Secretary General Theodore Skylakakis
Remarks Woodrow Wilson Center

Ladies and Gentlemen,

I would like to thank the Woodrow Wilson Center Southeast Europe Project for the kind invitation to address this distinguished audience as part of the distinguished Tsakopoulos-Kounalakis Lecture Series. It is indeed an honour and a privilege to be with you at this esteemed international center for scholars, to present the Greek strategy of economic diplomacy as we have practiced it, and will continue to practice in the years to come.

This presentation will describe the reasoning and objectives at the foundation of our policies, the initiatives undertaken, and the first results of our efforts, both in fostering economic development and in helping prevent future conflicts in difficult and volatile regions of the world.

The importance of economic diplomacy as a driving force for political development is well known and understood. After all, the reason why policy makers are considering globalization as the most important economic and social trend of our era is because in large parts of the world, localization and its attendant underdevelopment still reign supreme.

International trade and other areas of global international economic relations are increasing in importance. As a result, if one considers the internal market in Europe, or the United States, and compares it with the level of economic relations between and within other regions of the world, it is clear that there are large areas for progress, prosperity and dynamism that could result from effective economic diplomacy.

By economic diplomacy, we mean the use of our political influence and relationships to

• promote international trade and investments,
• improve the functioning of markets,
• reduce the cost and risks of cross-border transactions,
• achieve internationally accepted standards,
• secure private property rights,
• develop international telecommunications, energy and transport networks; and of course - first and foremost –
• consolidate the right political climate to facilitate and institute all of these objectives.

This is a great challenge, especially for governments which must contend with the forces of economic nationalism, cultural anxieties, embedded corruption, and resistance to reform.

Economic diplomacy is also of great importance as a long term instrument for conflict prevention. The most obvious example, and one of the greatest success stories of the past sixty years, is the creation and astounding success of the European Union.
When the Union was first established as the European Coal and Steel Community shortly after the second world war, its basic idea - explicitly discussed by its founding fathers - was the strengthening of the economic ties between member states and nations as an instrument for preventing future wars in Europe.

Indeed, for more than 60 years, Europe enjoyed unprecedented economic growth and political stability. So strong are the mutually beneficial economic bonds and interests that, today, conflict is unthinkable between the member states of the European Union.

However, this success is not a work of Europe alone. The United States played a crucial role, providing within the NATO alliance an immensely important security component. America's long-term commitment, lasting more than forty years, until the major security threat of the Soviet bloc was eliminated, was essential to Europe's success.

The United States and Europe complemented each other, combining their respective strengths time and again, working together and with other powers and important nations of the international community, within the framework of international organizations. That partnership, between Europe and America, is and will remain for the foreseeable future the most important factor for conflict prevention in the world.

But Europe utilized its unique historic experience only partially after Communism collapsed and the continent was confronted by the inherent instabilities of emerging democracies and economies in Eastern Europe and the Balkans. Europe did succeed in enlarging the EU to embrace Eastern Europe, but failed to use the same instruments in time in the case of former Yugoslavia.

This partial success can be explained if one considers some of the obvious disadvantages that limit the usefulness of economic diplomacy in conflict prevention – namely, the need for long-term commitment to achieving objectives. Economic diplomacy is necessarily a long term process. Its results start showing not in mere months or years, but rather in a decade, or even longer. So it cannot be effective by itself when a situation rapidly and unexpectedly deteriorates towards conflict.

Also in recent years, the importance of cultural differences as a fundamental cause for conflicts has influenced policy makers all over the globe. So much so, that in some cases policy making has reached the other extreme of the pendulum. It has moved from excessive trust in economic tools and markets to the deterministic belief in cultural schisms. This is a dangerously effective concept, because it can act as a self fulfilling prophecy. It can make us lose our focus from the fact that all the great achievements of Western civilization, involving human security, technological modernization, economic development and individual freedom, are still desired by billions of people today – men, women, and children of different cultural backgrounds, but all sharing the same fundamental human needs. The same fundamental human aspirations.

