A new wave of austerity is threatening to swamp every corner of Greece economic life, including the country's powerful shipping sector.
Under the country's recent debt deal with its creditors, Greek Prime Minister Alexis Tsipras has proposed raising taxes and cutting subsidies for the country's maritime industry, a global powerhouse that dominates the world's oceans and has made some Greeks billionaires. It is a delicate balancing act.
Some experts say coming down too hard on the shipping tycoons could drive ships flying the Greek flag to so-called flags-of-convenience jurisdictions, something much of the Greek fleet has already done. These alternative national maritime registries offer both friendlier regulatory and tax regimes. At stake could be some of the 200,000 good-paying jobs the maritime sector provides in a country were unemployment runs as high as 25 percent for the general population and upwards of 50 percent for young people.
"If these measures are implemented, then we will see an overnight move of the major shipping companies from Greece to Cyprus, similar to the one that London has experienced a few years ago," said Nikolaos Artavanis, assistant professor of finance at the University of Massachusetts Isenberg School of Management. "Many of these companies have already made preparations for this shift. It is needless to say that this development would be disastrous for the Greek GDP and balance of payments."
Shipping is ancient business in Greece, and deeply embedded in the nation's cultural heritage. From practically the beginning of recorded time, the country's 227 islands and strategically placed mainland have served as a gateway between East and West. And to this day, the industry continues to play an outsized commercial role in Greece, ranking second to tourism its contribution to the Greek GDP.
For a sense of scale, consider that if the Greek maritime fleet were a national navy, with its 3,428 ships, it would be 1o times the size of the U.S. Navy; in fact, it would be more than twice the size of the world's 10 largest national navies combined.
Greece's tanker fleet, with some of the most innovative ships working the oil trade today, represents close to a quarter of the world's tanker inventory. When the recent global oil market saw a glut in supply, for instance, it was Greek shippers who reaped the windfall as shipping rates shot up as oil producers found themselves chasing busy tankers to move their product.
Some industry analysts contend the industry isn't going anywhere, noting that a proposed hike in so-called tonnage taxes facing Greek shipping firms is relatively small compared to their overall costs. Tsipras' plan also is unlikely to come as any great surprise. These companies agreed to a tax increase in 2014 that will yield the Greek treasury another $420 million through 2017, according to industry analyst Lambros Papaeconomou of NYFEX Equity Research.
"I believe the lobbying on behalf of Greek ship owners is not about tonnage taxes, but about keeping their income tax free status," said Papaeconomou in a note to investors. "I suspect they will cut a deal with the taxman sooner or later, and I may add, for the benefit of both sides."
But as Tsipras pivots from his role as champion of anti-austerity tilting the Euro debt-meisters to domestic tax collector, the left-wing politician has a heavier lift at home. He could pay a political toll at home for failing to sufficiently squeeze shippers while asking struggling pensioners to tighten their belts.
Meanwhile, average Greeks are exposed to the pain of austerity in ways that the country's shipping industry is not. Global wealth rankings regularly include Greek billionaire shipping tycoons like Spiros Latsis and the Angelopoulos family.
"This industry has become a grandmaster of global haven-based chicanery. It routinely uses 'flags of convenience' like Panama, the Marshall Islands and Liberia to flout safety regulations, labor laws and insurance requirements," said James Henry, Senior Fellow at Columbia University's Center on Sustainable International Investment.
"It uses financial havens like Switzerland, Luxembourg, and Cyprus to hide wealth and make back-to-back loans that minimize corporate taxes," he added. "It uses 'residential havens' like London and New York -- and the best lawyers, bankers, accountants and politicians that money can buy -- to afford its super-rich owners an extravagant, virtually tax-free, transnational lifestyle, even while their fellow Greeks endure a Second Great Depression."
Whatever side of this debate you come down on, one of the consequences of Brussels pressing Greece so hard for austerity is that these perfectly legal global wealth-sheltering arrangements like flags of convenience and off-shore banking are coming under greater scrutiny.