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Spyros Polemis, former chairman of the International Chamber of Shipping, talks about the meaning of the maritime industry for the Greek economy, current tax policies, reasons for overcapacities and their environmental impact
Mr. Polemis, shipping has been a key element of Greek economic activity since ancient times. How would you describe[ds_preview] the situation of Greek shipping in general under the sovereign debt crisis in Europe?

Spyros Polemis: Greek shipping by its very nature is a cross-trader, meaning that it cannot and it does not rely on imports or exports to or from Greece or just Europe for that matter. The cargoes it carries internationally are between major importing and exporting areas. Consequently, the sovereign debt crisis in Europe does not have such a direct impact to the industry’s viability to the extent that people might imagine. Of course the Greek shipping industry, like all others, is affected to an extent, because trade is affected, as is the economic activity around the world during a financial crisis.

In 2012 you once mentioned that there should be a moratorium on new orders for ships until the crisis is over. What is your opinion about the reasons for this obvious oversupply and is the moratorium still eligible nowadays?

Polemis: Indeed, too many ships have been ordered and continue to be ordered, and this will prolong the shipping market’s downturn and eventual recovery because there is an oversupply of ships. The reasons are many and varied. One is that capital markets, private equity and hedge funds have come into shipping in a big way by financing shipping companies in ordering newbuildings. The reason for doing this was purely an asset play, i.e. a relatively short-term investment in order to make a profit from the appreciation of ship values.

Another factor has been the push by politicians and various authorities to reduce the CO2 emissions from ships because of global warming by ordering new vessels which were to be more economical. Thus, many shipyards have been selling or trying to sell their so-called eco vessel designs.

This is very unfortunate, however, because although we do want – as an industry – more economical ships, the idea that we build vessels to replace still relatively new ships, simply because they are not as economical, is totally wrong. This is because the CO2 footprint in building a new vessel is much larger than the savings that would be achieved in the improved consumption. In other words, from an environmental point of view, it is not justified.

The third reason is that some ship-owning companies as well as charterers want to be seen to be actively doing something about the environment vis-à-vis the authorities as well as their competitors, and thus they have shown a strong preference for newer and more economical vessels, and a dislike for the relatively new but somewhat less economical existing ships. In the end, however, as explained above, this trend is damaging to the environment overall, plus the fact that it is not simply building ships we do not need, which process itself creates a very large CO2 footprint, but also having more ships in the water, thereby increasing the overall CO2 emissions.

Recycling cannot correct this trend as the net number of vessels also keeps increasing. Ships should be replaced as always in the normal course of events as market forces dictate. Anything else is a huge waste and damaging to the environment.

With regard to the requirements for environmental standards, specific demands on the shipping sector might arise in the upcoming years. What would you say about the efforts of the Greek shipping industry to encounter these challenges?

Polemis: The Greek shipping industry has continuously proved all through the years that it adapts and adjusts to the demands of the day by the authorities or the market, and this is indeed the case today as well, regarding the new regulations concerning the environment. The Greek shipping industry is comprised very much of hands-on operators, which means that they have intimate knowledge of the pros and cons, of whatever new rules are being proposed, and thus they are in an excellent position to have a very valuable input and a construc­tive dialogue. Ultimately, what we all want is that all regulations, environmental regulations included, are fit for purpose, are cost-effective and will apply to all ships worldwide, whatever the flag or ultimate beneficial ownership is.

As a part of its measures against fiscal shortfalls, the Greek government has imposed a triple tax on ships managed out of Greece. It is intended to include the shipping companies in the nation’s economic recovery. Do you think it works?

Polemis: The Greek shipping industry has supported the Greek government or rather the Greek state throughout its history in various ways, both financially as well as politically, strategically and otherwise. During this period of a very deep financial crisis in Greece, it was not an exception. The dispute concerning the triple tax and the voluntary vs. mandatory arrangement is unfortunate, but in many ways and deep down it is not in a sense the fault of the Greek government or a misunderstanding between the government and the Greek shipping industry.

It has more to do with the unprecedented pressure by the European Union, the European Bank and the IMF, whose agenda appeared at times to have a political hue rather than a purely financial. The Troika played a very dangerous game in this respect, dangerous from a European perspective, because they risked alienating the Greek shipping industry, the biggest in the world and by far the biggest in Europe, very much to the detriment of Greece, the country that they were supposed­ly trying to help, but also of the EU itself.

Many inaccurate statements have been made by a number of people over many months, that have fueled resistance to an agreement within Greece, which was contrary to what the government, the Troika and the Greek shipping community wanted. Everyone wished that a sensible and practical way forward was found, and some of the comments people made were extremely unhelpful.

As it is, the triple tax has been withdrawn, the voluntary agreement has been reinstated for a longer period, so that the Greek state will in the end have the income it was planning to have and perhaps even more than originally anticipated.

There is a scenario that the lack of trust between the maritime community and the Greek legislation may lead to an exodus from the Greek flag. Do you think it may come true under this new tax regime?

Polemis: It is hoped that because of the fact that after this unnecessary turmoil, a new agreement has been reached with the government, trust will be restored. It is in no one’s interest not to have smooth relations between the government and the Greek shipping industry because both will lose, although the Greek state stands to lose much more than just much needed income. As it was stated previously from the Greek state’s perspective, the existence of a very strong and healthy Greek shipping industry is a huge bonus for the government.

The rate of unemployment in Greece is at 28% the highest in Europe. Besides, the shipping industry is one of the main pillars of the Greek economy. Do you think there might be a contribution of the shipping sector to mitigate the social and economic marginalization?

Polemis: The Greek shipping industry has made a number of proposals to the government to enable them to employ a greater number of people in the industry, but unfortunately so far these have been rejected because of pressure from some ill-informed stakeholders, and also for political reasons. However, many Greek shipping people have invested in other fields, such as hotels, resorts, yachting enterprises, banks, hospitals, local communities and others, and thus they have had a positive impact on employment, quietly and with­out any fanfare. Thus, it is not difficult to imagine that the Greek shipping community, because of its strength and vibrancy, has had an involvement throughout the

years in many other fields and many other industries, so their impact is much bigger than can be seen at first glance.

Mr. Polemis, thank you for the interview.

Interview: Birgit Nolte-Schuste

Birgit Nolte-Schuste