When one thinks of Greece, images of social and economic devolution, depression-era GDP, tear-gas heavy protests, an insolvent, flip-flopping government that has no choice but to be a pawn of the Eurozone, rising ultra-nationalist sentiment buoyed by over 50% youth unemployment, 25% total unemployment and where over 36% of the population is at risk of poverty or exclusion from social benefits, is what typically come to mind.
It may therefore come as a surprise that across from the stark Greek economic calamity is an industry that has swam, so to say, while everything else has sunk, because while virtually every other aspect of the Greek economy is in shambles, its shipping industry is not only the pride of the nation, but has created more Greek billionaires than any other aspect of the economy.
As Bloomberg recounts, Greeks have long dominated the shipping business. The nation’s fleet, numbering 3,669 vessels in 2013, is the largest in the world, according to the annual report of the Union of Greek Shipowners, making up more than 7 percent of the Greek economy and providing 192,000 jobs in 2013.
Greece’s shipping magnates control 23 percent of the world bulk carrier fleet, according to the report, even as their home country accounts for less than 0.4 percent of the world economy.
And, perhaps most relevant, Greek shipping has also made billionaires of the country’s four largest ship owners by tonnage: John Angelicoussis, George Prokopiou, Peter Livanos and George Economou. The quartet control a combined fortune of $7.6 billion, according to the Bloomberg Billionaires Index. None of them appear individually on an international wealth ranking.
It was them, along with more than a thousand delegates from the shipping industry, who gathered last month at the Hilton Athens for the Greek Shipping Forum, a day of speeches and panel discussions on private equity, ship recycling and financing.
The packed reception hall was a testament to how the nation’s ship owners still dominate the industry decades after Aristotle Onassis and Stavros Niarchos ruled the waves. The Hellenic fleet is the world’s most valuable at $106 billion, according to VesselsValue.com, accounting for 19 percent of the world’s tankers.
Greece’s seafaring mastery is a remarkable feat for the world’s 42nd-largest economy, where economic and political turmoil has left a quarter of the population unemployed.
“This is a business that’s part of their soul,” Matt McCleery, author of “The Shipping Man” and president of Stamford, Connecticut-based ship finance consultancy Marine Money International, said in a phone interview. “It’s so important to their culture, to their identity, and to their history.”
A quick look at the current generation of Greek shipping oligarchs:
The richest is Angelicoussis, whose companies own 96 active vessels with a capacity of more than 18 million deadweight tons, the industry’s standard measurement for how much ships carry, according to data for December compiled by maritime newspaper Shipping Finance. His family’s stake in the fleet is valued at $2.4 billion, according to data compiled by Bloomberg. “He’s one of the great men of our industry,” Harry Fafalios, chairman of the Greek Shipping Co-Operation Committee, said in an interview in London.
Prokopiou has a fortune valued at $2 billion, according to the Bloomberg ranking. Livanos controls at least $1.7 billion and Economou has a net worth of $1.5 billion. Their fortunes are comprised of stakes in their publicly traded shipping businesses and closely held vessels.
Livanos is the biggest shareholder in liquefied natural gas carrier operator Gaslog Ltd. and tanker owner Euronav NV. Prokopiou listed Dynagas LNG Partners LP on the New York Stock Exchange in 2013. Economou’s Dryships Inc. operates bulk carriers. Together, their fleets exceed 40 million deadweight tons. Livanos operates 83 vessels, while Prokopiou has 89 and Economou has 116, according to Shipping Finance.
The reason these prominent and successful businessmen, as well as everyone else in their lucrative industry, are relevant is because with the Greek government scrambling to unveil any sources of funding as the Syriza government now lives paycheck to paycheck, it is almost inevitable that sooner or later it will turn its attention to the one most vibrant Greek industry.
