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Chinese Capital: Good or Bad Influence in Greece?

August 12, 2010 at 12:00 AM EST
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As part of his ongoing reports on Making Sense of financial news, business and economics correspondent Paul Solman examines the pros and cons of a massive infusion of Chinese capital into Greece.
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TRANSCRIPT

JIM LEHRER: Finally tonight, one more snapshot from “NewsHour” economic correspondent Paul Solman’s recent trip to Greece.

Tonight, he reports on what’s behind China’s growing presence there. It’s all part of his ongoing coverage of “Making Sense” of financial news.

PAUL SOLMAN: The Port of Piraeus, Greece’s largest, circa 1960. A time when dock workers could and would take a little break whenever the mood struck. A model of inefficiency then and even now.

A midsize cargo ship can take a week to unload in Piraeus, compared to just days in Rotterdam. Many in the shipping industry blame Greek workers.

NICOS VERNICOS, president, International Chamber of Commerce, Greece: Greeks in the last generation have been spoiled.

PAUL SOLMAN: Nicos Vernicos’ family has run tugboats in Piraeus for generations. And he doesn’t think the Greek economy will reform on its own.

NICOS VERNICOS: We need foreign investment, and especially we need the Chinese.

PAUL SOLMAN: For years, the Chinese presence in Greece was restaurants and small shopkeepers in the seedy part of Athens. Not anymore.

Greece is courting China in a big way — wooing Chinese tourists to come visit that other ancient civilization and Chinese investors to pump cash into its antiquated state-owned utilities, train lines and most importantly, its ports.

In June, Chinese shipping giant COSCO took full control of the major container dock in Piraeus, just southwest of Athens. In return for a 35-year lease, the Chinese have pledged to spend hundreds of millions dollars on upgrades. Having opposed the deal when it was first suggested a few years ago, the cash-strapped socialist government now embraces it.

Prime Minister George Papandreou.

GEORGE PAPANDREOU, prime minister, Greece: We are one of the biggest, if not the biggest, shipping country in the world. And now we have attracted important investment.

The Port of Piraeus, which is a traditional port in the Mediterranean, but it was a declining one, now will become the basic hub for all Chinese produce to come to the European Union.

PAUL SOLMAN: Tugboat tycoon Vernicos (ph), just back from the Shanghai 2010 Expo, is rooting for the Chinese to succeed.

NICOS VERNICOS: As a tug operator of the Piraeus Port –

PAUL SOLMAN: Of tugboats.

NICOS VERNICOS: – of tugboats, I’m proud that I am their servant. And everybody who is doing business with them here in Europe is very happy with them in Greece.

PAUL SOLMAN: Well, not exactly everybody.

LEONIDAS VATIKIOTIS, journalist: You can see here the investment from Greek government that will help COSCO.

PAUL SOLMAN: In the industrial wastelands west of Athens, the Greek government has laid the groundwork for another hoped-for Chinese investment: a sprawling new distribution center where cargo from Piraeus would be put on trucks and trains bound for points north.

Leonidas Vatikiotis, a journalist who has a Ph.D. in economics, says the privatization plan will benefit China, but not Greece.

LEONIDAS VATIKIOTIS: First of all, we are worried about the employment. The problem is that the employment will not be increased, and very little employment will be made. It will be with very, very low salaries.

PAUL SOLMAN: In fact, as part of the deal, 500 union workers at the Piraeus Port were either pensioned off or moved into other jobs, allowing the Chinese to bring in cheaper non-union local workers.

But Greece’s deputy prime minister, Theodoros Pangalos, said that was not necessarily a bad thing.

THEODOROS PANGALOS, deputy prime minister, Greece: The practice of the Chinese up to now is absolutely correct as far as it regards to the way they pay the people working for them, and also they have a good labor relations. So I think they want to have a good presence here.

PAUL SOLMAN: But Vatikiotis had another concern.

LEONIDAS VATIKIOTIS: A very big black market. In such a big investment, nobody knows what’s coming into the port and where does it go.

PAUL SOLMAN: Is there not a concern that goods will be smuggled into a port like this once the Chinese own it?

MAN: No, I don’t think there is a risk. This has to do with organization of the port, and don’t forget that the workers are Greek. I mean, even the top management is Greek. So they cannot organize smuggling. Forget it.

PAUL SOLMAN: Not now. I’m talking potentially years from now.

MAN: Potentially years from now, I think we are going to lose our economic leadership.

PAUL SOLMAN: We, the West?

MAN: The West exactly, yes.

PAUL SOLMAN: To China?

MAN: To China.

PAUL SOLMAN: So we better be friends with them?

MAN: Exactly. I believe that we will not be able to compete.

PAUL SOLMAN: Not the most appealing argument for foreign investment, perhaps, recalling as it does the cynical so-called golden rule of the world economy: he who has the gold, makes the rules.