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Germany recently implemented the EU Utilities Directive and its related Remedies Directive. With the recent conclusion of a US-EU memorandum of understanding on utilities procurement of heavy electrical equipment, U.S. firms now can claim rights equivalent to European firms under the Utilities Directive in this sector. Under the terms of the U.S.-German FCN, Germany is also to provide U.S. firms with nondiscriminatory treatment in the telecommunications sector.

Investment Barriers: The German investment climate is generally very open, but some of the concerns mentioned above, such as access to services markets and standards and procurement questions, may also be seen as obstructing an increase in investments.

Customs Procedures: Customs procedures at German ports-of-entry are relatively streamlined and efficient.

6. Export Subsidy Policy

Germany does not directly subsidize exports outside the EU framework of export subsidies for agricultural goods. Government or quasi-government entities do provide export financing, but Germany subscribes to the OECD guidelines that restrict the terms and conditions of export finance. An earlier policy that provided exchange rate guarantees to the German Airbus partner has been terminated, largely as a result of U.S. pressure and a GATT finding against this program.

7. Protection of U.S. Intellectual Property

Germany is a member of the World Intellectual Property Organization and party to the Bern Convention for the Protection of Literary and Artistic Works, the Paris Convention for the Protection of Industrial Property, the Universal Copyright Convention, the Geneva Phonograms Convention, the Patent Cooperation Treaty, the Brussels Satellite Convention, and the Treaty of Rome on neighboring rights.

Intellectual property is generally well protected in Germany. The German Patent Bureau, Verwertungsgesellschaft (which handles printed material), and GEMA (the German rough-equivalent to the American Society of Composers, Authors and Publishers) are the agencies responsible for intellectual property protection. U.S. citizens and firms are entitled to national treatment in Germany.

Legislation to transpose the EC software copyright directive into national law was passed in June 1993. This new law met U.S. concerns about IPR protection for computer software by lowering the standards of originality which had undermined the level of protection for many business application programs. But American software firms are still concerned with the perceived level of software piracy by businesses in Germany. These concerns will be addressed when Germany implements provisions required by the TRIPs portion of the Uruguay Round, most likely before the end of 1995

8. Workers' Rights

a. Right of Association.-The constitution guarantees full freedom of association (Article 9). The workers' rights to strike and the lock-out are also legally protected activities. These rights have been developed further by jurisdiction.

b. Right to Organize and Bargain Collectively.-The German industrial relations system consists of a series of statutory mechanisms for sharing power over certain activities within firms, coupled and overlapping with an autonomous private collective bargaining system developed between the unions and employers organizations. The system of codetermination and worker participation (Mitbestimmung) is regulated at different levels by various laws enacted between 1951 and 1989. They cover two basic spheres: day-to-day social, personnel, and economic matters, which are handled by elected works councils; and basic business decisions at the enterprise level, made by supervisory or management boards, which include members elected by the workers. Wages, salaries and working conditions are determined either by collective bargaining agreements or individual contracts. Collective bargaining agreements are legally binding and can be enforced through the courts. Under certain circumstances, a collective bargaining agreement can be declared "generally binding" by the Government which means that all employers in the industry covered by the agreement must abide by its provisions, regardless of whether or not they are members of the association that signed the agreement.

c. Prohibition of Forced or Compulsory Labor.-The German constitution guarantees every German the right to choose his own occupation and prohibits forced labor although some prisoners are required to work.

d. Minimum Age for Employment of Children.-German legislation in general bars child labor under age 15. There are limited exemptions for children employed in family farms, delivering newspapers or magazines, or involved in theater or sporting events.

e. Acceptable Conditions of Work.-German labor and social legislation is comprehensive and, in general, imposes strict occupational safety and health standards. The legislation and regulations may be supplemented by collective agreements which cover entire industries or regions. The resulting standards are widely considered to be among the very highest in the European Union, and thus the World. European Union legislation is becoming more and more important in this area. There is also a mandatory occupational accident and health insurance system for all employed persons.

f. Rights in Sectors with U.S. Investment. The enforcement of German labor and social legislation is strict, and applies to all firms and activities, including those in which U.S. capital is invested. Employers are required to contribute to the various mandatory social insurance programs and belong to and support Chambers of Industry and Commerce which organize the dual (school/work) system of vocational edu

cation.

Extent of U.S. Investment in Selected Industries.-U.S. Direct Investment Position Abroad on an Historical Cost Basis-1993

[Millions of U.S. dollars]

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Rents

Financial Services
Other Services

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Services

.........

Other Industries

........

TOTAL ALL INDUSTRIES

Source: U.S. Department of Commerce, Bureau of Economic Analysis.

Income, Production and Employment:
Real GDP (1988 prices)2
Real GDP Growth (pct.)
GDP (at current prices) 2
By Sector:
Agriculture
Energy/Water
Mining ........
Manufacturing

Construction

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Key Economic Indicators

[Billions of U.S. dollars unless otherwise noted]

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GREECE

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Statistical Discrepancies ...... Net Exports of Goods & Services

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Government/Health/Education ....

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1992

......