Ladies and Gentlemen,
Let's now discuss specific Greek policies and initiatives, starting with the Greek-Turkish relations, which are of great importance for the stability of the wider southeastern European region.

The basis of these relations today is the candidacy of Turkey for membership to the European Union. Greece took the brave decision to encourage and support Turkish candidacy. We believe that if Turkey proceeds with the reforms necessary for European integration, both our countries, and the broader region, will enjoy very substantial political, economic, and security benefits.

However, the changes needed, in policies and in mindset, are considerable and daunting, as they have been for every single country that joined the EU. And it is important for Turkey to move towards that direction with much more forcefulness and determination.

Granting candidacy status to Turkey was not an easy decision for European governments, especially considering the substantial opposition of European public opinion, and if the momentum of Europe's supportive decision is lost, it will indeed be very difficult to renew.

Parallel to the European process, Greece is working with Turkey in promoting our bilateral economic relations. In the past seven years alone, we have completed an extensive framework of thirteen major economic agreements covering all aspects of our relations, and today a number of projects and initiatives are being implemented.

I will cite the more important:

• the natural gas pipeline starting from Baku, going through Turkey and Greece to Italy, with construction already under way;
• the agreement to interconnect electricity networks of Greece, Turkey and Bulgaria;
• the decisions to jointly construct a new bridge across the Evros, the frontier river between the two countries, to jointly renovate our railroad connection, and to open new maritime corridors between Greek and Turkish ports.

Also in the last five years, there has been significant increase-more than doubling- in Greek-Turkish commerce, while fifty five large Greek and Turkish companies have started investing across the Aegean Sea.

Finally, and this is a very important development, the largest bank in Greece, the National Bank of Greece, has entered the Turkish banking sector through the purchase and acquisition of Finansbank, Turkey's fifth largest bank, for 2,7 billion US $. This is by far the largest single foreign investment of a Greek company anywhere in the world, and clearly a dawn of a new era in our economic relations with Turkey.

Facing northward, our policies towards our Balkan neighbors are based on three pillars:
• actively encouraging bilateral economic relations in the form of trade and investment;
• supporting the aspiration of our neighbors to become full members of the European Union; and
• promoting the creation of a single Balkan economic space.

We have prepared the ground for stronger bilateral relations by signing more than thirty bilateral economic agreements covering most aspects of economic activities, including protection of investment, avoidance of double taxation, seasonal employment, transport, development of border crossings, tourist cooperation, and development assistance.

Nearly three thousand Greek enterprises and businesses have taken advantage of this new environment and are now actively conducting operations in these markets. Overall Greek investment now exceeds eight billion Euros, or more than nine billion dollars, in sectors such as banking, telecommunications, construction, energy, mining, cement production, foods & beverages, oil and petroleum delivery, and an array of professional services.

This process of heavy Greek investment started in the early nineties and has never stopped, even while the region was in turmoil. Today, Greece and all of Europe are reaping the rewards of economic development as the foundation for long-term political democratization and stability within the countries of the Balkans.

Finally, Greek immigration policy has been critical to this success story. Over the past fifteen years, Greece has accepted and successfully integrated a wave of immigrants, mostly from neighbouring countries, that exceeds 10% of the country's entire population. This policy helped all the economies in the region, providing Greece with needed labor and the countries of origin with sizable remittances and workers who returned to their homelands experienced in the functioning of a modern market economy.

The second pillar, Greece's support for the aspirations of our neighbours to become full members of the European Union, is of great strategic significance. The full integration of the Balkan countries in the EU is Greece's final, hopeful destination. And Greece remains firmly committed to this policy, and this destination, even as wider Europe public opinion is showing strong signs of "enlargement fatigue."

This brings me to the third pillar of our Balkan policy: the promotion of a single Balkan economic space. With the full participation in the European Union of all Balkan countries as Greece's final goal, we must recognize the practical obstacles that lie ahead, especially in the western Balkans. These obstacles are rooted in the creation of new states, in unresolved political problems, and in continued difficulties in pursuing economic reforms.

