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By Kathy Tzilivakis
2012-07-05
As Greek politicians continue to squabble over who’s more to blame for the country’s economic crisis and the economy spirals further into recession after three years of painful austerity measures, there seems to be no end in sight for this economic crisis. Or is there?
Meet Greek shipping heir Peter Nomikos, the son of a Greek shipping magnate who built a multi-billion dollar empire in shipping and medical technology, who says he has a plan to wipe out Greek debt– and people are listening.
Part of the reason why is because Nomikos– a successful serial entrepreneur who is passionate about Greece– is putting his own time and money behind the project.
The entrepreneur still lives in the British capital and finances both commercial and non-profit projects. Nomikos spends about 70 percent of his time earning money, the rest he devotes to charitable ventures. With a seven member team he now runs the campaign for a Debt-free Greece.
His Santorini beer company that he founded, Volkan, contributes 50 percent of its profits to the charity.
In an interview with The Pappas Post, the 33-year-old Nomikos who studied economic history at Princeton University, explains how Greeks (and Philhellenes) around the world can help reduce the Greek national debt.
Last month, he set up a U.S.-based non-profit organization called Greece Debt Free that will buy Greek debt bonds and then… forgive them.
It hasn’t been done before anywhere else and as crazy as it sounds, it just might work. If it does, Greece can reduce its indebtedness to international rescue loans from the European Union and the International Monetary Fund.
According to Nomikos, Greece Debt Free is a non-profit, fully-transparent internet and social media based mechanism for people to support Greece in a “smart way’.
His message is resonating in the highest echelons of the media and financial world, with interviews and profiles in The New York Times, Bloomberg and the German magazine Spiegel.
Greece Debt Free accepts donations for the sole purpose of buying Greek government bonds in international markets at prices much lower than the amount owed by the Greek government. A donation of just one euro can reduce up to eight euros of debt.
Here’s our exclusive interview with Peter Nomikos.
Why did you launch Greece Debt Free?
I’m a patriot. Greek bonds can be bought in the market for 12 cents for every euro.
That means that Greece Debt Free can buy a euro worth of government debt for only 12 cents.
If we can get more Greeks to buy the Greek government debt at 12 cents on the euro, and cancel a hundred cents worth of debt then we can make a difference. Greece Debt Free was founded as a non-political, non-governmental, fully transparent, internet and social media based mechanism for people (Greeks and philhellenes) to support Greece in this smart way.
How did you come up with the idea for this charity?
The value proposition is clear. Someone who wants to help Greece can invest a euro and GDF will help cancel eight euros of debt. If you can communicate this incredible message to everyone who supports and loves Greece, then change can happen.
I started to develop the Greece Debt Free concept last year, during the Arab Spring movements. What was incredible was how half a billion people could be motivated to facilitate democratic change using social media (Facebook, Twitter, YouTube etc) in the Middle East. An entire region organized and motivated within the space of weeks. Greece Debt Free has been designed to take advantage of these new media tools.
With Greece Debt Free everyone can now help who wants to help, with confidence and transparency.
Does something similar exist in another country?
No.
Why did you establish your foundation in the US state of Delaware?
In Greece, I couldn’t be sure the money would remain untouched. Also, being a U.S. charitable foundation means that American taxpayers can deduct any donation from their taxes. It is an incentive for the wealthy Greek diaspora in the U.S.
Greece Debt Free is a 501 3C charitable foundation, that affords US source income donors a 30 percent tax deduction, so if you give a 1000 euros, after deduction your cash cost is about 700. So your cash cost to Greek Government debt reduced is actually between 11 and 12 times. This is an unprecedented use of US charitable foundation status.
Greece Debt Free had to be established outside of Greece under strict US charitable laws in order to ensure donors that their money went exactly for the purpose that is stated on our website.
How does it work?
The Greek government owes 280 billion euros. The Greek Government borrowed 280 billion euros. ( In fact more than that due to the recent haircut.) Investors do not believe that the government will be able to pay back that full amount. On the cheapest bonds investors think the government will only be able to pay them 12 cents on the euro. So you can buy about 8 euros of Greek government bond obligation for 1 euro.
It is written in our by-laws that we must use donations to buy the most government debt at the lowest price. Greece Debt Free is not an organization, it’s a mechanism. It has no employees and it has no expenses. The establishment strategic formulation, legal documentation and web assets out of my own pocket, such that every euro that someone gives (less brokerage fees and other normal transactional costs goes to buy as much Greek Debt as possible).
Many people ask if we are successful wouldn’t a large buyer of government debt that then cancels that debt effect the prices? We have to acknowledge that that may be the case, but we seek to cancel the debt that we buy in a one off event, rather than incrementally reducing Greek Debt and raising our buy back price.
The irony here is that the worse the Crisis gets the cheaper the bonds we’re buying. Right now, there couldn’t be a better deal for someone who supports Greece. To invest one euro and get eight euro debt reduced is amazing.
How many bonds has your foundation bought so far?
Look on line for the latest figures, but we have lots of funds that have been promised but not yet processed, due the weekend and wire delays. Publicly it is 2.5 million euros.
What’s been the feedback/response?
Greece Debt Free is non-political, non-governmental. When you ask a Greek to respond for a patriotic cause separate from the political uncertainty and distrust that plagues our nation the response is overwhelming. Historically, we Greeks have been some of the most vigorous patriots. I have spoken to very few business leaders. They typically return within twenty-four hours with a list of creative ways that they can contribute.
How did you get Olympiakos’ Marinakis involved?
I asked Vangelis to communicate the GDF message via his media platforms and his teams. He agreed immediately. My next call was to ask Vangelis to de-indebt his players, to buy what each Greek owes , that is 24,800 euros in national debt, however that can be bought for 3000 euros. Vangelis immediately agreed, but extended it to not only his 20 or so players but also to the entire 55 Olympiakos employees.
We are now in discussion with many other organizations and private entities interested in making themselves debt free. Of course I started this by making my own and my family’s organization debt free.
Other recent attempts to help Greece through patriotic efforts have had little success. How confident are you that Greece Debt Free will work?
Citizen lead actions to support a patriotic end have had many historical precedents. Most recent was the 1997 South Korean debt crisis, where Koreans gave gold to their government to help repay IMF loans.
Greeks have an advantage over the South Koreans the Greek currency, the euro, is strong, and the Greeks debts are euro denominated. In South Korea the won had collapsed, and the IMF loans remained in dollars. That’s why the South Koreans had to give gold.
We Greeks have a strong currency. Greek national debt per capita is 24800 euros. However, the value of that debt has collapsed. At today’s market prices, you can buy on the secondary market for 3,000 euros 24800 euros worth of government bonds.
What’s your personal take on the economic crisis in Greece? How do you see the situation developing?
GDF does not allow personal or political opinions.
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