Can islands save Greece from debt crisis?

By Piia Simola, Henni Laitinen and Jussi Soini (Group 3)

Want to buy a Greek island? Go ahead. There are 6000 islands in Greece, only 277 of which are populated. Selling these sun resorts could help the country cover its huge debt. But just in case you’re out of cash – who could buy such paradises for real?

Greece’s debt crisis was a long way coming, although the country did try to sugarcoat it. (Off the record, here is a less official, yet interesting angle.) It cut inflation and interest rates big time before joining the euro in 2001, appearing adequate for the currency. In the reality it had never had its deficit below the EU’s demand of 3 percent, not since 1999.

In 2009 Greece’s credit rating dropped and the EU expressed serious concern toward the country’s economic state. At this point Greece had to admit the disaster. A year later it launched an austerity package, freezing the public sector pay and commanding higher taxes. The same year, after much debate, the EU and IMF also stepped in with a multi-billion bailout package – 110, to be exact.

It is debatable whether or not this is enough: in 2012 the country’s debt will rise to 400 billion euros. There has been much speculation that the country should, in fact, start selling its assets. Greek islands have got to be worth something, right?

Well, yes they are: some 300 billion euros, to be exact.

Land has always been for sale

Selling state land isn´t quite a new idea. A certain Napoleon sold land from Northern America to USA in 1803 when France was in desperate need of cash to pay its debts.

Recently fashion mogul Giorgio Armani bought an island called Skorpios in Ionian Sea for $190 million, and rumors have that even The Beatles owned a Greek island in the 1960s for couple of months.

Nowadays  most of Greece’s islands are owned by private people,  valued between €3 million and €150 million. The government benefits from the sales through tax revenue and development. It is always involved when Greek property’s for sale, from authorizing a deal to regulating who can buy a property and for which amount of money. The complicated bureaucracy makes selling property actually quite difficult.

However, there are a few players in the market.

Companies are already selling Greek islands

Greek real estate company, Ktimatoemporiki Crete, is one of the companies selling islands for private buyers.

The company has 11 different isles in its selection. All of them are part of the Greek islands and most of them nearby Crete. The costs and sizes of the islands vary: smaller islands of 200 acres can be bought for four million euros. When the plot’s size increases to almost 1400 acres, the price goes up to 50 million euros.

Ktimatoemporiki Crete’s islands are sold for both private and commercial purposes. The islands attract buyers because of their beautiful coastlines and construction possibilities. You can build a dream summer house or start a new business.

In addition to entire islands, Ktimatoemporiki Crete also sells parts from already inhabited islands. This way houses can be built closer to public services. Selection of such sites is much bigger. Right now Ktimatoemporiki Crete has 69 plants for sale.

Toronto-based Private Islands Online is another real estate firm that sells Greek islands for private purposes. Their selection’s smallest isle, St. Athanasios, is 2.5 acres and costs 1.5 million euros. The 300 acres St. Thomas, on the other hand, is on sale for 15 million.

One might think that travel agencies could be interested in buying these holiday heavens. By owning entire islands the agencies could be sure that all of the tourists´ money drain and profit into their own cash register.

In Finland no one has yet come up with this idea.

“Our company has never considered the opportunity”, says Salla Salo, a press agent in Finnmatkat travel agency.

According to Salo, no other travel firm in Finland has ever bought an island abroad, either.

Greece must sell its property to cover bailout

How about other countries then? Could Finland land from the sunny south?

First, it must be said that Greece is not fond of this idea. The country’s prime minister, George Papandreou, considers such suggestion an insult.

Selling its assets, however, is a vital element in surviving such crisis.

“Finland sold its solid property during the 1990’s recession, as well”, says Pekka Morén, financial adviser from the Secretariat of International Affairs in Finland’s Ministry of Finance.

“However, Greece is not selling its islands. There are some state-owned companies that the country is considering selling, at least partially”, Morén continues.

These include Public Power Corporation, Hellenic Post Bank, water supply companies and ports, to name but a few.

“Selling these properties can be useful. They can be used as financial insurance.”

Morén says that selling state-owned assets is always done after much and thorough consideration, including defense and security matters.

“Finland is not buying islands from Greece, nor will we buy its state properties. It is in our interest that we get back our loan, 788 million euros so far, with interest. Greece must also sell its assets in order to decrease its debt.”

Greece's Prime Minister George Papandreou.

Greece's Prime Minister George Papandreou.

Quick tip: Set your foot in paradise!

Took a look in your wallet and realized you could spare a few euros for your own piece of crystal clear water and white sand? If that is the case, follow these instructions by Ktimatoemporiki, made for all of you who want to buy property from Greece.

  1. Appoint a lawyer
  2. Appoint a Public Notary, any property purchase agreement must be done in the presence of a public  notarity
  3. Get a copy of the title deed and perform a title search at the Registry of Mortgages
  4. Issue a tax registry number
  5. Pay the transfer tax
  6. Sign the contract
  7. Effect transfer at the Registry of Mortgages
  8. Notify the Land Registry for the transfer (if applicable)

Yearly costs for property in Greece are local municipal tax and yearly property tax, which is 0.3–0.8 % of the assessed value of the property.

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One Response to “Can islands save Greece from debt crisis?”

  1. peterverweij Says:

    Very good story; I like it very much! Attractive opening sentence, good use of the split. Summarizing financial problems of greece in text is oke, links to guardian and bbc are good for more detail. Attractive style of writing. good use of pictures and video. Nice links to finish sources. And the tips at the end are helpful (what is the source?)

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