So an added, parallel effort is needed. The creation of a single economic space will facilitate the accession process of lagging Balkan countries and simultaneously provide immediate economic development with long-term benefits.

Greece supports this concept by supporting, together with our EU partners, the creation of a free trade area encompassing all our northern Balkan neighbours. The target date for signing the new agreement is the end of 2006.

Greece is advancing the work on major trans-European transport freeways, railroads, and other networks that, once completed, will interconnect regional markets and create new arteries to nourish economic development. Though the main catalysts are European Union and international organization funds, Greece provides considerable national funding as development aid to facilitate this effort, mainly in the X transportation axis that connects Greece with the rest of Europe through Serbia and the Former Yugoslav Republic of Macedonia.

Greece is facilitating the creation a common energy market in the region. An Energy Charter has been signed between the 25 EU members and 9 countries in the region, harmonizing their internal legal framework with that of the EU to integrate energy connections running through the Balkans and enhancing regional and Europe-wide energy security.

In addition to the Greek-Turkish natural gas pipeline and the regional electrical grid, the Bourgas-Alexandroupolis pipeline will provide yet another secure corridor for Eurasian oil to reach Western markets.

Greece is also leveraging its sizable development aid to promote economic unification and strengthen financial incentives for investing in the Balkans with smaller projects such as the broadband interconnection of regional education and research institutions.

Greece's economic diplomacy is also very active in the Black Sea region, where stability is utterly critical for the security of the global energy supply networks. Greece is present in the Black Sea through development aid and its membership in the Black Sea Economic Organization, supporting a number of initiatives like the interconnection of electrical networks among Black Sea countries and the creation of a freeway around the Black Sea that can vastly improve their economic infrastructure and development.

As the Greek economy becomes even more extroverted, in order to sustain our high development rate, now averaging 4% annually, our economic diplomacy is also promoting our role as a gateway to Europe for other regions of the world.

Greece offers potential investors political stability, rule of law, modern infrastructure, and direct access to a newly dynamic economic region. Based on these regional advantages, Greece is strengthening its ties to economies with great development potential, such as in China, using also our influential commercial maritime sector, which owns sixteen percent of the world's total shipping tonnage, the largest such fleet in the world. Clearly, Greece's shipping fleet is a genuine global strategic asset that accelerates the flow of international commerce in this 21st century era of globalization more than any other in the world.

Ladies and Gentlemen,

If one examines the results of modern conflicts, in most cases the costs far outweigh the actual gains for all the parties involved. Short sighted political motivations, fueled by ethnic, religious and cultural prejudice, usually explain the reason for irrational decisions.

Economic diplomacy in the long run can contain these forces.

We can imagine economic relations as threads interconnecting people, organizations, regions and countries. These threads are the daily transactions that are by definition voluntary and mutually beneficial, and the long term relations that create personal trust and dismantle hostile stereotypes and misperceptions.

These threads are created by trading goods and services between companies in different countries, by transport and telecommunications networks, by energy connections and pipelines.

Powerful threads are created by big investments that dominate the news, but even when everyday, ordinary people work in one country and provide for their family in the other, buying land and building houses, or when tourists travel and experience culture, food, and entertainment in neighbouring lands, the threads created can be lasting.

If enough such threads form the relations among countries, then gradually the destructive forces motivating conflicts will find themselves constrained and defeated by this net of intersecting economic threads. These destructive forces have long existed, and they will not disappear overnight. But like the ropes of the Lilliputians, the multiple threads of economic relations, given enough time, can restrain and immobilize the Gullivers who wreak havoc in the world.

This is the long term paradigm that Greece, as a longstanding member and integral part of the European Union, is actively and forcefully promoting in and throughout southeastern Europe. Facilitating economic development and working hard not just to prevent future conflicts but make them unthinkable in our region – this is the spirit, and the success, of our economic diplomacy.

Thank you very much.