Hellenic Defense Faces New Reality
May/June Issue
Foreign Affairs magazine

Greece has traditionally been big on defense budgets, but with military spending constituting 4.1 percent of GDP until very recently, the government has needed to cut down fiercely. Now at 2.8 percent, Greece’s Minister of National Defense Vangelis Meimarakis plans to whittle spending down to 1 percent of GDP. Although the ministry has allocated $35 billion over the next 10 years, most of this is likely to be spent on new fighter jet orders, including $1.99 billion for 30 F-16’s, leading the 150 companies active in the Hellenic defense sector to seek out new markets. The Minister’s solution is a new law on procurements, establishing the obligatory participation of the national defense industry in new armament programs. “We are converting the domestic defense industry into a development lever of the Hellenic economy,” says Meimarakis. “We are convinced that the economy and the development of our country has a lot to expect from the enhancement of the defense industry.”

How are Hellenic companies facing up to the new reality? Their reputation for high end products has made Greek defense players a popular partner with international firms. In the case of the F-16’s, Hellenic Aerospace Industry (HAI), the largest state-owned aerospace and defense company in Greece, has become the sole manufacturer of key components for Lockheed Martin’s fighter jet. “We currently have 67 percent of our contracts signed with international companies,” reveals HAI’s CEO Tassos Philippakos. He wants to see the company turned into a major exporter for Greece by moving even further afield. “We don’t need to capture 10 percent of the global market; we need a fraction of 1 percent in order to have a successful company.”

“We are converting the domestic
defense industry into a development
lever of the Hellenic economy.”
Vangelis Meimarakis, Minister of National
Defense, Greece

For Europe’s defense industry, Philippakos ultimately sees consolidation leaving room for up to four pockets of excellence. “Europe may have to concentrate on certain technologies instead of trying to cover them all. You cannot be effective on all fronts when you have one fifth of the research and development budget of the US.” Philippakos’s 30 years of experience in the United States with Moody’s and Merrill Lynch gives HAI a clear insight into the global market, on which it
is furthering its growth plans.

Fortunately, more and more Greek SME’s are connecting to a wider world, among them the private firm Elfon Ltd, an innovative electronics and defense applications cabling producer. Elfon’s Managing Director Nicholas Kemos insists “Greek companies should concentrate on becoming subsystems providers and consistent partners to bigger firms across the globe.” Reflecting the company’s wiring and harnessing expertise, what Kemos describes as the “neural system within a system”, the Managing Director points out that “manufacturing today is a chain of diverse supplier relationships. Any supplier that enters this network must be fully aware of the responsibility undertaken and the ripple effects caused by deviations from expected performance.” This mindset has earned Elfon an Outstanding Supplier Award from Lockheed Martin for its participation in the F-16 program, as well as accolades from major partners in submarine, surface vessel, and missile systems.

“Europe may have to concentrate on
certain technologies instead of trying
to cover them all. You cannot be effective
on all fronts when you have one fifth of the
research and development budget of the US.”
Tassos Philippakos, CEO of
Hellenic Aerospace Industries

The real advantage for SME’s lies in their capacity to be flexible. Small, specialized lines of production make medium sized companies the most cost-effective suppliers for custom modifications required by the armed forces. Add to that a longstanding and active experience with naval-based systems and you get SSMART Signaal Hellas, a combined hardware and software solutions firm renowned for its custom-made production and services. Founder and Managing Director Charalambos Becatoros explains that a mid-1990’s assignment for a complete modernization of sensor systems originally produced by Signaal B.V. for the Hellenic Navy led to a fruitful and productive relationship with Thales Netherlands, SSMART Signaal Hellas’ first international partner. The company’s portfolio now includes a wide variety of products such as the TACTICOS Combat
Management Training System and logistic support for radars, missiles, and combat systems.

“The Greek labor force is highly
skilled in special areas, in some
cases even outperforming established
European countries.”
Charalambos Becatoros, Managing Director of
SSMART Signaal Hellas

With satisfied and repeat customers at home and abroad, including the German, Polish, and Indonesian Navies, Becatoros looks forward to forging stronger links with the US, the Balkan states, and the Middle East. “We feel the experience gained through already implemented programs gives us the security to knock on other doors. The Greek labor force is highly skilled in special areas, in some cases even outperforming established European countries, and as far as our reputation is concerned, people equate it with quality.” The next step for SSMART Signaal Hellas is a deepening of its R&D activity, a move that Becatoros says will take “patience and persistence”, not only for his company, but for any Greek firm serious about competing in the European defense market.

Most Greek defense firms are linked to the non-profit organization SEKPY. Created in 1982, SEKPY now strives to amass valuable transfer of knowledge from the United States by liaising Greek companies with similar sized American firms through which they can reach the big players of the US market. “Greece is a small, dynamic market that US and EU defense companies are competing to get orders for because it is an EU and NATO member with a prestigious defense budget,” says Spyros Papageorgacopolous of consultancy firm Commersa. One significant opportunity may arise when the government finalizes its decision on which major fighter jet program to adopt. Lockheed Martin’s regional Vice President Dennys Plessas hopes Greece will buy into the 5th Generation Joint Strike Fighter F-35, joining other European partner countries and Turkey. “As we look out into the future, it will be important to see those areas where each nation or each company contributes its best capabilities, so we don’t duplicate unnecessary investments, defeating the purpose of creating economies of scale.”

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Very nice post Ariadne, thank you B) :friendship: