Identifier
Created
Classification
Origin
09ATHENS1271
2009-07-20 07:09:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Athens
Cable title:  

TITAN CEMENT EXECUTIVE DISCUSSES IMPACT OF THE ECONOMIC

Tags:  ECON EFIN EIND GR 
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DE RUEHTH #1271/01 2010707
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R 200709Z JUL 09
FM AMEMBASSY ATHENS
TO RUEHC/SECSTATE WASHDC 0457
INFO EU MEMBER STATES COLLECTIVE
EU CANDIDATE STATES COLLECTIVE
EUROPEAN POLITICAL COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHIK/AMCONSUL THESSALONIKI
RUEHTH/AMEMBASSY ATHENS
UNCLAS SECTION 01 OF 02 ATHENS 001271 

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: ECON EFIN EIND GR
SUBJECT: TITAN CEMENT EXECUTIVE DISCUSSES IMPACT OF THE ECONOMIC
CRISIS AND THE GOG'S RESPONSE

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SUMMARY
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UNCLAS SECTION 01 OF 02 ATHENS 001271

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: ECON EFIN EIND GR
SUBJECT: TITAN CEMENT EXECUTIVE DISCUSSES IMPACT OF THE ECONOMIC
CRISIS AND THE GOG'S RESPONSE

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SUMMARY
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1. (SBU) The global economic crisis, which continues to have a
significant impact around the world, has not spared even the most
robust businesses in Greece. The global credit crunch has
significantly affected the liquidity position of Greek companies,
regardless of how strong their capital base was going into the
crisis. In addition, the spread of the crisis to the real economy is
having an even stronger impact on companies' balance sheets, as
economic activity contracts and consumer demand declines. Recently,
A/EconCouns and EconIntern met with Dimitris Papalexopoulos, the
Managing Director of Titan Cement Company to gauge the private
sector's assessment of and reaction to the crisis. As one of
Greece's largest private companies, with holdings and investments in
the U.S. and in South East Europe (SEE),Titan is a bellwether for
how the Greek private sector is faring. Papalexopoulos indicated
that, while the economic crisis has had a global reach, Titan's
biggest losses have came from the United States and not its
operations in Greece or its other holdings in the Balkan region and
Egypt. Papalexopoulos was frank in his assessment of the GoG's
handling of the crisis, indicating it had not done enough. He hopes
that pressure from the IMF and European Commission (EC) will help
force the structural changes so needed in order for Greece's economy
to reform and continue to grow. End Summary.
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TITAN: BACKGROUND AND ITS
REACTION TO THE CRISIS
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2. (SBU) Founded in 1902, Titan is a cement producing company based
in Athens. It is one of Greece's largest companies, with annual
revenue of approximately EUR 1.5 billion. In addition to its base of
operations in Greece, Titan has production facilities in Egypt,
Bulgaria, Serbia, the Republic of Macedonia, and a large plant under
construction in Albania, as well as large plants in the U.S. These
investments make it well suited as a barometer for how private
industry is faring in Greece and the region, especially given the
importance of the construction industry and major infrastructure
projects to the economy. Titan's most recent financial statement
shows a 50 percent decrease in net profit over the first quarter of

2009 compared to the same time period in 2008. According to Dimitris
Papalexopoulos, Titan's Managing Director, while European sales are
down markedly, it has been the U.S. market's dramatic decline that
has had the most negative influence on its balance sheet. Titan has
$1 billion invested in the U.S., and it employs over 2,000 people
there. [Note: Papalexopoulos received a degree in electrical
engineering while studying in Zurich before attending Harvard
Business School, where he earned his MBA. He has been with Titan, or
its subsidiaries, since 1991 and was appointed to his current
position in 1996. End Note.]


