Athens News Agency: News in English (AM), 98-03-18

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

NEWS IN ENGLISH

Athens, Greece, 18/03/1998 (ANA)

MAIN HEADLINES

• Simitis anticipates rise in investments, drop in interest rates
• Tsohatzopoulos: Turkish proposal on Balkan peace force 'arbitrary'
• Prime Minister concludes Czech visit
• Turkish warplanes violate Greek air space
• Evert calls for Papantoniou's resignation
• Pangalos-Albright meeting on Friday
• Tzoumakas on 'green' drachma parity
• Boeing touts the F-15E at press conference
• Gov't: Imports priot to March 24 subject to pre-devaluation parity
• Drachma devaluation results in higher EU inflows
• Greek stocks hit year's high on ERM, devaluation euphoria
• Impact of drachma devaluation to foreign investors outlined
• Greek hoteliers cautiously back drachma devaluation
• Weather
• Foreign exchange

NEWS IN DETAIL

Prime Minister Costas Simitis said the government's long-held plan to incorporate the drachma into the EU's Exchange Rate Mechanism (ERM) was fully implemented with respect to both the scheduled timeframe and the manner in which it was carried out.

Speaking yesterday to reporters in Prague shortly before returning to Athens, Mr. Simitis said there would be no need to take new measures, but rather it would be necessary to accelerate implementation of the policy already announced. Greece entered the ERM over last weekend with a subsequent devaluation of the drachma by 14 per cent, while drastic economic measures were announced for immediate implementation.

He forecast a drop in interest rates and prices and an increase in investments, and dismissed talk of the political cost arising from the devaluation.

Positive results from the devaluation were already visible, he said, with a strengthening of the drachma above the new parity, a steep rise in stock prices and inflows of foreign exchange.

National Economy Minister Yiannos Papantoniou, addressing Parliament last night, said that low inflation was behind the "adjustment" of the drachma's parity at this time.

He added that the European Union could not accept Greece with high inflation, while he noted that Italy was accepted with an inflation rate of under 3 per cent. He said that by the end of the year inflation will stand at 2.5 per cent.

Tsohatzopoulos: Turkish proposal on Balkan peace force 'arbitrary'

National Defence Minister Akis Tsohatzopoulos has described as "arbitrary" Turkey's proposal that a Balkan peacekeeping force be based in Edirne, near the Thrace border with Greece.

"This is an arbitrary...initiative, compared to our own, in continuation of the conference in Sofia a few months ago, on a joint effort to formulate terms of security, cooperation and stability in the Balkans," he said on the sidelines of the Western Euro pean Union (WEU) conference.

"Turkey's initiative annuls implementation of the programme agreed to in Sofia by all Balkan countries. We are meeting in Tirana in April to plan the further implementation of what we approved in Sofia. For this reason we do not respond to Turkey's initiative and we call on them to come to Tirana for a joint agreement with other Balkan countries," he said.

Prime Minister concludes Czech visit

Prime Minister Costas Simitis yesterday wound up an official visit to the Czech Republic, describing it as constructive and focusing on that nation's prospects for EU membership.

Mr. Simitis had talks yesterday with Czech President Vaclav Havel on bilateral relations and the enlargement of the European Union and NATO. On Monday he had talks with his Czech counterpart Josef Tosovsky and Deputy Premier and Foreign Minister Yaroslav Sendivi.

Mr. Simitis added that small countries would play a constructive role in the EU in coming years, and for this reason Greece had to maintain good relations with them.

He rejected views on the linking of a solution to the political problem of Cyprus to its EU accession course towards the EU, saying that his Czech counterpart had understood Greek positions and accepted them.

Questioned on yesterday's statements by German Foreign Minister Klaus Kinkel, who tried to link the two issues, the prime minister reminded that Germany itself had been divided.

"We have said it to the Germans themselves, that Germany had been a member of the EU while divided. We are in a phase of negotiations and such things do not deter us," he said.

Turkish warplanes violate Greek air space

Twelve Turkish warplanes infringed on Athens Flight Information Region (FIR) regulations yesterday over the Aegean, many of which developed into violations of Greek air space.

According to reports, from 12 noon until early in the afternoon, eight Turkish F-16 and four F-4 "Phantom" jets infringed on Athens FIR air traffic regulations. Ten violations of national air space in the region between the islands of Limnos and Samothr ace were also reported.

In all cases, the Turkish warplanes were intercepted by Hellenic Air Force Mirage 2000 and F-16 fighters, while on four occasions the interception process turned into dogfight.