62.6

0.8

84.6

9.2

2.2

0.7

11.5

6.5

12.3

16.0

11.0

14.0

1.2

-9.6

Amount

2,054

3,812

1,194

5,368

877

5,293
3,686

1993

62.2

-0.5

80.6

8.2

2.0

0.6

10.0

6.1

12.7

15.5

10.8

13.9

0.8

-9.0

2,468

22,283

2,945

2,229

5,107

862

1,630 37,524

1994 1

62.9 1.1

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

-9.7

Key Economic Indicators—Continued
[Billions of U.S. dollars unless otherwise noted]

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N/A-Not available.

11994 figures are all estimates based on available monthly data in October 1994. 2GDP at factor cost.

*M2 not available in Greece.

15.0

26.0

17.0

14.4

11.9

14.5

229.3

N/A

5,034.3

377.1

17,615.5

820.5

N/A

N/A

26,857.0

6,987.4

8,693.6

- 12,581.2
-443.4

1994 1

4 Figures are actual average annual interest rates, not changes in them.

5 Merchandise trade, Bank of Greece data, transaction basis.

6 Customs data (National Statistical Service of Greece). 1994 figures cover January-March period.

6,041.0

4,143.1

10.0

10.0

26.0

16-17

11.1

8.5

11.1

243.0

N/A

5,000.0

86.2

18,500.0

190.6

N/A

N/A

28,800.0

7,000.0

13,000.0

- 13,500.0

- 104.4

1. General Policy Framework

Greece has been a member of the European Union (EU) since 1981 and enjoys a relatively open, free-market economy. It has a population of 10.4 million and a work force of about four million. The moderate level of development of Greece's basic infrastructure-road, rail, telecommunications-reflects its middle-income status. The public sector constitutes 50 to 60 percent of Gross Domestic Product (GDP), a substantial portion of the total official economy. Despite the recent revision on national accounts, which boosted GDP by 20 percent, some 15 percent of economic activity still remains unrecorded (parallel economy). With about 66 percent of GDP deriving from services (including government services), 23 percent from industry (13 percent from manufacturing) and 11 percent from agriculture, Greece imports more than it exports. In 1993, Greece had a trade deficit of 12.6 billion dollars on a total two-way trade of 22.6 billion dollars. Greece exports primarily light manufactures and agricultural products, and imports more sophisticated manufactured goods. Tourism receipts, emigrant remittances, shipping, and, increasingly, transfers from the EU form the core of invisibles earnings. Substantial funds from the EU (about 20 billion dollars) are allocated for major infrastructure projects (road and train network, ports, airports, bridges etc.) over the next five years (1994-99). The Uruguay Round Agreements were ratified in late 1994.

The government has expressed the intention to meet the targets of the Maastricht Treaty for EU Economic and Monetary Union (EMU). The new government which took office on October 13, 1993 has pledged that it will continue efforts to lower inflation and to reduce net borrowing as a percent of GDP from the present 12.5 percent to 7 percent in 1996 and 0.9 percent in 1999. The government is concentrating its efforts on ending tax evasion and an incomes policy aimed at protecting the real

income of workers. It also intends to sell minority share holdings of certain state enterprises and organizations. However, international financial organizations believe that new measures are required to reduce the budget deficit if Greece is to meet its convergence targets.

Greece's huge government deficit stems from past debts and a bloated public sector which has many more civil servants than an economy the size of Greece's can support. Greece's social security program has also been a major drain on public spending. Finally, the state owns a number of loss-generating companies. The government passed in September 1992 a new bill on social security with the eventual goal of balancing expenditures with receipts. Deficits are financed primarily through treasury bills.

The government passed a new tax reform package into law in April 1994. The new law makes changes in the income tax system mainly through the introduction of objective income criteria for determining the income of small businesses and some 1,300 professions. A new investment incentives law, introduced in 1994, makes modifications to the incentives regime. The emphasis of the new legislation is on the assistance for larger projects and on the development of new products. Foreign investments offering new know-how will get preferential treatment. Greek investments throughout the Balkans will be subsidized.

Monetary policy is implemented by the Bank of Greece. The Bank uses the discount and other interest rates in its transactions with commercial banks as tools to control the money supply. The State continues to retain privileged access to credit via state-controlled banks and via the tax-free status accorded to government debt obligations (which includes the right of Greek residents to purchase government debt obligations without having to declare their source of income to the tax authorities). Treasury bills are issued by the Ministry of Finance but they are expected to fall within the monetary program prepared by the Bank of Greece. The Bank's policy includes a more active intervention in the secondary money market.

2. Exchange Rate Policy

Greece has followed a relatively "strong drachma" policy during 1994 as a means of holding down inflation. The Bank of Greece maintains a "crowling-peg" system and allows on a limited depreciation of the drachma against the Deutche Mark. In the past year, the drachma has appreciated slightly against the U.S. Dollar. The Greek drachma does not yet belong to the EU's Exchange Rate Mechanism.

Foreign exchange controls have been progressively relaxed since 1985. Mediumand long-term capital movements for EU and non-EU countries have been fully liberalized. Remaining restrictions on short-term capital movements were lifted as of May 16, 1994. This move brings Greece in line with EU rules on free movement of capital. Some bureaucratic obstacles still remain, but they are expected to be phased out.

