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RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSL RUEHSR RUEHVK
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DE RUEHTH #1271/01 2010707
ZNR UUUUU ZZH
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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¶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 
------------------------- 
 
¶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 
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¶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