Bailout Reforms Put Heavy Pressure on Greece’s Shipping Industry



Greek-shipping-ship-ownersGreece’s world-leading shipping industry is coming under increasing pressure to carry a big part of the new taxes the new bailout agreement requires.

The Greek government has agreed to raise taxes on the long-protected sector of shipping, “a part of Greek culture that it has tax breaks enshrined in the constitution,” a Wall Street Journal report says.

The shipping industry is dominated by a small circle of family run companies that control almost one fifth of the world’s shipping fleet, putting Greece’s trademark in all seas.

Greek shipping has been a badge of pride for the country. However, the economic crisis has made shipowners more of a target than recipients of public admiration.

“The country’s shipping community must be ready to lift the heaviest of burdens to help the country out of the economic crisis,” Merchant Marine Minister Thodoris Dritsas told a gathering of owners in January, shortly after the left-wing SYRIZA party took office, says the WSJ report.

But industry executives and supporters say higher taxes threaten to drive away a business that employs more than 200,000 people and contributes around 7.5 percent of Greece’s gross domestic product. By comparison, tourism directly contributes about 600,000 jobs and 9 percent of GDP.

As part of negotiations with creditors for a third bailout, the Greek government has agreed to increase the tonnage tax—a flat, annual rate, based on a ship’s capacity, that is now roughly harmonized across the European Union. Greece also would gradually abolish some tax benefits that other EU countries also offer, the report says.

“If there is a change in the tax and legal framework under which shipping operates in Greece, I would certainly expect a mass exodus by owners. That’s what I will do,” said Michael Bodouroglou, who runs a fleet of 25 dry-bulk and container vessels through two New York-listed companies, Box Ships and Paragon Shipping.

According to the report, the prospect of higher taxes comes at a bad time for the global shipping trade. It is currently being hurt by low freight rates, steep competition on pricing and an abundance of ships sailing the world’s oceans.

Nevertheless, shipping is one of the few areas in Greece that is still hiring, at good wages, in a country where unemployment exceeds 25 percent. According to the Union of Greek Shipowners, revenue generated by Greek shipping totals about 13 billion euros annually. Over the past three years, the industry paid tonnage taxes of more than 100 million euros annually, according to a government official.

According to the report, in 2013, under government pressure to do more for the economic crisis, Greek shipowners agreed to double that for four years—contributing an additional 420 million euros through 2017.

Counting those payments, “the Greeks now pay the highest tonnage tax in Europe,” said Basil Karatzas, a New York-based maritime adviser.

But Europe thinks differently: “The Greek shipping industry is very successful and should contribute more to national coffers,” an EU official said.

The lavish lifestyles of some shipowners have provoked strong reactions amid crisis-stricken Greeks. “We are up against years of mistrust from the Greeks, personified in the new government,” Bodouroglou said.


9 COMMENTS

  1. What good would putting the ship owners out of business do?
    They’re the only sector of the economy that’s growing at the expense of German shipping, and the EU wants the Greek government to destroy them on their behalf.
    I hope they take all their ships somewhere else, and continue to flourish.

  2. Be careful of biting the hand that feeds tens of thousands of merchant marine families. Like the British and Norwegians to remain competitive, Greeks will reflag their fleet and shutter their Piraeus offices and move to more friendlier nations.

  3. This has happened before and the exodus of Greek Shipping firms to London and Monte Carlo was almost instantaneous. The EZ wants to hobble Greece and remove every last shred of dignity and competitiveness.

  4. Zante what are you thinking? I wasn’t suggesting physically relocating the Greek fleet to Monte Carlo or London. Not considering physical limitations of most harbours, why would anyone do so when the fleet must be at sea to make money??? Simply put so you understand, the ship’s propeller must be turning for it to make money. If you had experience in international business you would know Monte Carlo is a tax haven where businesses relocate to remain competitive. In todays business climate if you cannot compete against lower cost shipping companies based in the Far East you are out of business, crew members/office workers lose their jobs, offices are vacated and more become dependent instead of being independent. That’s why taxing Greek Shipping interest is counter-productive.

  5. Prior to joining the EEC in 1981, Greek domestic agricultural production used to feed almost 100% of the Greek population. After Greece joined the European Economic Community EEC in 1981, EEC grants given to Greek farmers in return for Greek farmers cutting back or ceasing production destroyed Greek agriculture and today Greece must import most of its food or the Greek people will starve. Even back then the EEC (now EU) intended to someday reduce Greece to a mere debt colony by destroying its ability to produce anything. They succeeded.

    In 1994 alone, Greek farmers received £89million from the EEC to bulldoze 675,000 tonnes of peaches into the ground.

    The EU-ECB-IMF Loansharks now seek to eradicate one of the last remaining pillars of the Greek economy, the shipping industry. With 1,500 illegal 3rd world immigrants, primarily muslims, pouring into Greece every day, mostly by sea, the Greek tourism industry will suffer badly as well.

    If elected to govern Greece, Golden Dawn has stated that rebuilding Greece’s shattered agricultural industry would be one of their main priorities and that they would aim to have Greece completely self sufficient, i.e. able to feed 100% of the Greek population from domestic agricultural production within 5 years.

    A Golden Dawn government would deploy Greek troops to assist understaffed police with arresting and deporting all illegal immigrants residing in Greece, and GD stated that Greek naval commandos would be assigned search and destroy missions targetting Turkish people smugglers. People smugglers torn to shreds by 50 cal rounds or shot clean through the head by snipers would have the required deterrent effect on criminal Turkish people smuggling gangs.

  6. Every company can move its administration to a tax haven by your logic therefore lets tax no one ! Why would they be in Greece even now as these tax havens exist currently. Even if you are correct and they move to tax havens they can’t physically move everything as they must still employ Greek people So the only thing at Risk is taxes which they are avoiding paying anyway. They must still operate through Greece . Hamburg and Southampton survive as major ports and they are not tax havens.

  7. You still do not grasp the difference between where a ship operates Hamburg, Southampton and the country where a shipping company is domiciled. To be able to compete against lower cost operations in the Far East, Greeks must be able to use every resource a their disposal including tax havens. No havens means the shipping company cannot compete, which means no work, which means no income, which means no goods are purchased, which means the Greek economy suffers. I can’t make this any simpler.

  8. At this juncture if the Migrants are seamen, put them on a ship and let them work their way back home. The industry is in contrition because of over regulations, taxes and the slowing world economy. Shipping is our last uniquely Greek success story taxing into oblivion is pointless and counter-productive.

  9. I see your point but I respectfully disagree. Every business can argue the same point. – it’s an interesting point you make however.

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