3. Structural Policies

Greece's structural policies are largely dictated by the need to comply with the provisions of the EU Single Market and the Maastricht Treaty on Economic and Monetary Union.

Pricing Policies. The only remaining price controls are on pharmaceuticals and rents; some rents have been freed. However, about one quarter of the goods and services included in the consumer price index are produced by state-controlled companies, and the government retains considerable indirect control. Government-set prices and subsidies, e.g., public transport prices, distort the economy, but they are not barriers to U.S. exports.

Tax policies. New tax legislation passed in April 1993:

-Increased the corporate tax rate from 35 to 40 percent for all non-public corporations

-Increased the top personal income tax rate to 45 percent from 40 percent for amounts exceeding 62,000 dollars annually.

-Imposed presumptive taxation on a large number of professionals on the basis of a number of factors, i.e. the location and type of business, the number of years in operation, the imputed rent of the property.

The new law did not change the value added tax (VAT) rates: the lower rate of eight percent is applicable to basic commodities (mainly food products) and certain services; the higher rate of 18 percent is applicable to items not included in the lower rate. A four percent VAT applies to periodicals and books.

Tax laws do not discriminate against foreign or U.S. products.

4. External Debt Management Policies

Greece's public sector debt is forecasted at 113 percent of GDP in 1994. A change in national accounts statistical methodology has recently led to a 23 percent statis

tical increase in GDP. Before such adjustment government debt was as high as 135.8 percent of reported GDP in 1993. If one includes the debt of other public enti ties, total Greek public sector debt was measured at 150 to 160 percent of GDP, using the old system of national accounts. Foreign debt does not affect Greece's ability to import U.S. products.

Servicing of external debt in 1993 (interest and amortization) was equal to 138.9 percent of exports and 7.8 percent of GDP. With no new net borrowing, Greece's external debt service will be around 7.2 billion dollars in 1994. About two-thirds of the external debt is denominated in currencies other than the dollar.

Greece has regularly serviced its debts and has generally good relations with commercial banks and international financial institutions. It has not had an adjustment program with the IMF or any program with the World Bank. In 1985, and again in 1991, Greece borrowed from the EU.

5. Significant Barriers to U.S. Exports

Greece does not have merchandise trade barriers other than those imposed by the EU. It maintains, however, specific barriers on trade in services such as law, accounting, aviation, tourism and motion pictures:

-Greece maintains nationality restrictions on a number of professional and business services, including legal advice and accounting. Except for accounting, these restrictions do not apply to EU citizens. The U.S. companies can generally circumvent these barriers by employing EU citizens, the most prominent example being in auditing. However, the government recently passed a law which imposes burdensome qualifications on non-Greek accountants, virtually excluding non-Greeks from most accounting activities. The government has pledged to withdraw this restriction.

-Foreign air carriers may not sell ground services for aircraft to other airlines. The Greek flag carrier, Olympic, has a partial monopoly to provide ground serv

ices to other airlines.

-Greek residents are limited on the amount of foreign exchange they may spend on personal travel to 2,000 ECUs per trip (2,300 dollars).

-Greek film production is subsidized by a 12 percent admissions tax on all motion pictures. Moreover, Greek laws and practices are currently ineffective in protecting intellectual property rights, including film, software, music and books (see below).

Investment Barriers:

-Both local content and export performance are elements which are seriously taken into consideration by Greek authorities in evaluating applications for tax and investment incentives. However, they are not legally mandatory prerequisites for approving investments.

-U.S. and other non-EU investors receive less advantageous treatment than domestic or other EU investors in (1) the mineral sector, where restrictions continue to apply to non-EU investors, (2) banking, where only 40 percent of the shares of Greek state banks is open to non-EU residents and (3) land purchases in border regions. U.S. banks have been able to overcome this provision by operating on branches of EU operations.

Greek laws and regulations concerning government procurement ostensibly guarantee nondiscriminatory treatment for foreign suppliers. In fact, the Greek Government procurement favors Greek companies, or in some cases EU corporations.Officially, Greece adheres to the EU procurement policy, and Greece has also recently joined the GATT procurement code. Greek willingness to adhere to GATT government procurement procedures is a positive step.

Many problems, however, still exist. Included are occasional sole sourcing (explained as extensions of previous contracts), loosely written specifications which are subject to varying interpretations, and allegiance of tender evaluators to technologies offered by longtime, traditional suppliers. The real impact of Greece's "buy national" policy is felt in the government's offset policy (mostly for purchases of defense items) where local content, joint ventures, and other technology transfers are stressed. Occasionally transfer of technology is required in telecommunications projects.

6. Export Subsidies Policies

The Greek government allows exporters to pay tax deductible commissions and expenses to support exports. Some agricultural products receive subsidies from the EU. Greece, as an EU member, is also a member of the GATT Subsidies Code.

7. Protection of U.S. Intellectual Property

Greece is a member of the Paris Convention for the Protection of Industrial Property, the European Patent Organization, the World Intellectual Property Organiza

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