First, it will likely be a change in the tax code: according to Bloomberg, "as social pressures mount, the privileged tax status of the shipping industry has come under increasing scrutiny as successive Greek governments look to boost revenue. The industry pays no tax on international earnings brought into the country under rules incorporated in Greece’s constitution in 1967."
The reason why these existing tax laws were put into place in the first place according to Ilias Bissias, a lecturer in international shipping policy at Alba Graduate Business School in Athens, was "to protect ship management companies that serve mostly international trade and commerce. This regime should not be changed as it is similar and in line with international tax laws that exist in most maritime centers in all parts of the world."
Of course, this regime also means less tax revenue for the government, and when faced with a solvency and liquidity crisis, any government will do whatever it can to remain in power, which means to get any incremental funding possible, even if it means raiding the untouchable piggy bank of the shipping industry.
Ironically, Greek shippers knew which way the wind is blowing, and last October the Union of Greek Shipowners reached a voluntary agreement with the previous government to double the tax paid by the industry in the three years from 2014.
Whether that will be enough for the country’s new anti-austerity Syriza-led government isn’t clear. In a February letter to creditor institutions, Greece Finance Minister Yanis Varoufakis said the new regime will “ensure that all sections of society, and especially the well-off, contribute fairly to the financing of public policies,” as part of reforms that secured the continued availability of bailout funds for Europe’s most indebted country.
To answer Bloomberg's question, no - it will not be enough. But here Varoufakis will have to make a difficult decision:
“Shipping together with tourism are the two main sources of income for the country,” said Eurofin’s Zolotas. “The government would be ill-advised to make it less attractive for ship owners to remain in Greece because ship owners are providers of a lot of employment.”
But it is not just the internal threats of a ultra-leftist government with wealth-redistribution ambitions that is forcing Greek shippers to sweat. So is the Baltic Dry index, which as extensively covered here in recent months, has plunged to record low levels, indicative of a global demand recession, and is slamming the profitability of any, especially unhedged, dry-bulker.
With limited demand from their domestic market, Greek ship owners have long looked beyond home shores for business. While it’s helped shelter them from the worst of the Greek crisis, the industry is still fraught with challenges.
The Baltic Dry Index, a blended measure of rates for dry vessels, is down 51 percent this year to record lows. Meanwhile, low oil prices have caused the tanker market, another area that’s been a traditional Greek strength, to undergo a renaissance, though the market typically reverses within three to six months, according to Michail Kokkinis, founder of Piraeus-based ship broker Golden Destiny.
Which is why, faced with threats of further wealth redistribution internally, and a collapse in foreign demand in their end markets, the Greek shipping billionaires are now sweating.... and doing their best to prevent the public opinion tide turning against them.
For now they have nothing to worry about...
Niarchos and Onassis, dubbed the Golden Greeks because of their wealth and celebrity, competed during the second half of the 20th century. They raced to build the world’s largest fleets and outdo each other with the size of their islands, yachts and weddings. Stavros’s son Philip inherited much of his art collection from his father’s estate.
Their influence is still visible today. The Stavros Niarchos Foundation, endowed with a portion of the family’s estate following Stavros’s death in 1996, is responsible for the city’s largest construction project on the site of a former racecourse at the south end of Syngrou Avenue, which bisects the bottom of the city.
The $800 million undertaking, designed by architect Renzo Piano, will house the national library and opera company and feature a 42-acre park on the roof.
Adjacent to the park is the Onassis Cardiac Surgery Center. Other donations from shipping dynasties pockmark the city, including the Eugenides Foundation’s planetarium and the Goulandris Museum of Cycladic Art.
Today’s top shipping tycoons are more inclined to keep a lower profile, particularly since the crisis hit. “They’re very hard working and often humble people,” Marine Money’s McCleery said. “For the most part you find these guys who are dedicated and very family orientated. They work their tails off way beyond any monetary need.”
... but what happens to public mood when the government says it is the wealth of the shipping oligarchs or half the country goes hungry? Because sadly that may well be just how far Greece is about to fall.
