whatever differences it may have.

However, Mr. Pangalos, reiterated his invitation to Mr. Cem to attend a Western European Union (WEU) ministerial meeting to be held in Rhodes this May, which could be an opportunity for the two to meet.

Last week Mr. Cem had invited Mr. Pangalos to Ankara.

Balkans and the former Soviet Union, but also with countries of a large market size, such as China, Brazil, Indonesia and Japan.

Report on Greece's hashish users

Public Order Minister George Romeos told a parliamentary committee yesterday that the number of hashish users in Greece was 100,000. He added that the police had a "complete picture" of where hashish was being cultivated in the country and was "in tervening", while hastening to add that production was on a very small scale. Speaking before the standing all- party parliamentary committee on narcotics, Romeos acknowledged that the influx of narcotics to the country had increased in recent years , particularly of hashish. "If we wanted to, we could round up all the users in one night, but this will not solve the problem because it's difficult to separate the users and the dealers," Romeos said.

He proposed that any assets or money seized in drug cases should be given to the police to be used to help them combat the problem.

On the increased number of police patrols, particularly at night, announced earlier this week, Mr. Romeos said the measure had already borne fruit.

Wednesday night, he said, the police conducted 400 patrols in the capital, during which 2,000 people were taken to local stations for questioning and 40 arrests were made.

As of Monday, Romeos added, the patrols will be further stepped up as 1,000 newly graduated officers join the police ranks.

DEH loan worth $500 million

The Public Power Corp. (DEH) is to sign a loan with favourable terms in deutchemarks, equivalent to US$500 million, with a consortium of 12 banks, led by Sumitomo.

According to a statement yesterday, the loan will be used towards refinancing a 1991, 125-billion drachma loan in Japanese yen, expiring in May 1998.

The interest rate will be appreciably lower than the 8.1 per cent rate of the yen loan.

Greek money markets still high on ERM entry, rates drop

Greece's money markets remained euphoric for the fourth consecutive session after the drachma's weekend entry into the ERM and its devaluation by 14 percent.

Bankers reported new capital inflows at the drachma's daily fixing totalling 110 million Ecus and 450 million DMarks.

Interbank rates fell by one percentage point. The Greek currency was 0.06 percent higher against the Ecu. It strengthened 0.16 percent against the DMark, but was 0.64 percent off against the US dollar.

Gov't welcomes market reaction to ERM entry

Greek government spokesman Dimitris Reppas expressed his satisfaction at the country's economic progress as reflected in market reactions.

Mr. Reppas said that domestic and foreign markets were showing confidence in the economy and that the government's policies were bearing fruit.

HEPO conference on Greek-Algerian trade relations

The Hellenic Foreign Trade Board (HEPO) will organise a one-day conference on Greek-Algerian economic and trade relations, scheduled for April 1 in Athens.

Algerian Minister of International Relations Lahcene Moussaoui, as well as other high-ranking Algerian state and private sector executives will address the event.

Issues of bilateral interest expected to be discussed include construction, pharmaceuticals, energy, plastics, foodstuffs and marble.

WEATHER

FOREIGN EXCHANGE

(C.E.)

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