Since the crisis broke out in 2009, Greece has been cutting its defence budget by about 20 percent every year, as part of efforts to reduce structural spending and slash deficits. The 2011 defence budget is set at 4.87 billion euros ($6.68 billion) or 2.13 percent of GDP, down from 2.8 percent in 2010.
“We continue negotiations with France and Russia, but this doesn’t mean we will reach a deal in 2011,” Deputy Defence Minister Panos Beglitis said in an interview. “Our government’s message is clear: In these adverse conditions we can’t conclude specific deals.” Greece has been negotiating with France since 2007 to buy six FREMM frigates, worth about 2.5 billion euros. It is also in talks with Russia to purchase BMP-3 armoured vehicles. The ministry has earmarked 1.6 billion euros for arms programmes in its 2011 budget, but nearly half will be used to pay existing orders. About 830 million euros will go on maintenance, ammunition and spare parts for aircraft. Despite warmer ties with its historic rival and fellow NATO member Turkey, Greece has for years been spending more of its GDP on the military than any other EU country.
As part of a 110 billion euro bailout plan with the EU and the IMF, the government agreed to consolidate and privatise some its troubled state-run companies, including Hellenic Defence Systems (EAS), Hellenic Vehicle Industry (ELVO) and Hellenic Aerospace Industry (EAV). Earlier this month, the finance ministry appointed KPMG as legal adviser for the privatisation of EAS, which has just over 1,000 workers and accumulated debts of about 1.2 billion euros. “By April we will have the adviser’s suggestions. By summer we will have made our decisions to launch a tender,” Beglitis said, adding the state would sell a stake of up to 65 percent.
US based ammunition maker Alliant Techsystems, Israel’s IMI, and Germany’s Rheinmetall have already expressed interest for a strategic partnership, Beglitis said. German and Arab investors are also interested in acquiring a stake in Hellenic Vehicle Industry, which has a 70 million euro debt he said, and the government is considering its privatisation. Hellenic Aerospace Industry has a debt of 700 million euros. But Beglitis said the company has orders until 2015 that could bring in more than a billion euros and could offset the debt and the government was planning to maintain its control. “EAV is the national industry’s flagship, therefore we will preserve its state character,” Beglitis said without ruling out partnerships with interested companies from Qatar and Abu Dhabi.
