How Germany hopes to convert the Greeks

It was close to 11pm on October 6 when Philipp Rösler, German Economy Minister escaped from his Vouliagmeni hotel to take a few steps on the nearby beach. The night was balmy, quiet. A slight breeze wafted the scent of pine and the sound of lounge music from a cocktail bar. The spreading sea evoked Homeric epics; the plots hatched by the gods on Mount Olympus; the heroes of Sophocles; and the allegories of Plato.

It was hard to believe that Greece was on the brink of disaster, that without a green light from the Troika (IMF, ECB and EU Commission), Athens could default as of next month; or that Europe has been divided for the past eighteen months over how to contain a crisis that threatens to destroy the euro. Yet that was the case. On the eve of Philipp Rösler's arrival, another general strike against the drastic austerity measures adopted by the Papandreou government paralysed the country.

Energise the Greek economy

While the German minister, surrounded by bodyguards, allowed himself a few minutes' walk, Greeks disguised as Hitler were demonstrating in front of the German Embassy in Athens. After four years of recession, next year, unemployment is forecast at 20%, according to economists.

If Philipp Rösler came to Athens, it was not to commune with eternity but to offer Germany's help, as Greece's primary trading partner. Trade flows total €8 billion per year. To get out of the quagmire - it has long been clear in Berlin - Athens must do more than purge its public finances. It must also be helped to regain a competitive edge. In short, it must change its economic model. Preferably to adopt one that is more...Germanic.

Philipp Rösler led a delegation of some 70 bankers and business leaders who were expected to bring ideas, advice and capital. The visit should be seen as complementary to the work of the EU Commission task force, chaired by another German, Horst Reichenbach, established in July to energise the Greek economy.

Solar power

The visit was taken seriously and Philipp Rösler met with the PM, himself on Friday. He also met with his counterpart, the Greek Economy Minister as well as the Energy Minister. It's in this field that the German government sees the greatest opportunities, particularly regarding photovoltaic energy.

With an average of over 300 days of sunshine per year, Greece has enormous potential which it has, until now, under-exploited. It currently has a capacity for 350MW compared with some 20GW produced in Germany. "The country has an interesting guaranteed price system, better even than in Germany, but the problem is that investors don't know how it might change," explains Dirk Janssen, an expert lawyer from Watson, Farley & Williams.

Athens has now fixed a goal of installing up to 10GW on its soil. Called the Helios project, it aims to export this green electricity – perhaps to Germany. Berlin decided, in June, to shut down its nuclear plants in the next ten years and needs to readjust its energy mix to compensate. Chancellor Angela Merkel, herself, last week said that it made sense to produce solar energy where the most optimal conditions prevail.

Tourism, health or computers

Yet selling Greek solar energy to German consumers is a technological and legal challenge. But players in Germany's photovoltaic industry say they are prepared to finance up to 5% of the €20 billion need for Helios. "On the condition that the EU also invests," warns Frank Asbeck, head of Solarworld, a success story of the German solar industry.

Financing is the major problem. Ralf Ketteler is project manager for the Bremen-based wind farm firm WPD which is active in 14 countries. He confirms that "right now it is very difficult, but we work a lot and there are possibilities, especially through the [government-owned development bank] KfW". In its aid projects for Greece, Berlin attributes an important role to the bank, through partnerships with Greek companies. KfW is also proposing to help the Greek authorities create their own public development bank aimed at helping small- and medium-sized firms.

This Greek bank could finance projects, not only in renewable energy, but also in tourism, health or computers. "There are a lot of well-trained young computer specialists in Greece," says Volker Treier a chamber of commerce expert. German firms would gain from hiring them because the cost of labour is lower than in Germany. There is also much talk of medically-assisted housing for the elderly – Germany's population is ageing rapidly.

A reliable land survey

But for all this to function, it will take fundamental reforms, stressed Philipp Rösler. During the Berlin briefings that preceded the trip, the minister's entourage mentioned the need for a "mentality change ". Philipp Rösler didn't hesitate to remind the Greeks he spoke to that several major German firms including Bayer, Deutsche Telekom, Siemens and Fresenius, have been seeking, some of them for years, to collect Greek debts. There will be no massive investment in Greece without a better regulatory framework and a better administration.

German authorities are ready to send civil servants to Greece to help with the reforms. Germany wants to help with Greek privatisations using the experience forged of German unification, in which the Treuhand, a federal agency, was charged with organising the sale of East-German publically-held assets. Another area that clearly needs rapid attention is the establishment of a reliable land survey. "Currently we don't know who owns this or that plot," deplores Volker Treier. Finally, Philipp Rösler suggested to Athens that it imitate Poland, which after the fall of the Iron Curtain, benefited from the creation of Special Economic Zones, which lured foreign investment with preferential tax incentives.

Translated from the French by Pat Brett