Evert calls for Papantoniou's resignation

Former main opposition New Democracy party leader Miltiades Evert tabled a question in Parliament yesterday calling on National Economy Minister Yiannos Papantoniou to provide information on the commission received by the Lehmans Bros. and J.R. Morgan firms.

Those companies undertook to mediate for the one-billion-dollar loan concluded by Greece before the drachma was devalued. Mr. Evert claimed that Mr. Papantoniou's daughter is employed at one of the firms.

Replying to Mr. Evert's question, Mr. Papantoniou said that "Mr. Miltiades Evert's desperate effort to exit from his known political deadlock is leading him to maliciousness."

Mr. Papantoniou said that according to a memo by the State General Accounting Office and decisions taken by the relevant Undersecretary Nikos Christodoulakis, the selection of the two banks, Lehman Brothers and J.R. Morgan, who managed the loan, was made by the relevant services of the Bank of Greece following tendering and was ratified by the Debt Committee. He said the awarding terms are in absolute accordance with international practice and are particularly beneficial for Greece.

Referring to his daughter Daphne, Mr. Papantoniou said she has a Cambridge graduate and has been working for a year and a half as an ordinary employee with Lehman Bros., one of the largest US banks.

Pangalos-Albright meeting on Friday

Greek-Turkish relations a well as Cyprus' EU accession talks and the latest developments in Kosovo will be the focus of a meeting between Foreign Minister Theodoros Pangalos and US State Secretary Madeleine Albright on Friday at the State Department, according to spokesman James Rubin.

"Cyprus' accession into the EU is possibly a positive factor in resolving the (Cyprus) problem, and the likelihood of this happening would contribute to creating a favourable climate for the solution of such issues..." said Mr. Rubin, referring to the Cyprus problem.

Tzoumakas on 'green' drachma parity

Agricultural Minister Stephanos Tzoumakas yesterday announced that Greek farmers will receive 120 to 130 billion drachmas as a result of the new "green" parity to the Ecu.

He added that the new parity will be set, at the latest, by next Monday, between 350 to 355 drachmas to one Ecu as opposed to the current 312.5.

Mr. Tzoumakas said that there will also be positive results in the EU supported programmes for the agricultural sector.

Boeing touts the F-15E at press conference

Representatives of the Boeing company, manufacturers of the F-15E fighter, yesterday outlined the third generation warplane's performance during a press conference in Athens.

Two F-15E "Fighting Eagles" are currently being testing by Hellenic Air Force pilots.

The basic price of the plane is US$50 million, although the final price depends on the package.

Time of delivery is between 32 months and three years, maybe less if Greece opts for it.

The advantages of F-15E centre on its radar system, range and payload capability.

The Boeing representatives called their aircraft a multiple-role deterrent aircraft, claiming it has never been downed in a dogfight. Its net payload is 23,000 lbs, and its "Lantirn" system enables it to fly at a very low altitude during the night and under poor weather conditions.

The F-15E features two General Electric engines instead of the Pratt & Whitney F-100-P and W-229.

There are 1,400 F-15Es worldwide in use by the United States, Israel, Japan and Saudi Arabia.

The Seattle-based firm's spokesmen said the company was also actively seeking joint production with Greek companies in various fields.

Gov't: Imports prior to March 24 subject to pre-devaluation parity

The finance ministry yesterday announced that all imports cleared through customs by March 24 will be subject to Value Added Tax (VAT) estimated on the pre-devaluation parity of the drachma to other currencies.

According to a finance ministry circular, all imports clearing customs after March 25 will be subject to VAT estimated at the March 18 drachma parity levels.

The circular noted that all import dues on products from non-European Union countries will be estimated in the same manner.

All special dues are estimated on the parity of the day of clearing.

Drachma devaluation results in higher EU inflows

Greece will receive about 453 billion drachmas more from European Community funds due to the recent devaluation of the drachma, according to assessments by the national economy ministry.

The ministry clarified that the net benefit for the country will be far less, since a part of this amount will be provided to cover increased payments in foreign currency for three major projects, the Elefsina-Stavros- Spata ringroad around Athens, the n ew international airport at Spata and the Rio-Antirrio bridge.

The contracts signed for these projects with foreign companies anticipate that all payments concerning construction will be made in foreign currency.

Moreover, a considerable amount from the exchange difference resulting in EU inflows, due to the devaluation, will be absorbed by the additional cost caused by the decrease in the value of the drachma in the imports of goods and materials necessary for the construction of the projects.

The remaining amount will be provided as additional funding for various projects.

