Chinese investment offers a boost to the Greek economy

Container volumes at the Port of Piraeus have more than quintupled since China's Cosco began running the show. / Nikkei Asian Review

Nikkei Asian Review — China is pouring money into Greece’s infrastructure sector, viewing the cash-strapped country as a strategic gateway to Europe.

From the Greek government’s perspective, Chinese investment offers hope for keeping the economy afloat. The European Union, though, is increasingly alarmed at Beijing’s growing influence. 

Greece is required to cut government spending and privatize state-run businesses under the terms of its EU and International Monetary Fund bailouts. It has been relying on such help to cope with its debt crisis since 2010. Austerity measures, however, have prolonged the country’s economic slump, keeping it locked in a vicious cycle.

Foreign investment may be the best hope for breaking that cycle. And China has thrown Greece a lifeline as part of its Belt and Road Initiative — Beijing’s plan to build an economic zone stretching all the way to Europe and Africa by land and sea.

Cosco has been at the vanguard of the march to Europe since it acquired operating rights for the Port of Piraeus container terminal in 2008. The company hired more than 1,000 new workers and invested 600 million euros  to introduce state-of-the-art cranes and construct a new quay, among other projects.

The big push is paying off. When the terminal was still state-run, the Port of Piraeus did not even crack the global top 100 in terms of container volume. Today, it ranks among the world’s 50 biggest container ports.

At one point, European companies showed interest in taking over the facility. But by the final round of bidding, Cosco was the only player still in the game.

According to Greek media reports, the port authority’s management team will soon announce new investment plans. The pillars are expected to be a new cruise ship terminal — aimed primarily at wealthy Chinese tourists — and a vessel repair center. One Cosco source said investment over the next five years will “exceed 600 million euros.”

Greece’s expectations for Chinese investment grow ever higher, and Beijing is only too happy to oblige.

In December, State Grid Corp. of China, a power transmission company, agreed to acquire a 24% stake in a subsidiary of Greek state utility Public Power Corp.

Greek Prime Minister Alexis Tsipras is likely to attend a Belt and Road summit in the Chinese capital in May. There is speculation that he might hand Chinese President Xi Jinping a wish list of priority projects.

Even Greeks who oppose the privatization of state-run businesses are starting to wave the white flag, recognizing that China has overwhelming financial resources.

“We must adapt to reality,” said Giannis Lagoudakis, the mayor of Perama, the Piraeus suburb that is home to the port. He had previously called for keeping the port in the government’s hands. Now, he is lobbying the port authority’s new management to award expansion contracts to local companies.

However some EU officials warn that China, through its massive state corporations, could gain excessive influence in central and Eastern Europe. 

Such concerns clash with calls in Greece for closer ties with China, including efforts to increase the number of Chinese tourists to the country from the current 50,000 a year.

Greece once stood at the brink of leaving the eurozone, after clashing with the EU over its financial crisis. Differences of opinion over China could be seen as another example of the union’s fraying bonds in the wake of Britain’s vote to withdraw.