3. (SBU) Papalexopoulos stated that the macroeconomic conditions
within SEE are largely representative of the global economy -- poor
and uncertain. Overall, however, he believes the economic recession
has been a bit milder in Greece than in some other EU countries. He
attributes this to the fact that Greece's excesses, particularly in
the real estate market, were not as extreme as elsewhere (i.e. the
U.S. and Spain). While Greece entered the crisis with an
overabundance of housing stock, real estate prices were not largely
out of whack with fundamentals, and he expects the excess housing
stock will easily be absorbed as the economy recovers. Moreover,
according to Papalexopoulos, because a substantial part of the Greek
housing stock is older, some portion of it will need to be
replenished, which will help Greece's real estate sectors and, more
specifically, his company's recovery. For these reasons,
Papalexopoulos remains optimistic about his company's future in
Greece. He is even more optimistic about Titan's future in SEE once
a recovery begins. In his own terms, Papalexopoulos is "bullish" on
SEE, where he sees a major need for housing stock and infrastructure
in order for this region to catch up with consumer demand.


4. (SBU) Papalexopoulos told A/EconCouns and EconIntern that Titan
predicts there will be a continued slowdown in demand throughout the
remainder of 2009, particularly in Greece and SEE. Aside from a
decrease in overall demand and consumer spending, Greek businesses
are suffering from a shortage of available credit and the resulting
liquidity issues. Titan's strategy in the face of the crisis and
continued slowdown, Papalexopoulos told us, was to create a capital
cushion by cutting back on all new projects planned in 2009 and
keeping the lid on all capital expenditures that could drain cash
resources. Unfortunately, like its competitors and other businesses

ATHENS 00001271 002 OF 002


worldwide, trimming down has meant laying off staff. According to
Papalexopoulos, keeping lean in this manner will give Titan maximum
flexibility, allowing the company to weather the current storm and
placing it in a strong position to leverage their capital once
recovery begins. While he did not expand on the specifics of what
signs of recovery Titan would look for, Papalexopoulos did say that
Titan was prepared to continue investing heavily in Greece and in
markets in SEE "once sentiment improves." He thinks that the
tremendous liquidity boost by the U.S. and other countries will help
start the global recovery, but he expects more steps will be needed
by all governments and international institutions to sustain this
recovery.
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VIEWS ON THE GOG'S RESPONSE AND
ADDITIONAL REFORMS NEEDED
--------------


5. (SBU) Papalexopoulos, who also sits on the board of directors of
the Foundation for Economic and Industrial Research, (IOBE, which
describes itself as one of Greece's only private, non-profit economic
think tanks),gave us a frank assessment of the challenges he sees
confronting Greece. He agrees that the main issues with which the
GoG must contend include a ballooning fiscal deficit and external
debt, pension and health sector reform, educational reform,
deregulation of labor and product markets, improving competitiveness,
shrinking the size of the public sector, and attacking widespread and
endemic corruption and tax evasion. Papalexopoulos said that while
any politician or economist (including former Minister of Finance
George Alogoskoufis and current Minister of Finance John
Papathanassiou) would itemize the same challenges, the problem in
Greece is that no one has the political will to confront them. Both
main political parties (opposition PASOK and governing New
Democracy),in his opinion, wasted 10 years of strong growth and
supportive global economic conditions, doing little to tackle these
long- Papathanassiou to fight tax evasion and improve
competitiveness, standing issues. While he applauds the promises of
Minister he sees few concrete measures being taken to achieve these
goals. Papalexopoulos believes pressure is needed to galvanize the
GoG to act. He hopes that the crisis can be used as an opportunity
by entities such as the IMF and the EC to urge the GoG to take action
that will finally alter the structure of the Greek economy.
Otherwise, he fears that a prime opportunity will be lost and more
time will be wasted.
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COMMENT
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6. (SBU) Papalexopoulos was a candid interlocutor, sharing his views
on the crisis, his company's response, and his thoughts on the GoG's
response, or lack thereof. While he indicated he is sanguine that
economic conditions in Greece and the region would improve with a
global recovery, his views on the GoG tackling fundamental structural
challenges were far less optimistic. While Greece has not been as
hard hit as some other European countries, left unresolved, its
structural challenges will delay any economic recovery in the short
and medium term and dampen prospects for a return to the strong
growth the Greek economy experienced earlier in this decade. Post
largely agrees with Papalexopoulos that the current crisis provides
an impetus for change, but that the political will needed to
implement significant structural reforms is yet to be demonstrated.
SPECKHARD