According to figures provided by the ministry, as of now and until Dec. 31, 2001, the country should receive about 10.3 billion Ecu from the Delors package. This amount corresponded to 3.223 trillion drachmas before devaluation. Now, it corresponds to 3 .676 trillion drachmas - a difference of 453 billion drachmas.

Greek stocks hit year's high on ERM, devaluation euphoria

Greek equities yesterday jumped to their highest level this year reflecting the market's euphoria over a 14 percent devaluation of the drachma at the weekend and its entry into the European Union's exchange rate mechanism.

The general index ended 5.31 percent higher at 1,737.37 points, 56.77 points off its record close of 1,794.14 on October 8, 1997.

Trading remained extremely heavy with turnover at 63.4 billion drachmas due to massive new capital inflows.

According to early estimates, Greek mutual funds inflows totalled 40 billion drachmas over the last two days. Most sector indices scored gains. Banks jumped 6.62 percent, Insurance was 0.34 percent up, Investment rose 2.93 percent, Leasing increased 1.3 0 percent, Industrials soared 5.53 percent, Construction dropped 2.94 percent, Miscellaneous eased 1.41 percent and Holding rose 0.58 percent.

The parallel market index for small cap companies ended 0.23 percent up, and the FTSE/ASE blue chip index jumped 6.52 percent to 995.18 points.

Broadly, decliners led advancers by 132 to 99 with another 21 issues unchanged.

National Bank of Greece, Alpha Credit Bank, Ergobank, Hellenic Telecommunications Organisation and Titan Cement scored the biggest percentage gains at the day's 8.0 percent upper volatility limit. Yalco, Nematemboriki, Phaliro Medical and Proodeftiki su ffered the heaviest losses at the day's 8.0 percent limit down.

Hellenic Telecommunications Organisation share price soared to a new record of 7,873 drachmas reflecting increased foreign interest in the company ahead of a new flotation, probably in May.

However, analysts said the market looked vulnerable to a correction in the short-term, a normal reaction ahead of a push to break resistance at 1,800 points.

The forecasts were based on movement by the Italian and Portuguese stock exchanges which shot up 25 percent in the aftermath of their currencies' devaluations a few years ago.

In the domestic money market the drachma was stronger despite a new Bank of Greece intervention to hold back the currency's advance.

The drachma was 0.10 percent higher against the Ecu and up 0.31 percent against the US dollar. It was down 0.26 percent against the DMark.

Bankers reported new capital inflows totalling 100 million Ecus and 160 million DMarks at the drachma's daily fixing.

Impact of drachma devaluation to foreign investors outlined

Development Minister Vasso Papandreou on Monday night outlined to a group of foreign businessmen, bankers and institutional investors the new conditions created in the economy by the drachma's entry into the European Union's exchange rate mechanism.

Speaking at a business luncheon in London, Ms. Papandreou said that the economic situation had never before been so favourable for foreign investments in Greece.

She cited three main factors:

• Economic growth was better structured thanks to financial support from the European Union's economic and social cohesion policy
• Macro-economic improvement was more reliable as it was linked to negotiations for participation in the single European currency
• Greece was actively backing peace, democracy and a market economy in the Balkans

Ms Papandreou also outlined Greece's infrastructure programmes, accounting for 55 percent of approved European funding.

She said that in the next few days the government would call an international tender for the operation of a natural gas network in Athens, Thessaloniki and Larissa. It had also pledged to speed up privatisation.

Greece aims to privatise 11 public enterprises by 2000, along with three to four state banks. It also wants to float up to 20 percent of the Public Petroleum Corporation, she said.

She added that political stability in Greece was also a factor boosting confidence in the economy.

Greek hoteliers cautiously back drachma devaluation

Greek hoteliers yesterday cautiously welcomed a 14 percent drachma devaluation linked to the country's entry into the European Union's exchange rate mechanism at the weekend.

The Panhellenic Federation of Hoteliers, which long opposed the former hard drachma policy, said the benefits of the devaluation would appear in the future. At the same time, wage rises had to be contained to around 2.5 percent and inflation to 3.0-4.0 percent at the year-end for the devaluation to pay off, the federation said in a statement.

Most domestic tourism enterprises had signed contracts in drachmas long before the drachma's devaluation, which meant the devaluation would have little impact on hoteliers' revenue in the summer season, the statement said.

Hoteliers also would incur higher operating costs due to price rises in imported goods, including foodstuffs, beverages and fuel, resulting from the devaluation.

WEATHER

FOREIGN EXCHANGE

(C.E.)

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