In a downtown Athens building, a group of young Chinese women lounge on plush velvet couches, whispering in Mandarin while two young men at the bar sip complimentary espresso speaking Arabic.
The former bank branch in the Greek capital’s Syntagma Square looks like the lobby of a five-star hotel with its swank decor.
But it’s not.
The space in the heart of the square better known for street riots during the nine-year financial crisis that almost cost Greece its place in the European Union, now belongs to V2 Development, a real estate development company benefiting from a program that grants Greek residency — and by extension EU residency — to wealthy investors. In recent years, the program has been drawing throngs of Chinese seeking visa-free travel in Europe. At V2, visitors can gaze at passersby — and contemplate living in this European city for a mere 250,000-euro ($277,000) investment.
Greeks are still assessing the cost of remaining in the EU — saddled with the highest unemployment rate in the 27-nation bloc and the poorest country using the euro currency. But having clung to membership, the business of selling Greek (and therefore EU) residency permits to Chinese, Turkish and Russian nationals has become a lucrative industry and one of the bright spots for the economy, stoking a revival in the moribund Greek property market.
The prime drivers behind this revival are the newly wealthy Chinese. In Greece, where governments have welcomed Chinese investment in sectors from ports to energy, 13,075 Chinese nationals and family members received residency last year, compared with 1,342 Turks and 1,000 Russians.
“If it weren’t for the Chinese I wouldn’t be talking to you right now,” said Vaggelis Kteniadis, 47, the owner of V2. “The Chinese are tired of being forbidden, not having options.”
But what about the coronavirus? Is it stopping the flow of potential investors from China?
“It’s logical that sales will be affected until the virus is contained, but afterward it will be much busier than before,” Kteniadis said. “They will want to avoid living through similar incidents in the future.”
Touted as one of the cheapest such programs among EU countries, the number of people receiving Greek permits has nearly doubled each year since it began in 2013. Last year, Greece issued 18,616 residency permits to investors and members of their families, allowing them to move freely around dozens of EU countries.
That sort of demand has helped resurrect a domestic residential property market that lost 40% of its value between 2007 and last year, the biggest fall in the EU. While no specific figures are available, the 6,304 primary permits issued for an investment of 250,000 euros each would imply income for the Greek state of some 1.5 billion euros. Of those permits, 70% went to Chinese nationals.
About 20 EU countries sell residency permits to non-EU citizens in return for investments, in the same way that the U.S. does through its EB-5 program. The EB-5, begun in 1990 to boost investments and jobs, provides foreigners with permanent residency if they invest at least $1 million in a new business venture that creates at least 10 jobs.
But it is capped at 10,000 annual visas and at 7% for each nationality, which has led to a huge backlog of Chinese applicants. More than 82% of applications in 2016 — the most recent year for which figures are available broken down by country — came from mainland China, according to data from immigration authorities. In November 2019, the amount required for investment was raised to $1.8 million and $900,000 as a minimum in some areas, to account for inflation, the first increase since 1990.
A number of EU countries also sell citizenship. But the runaway success of both passport and visa programs among EU countries has sparked alarm in the EU’s executive, the European Commission.
While residency and citizenship remain the task of national governments, the EU has said that some of the programs, particularly those offering EU passports, could pose a risk to security and efforts to curb tax evasion and money laundering. A January 2019 report from the European Commission found there was a lack of transparency in how the schemes are managed.
The EU’s concern focused primarily on three member states — Cyprus, Bulgaria and Malta — which sold investors so-called golden passports. While these were national schemes, they were deliberately marketed as a way to buy EU citizenship and all its rights and privileges, including free movement across the bloc, the report said.
Bulgaria immediately said it would drop its program because it hadn’t brought the expected financial returns. But for other small EU states like Malta and Cyprus, which have built their economies on services for the wealthy, the financial gains are significant. The program accounted for 5% of Cyprus’ gross domestic product in 2017, the anti-corruption group Transparency International estimates. Overall, Europe’s golden visa and passport programs have brought investments of over 25 billion euros in the last 10 years, the group says.
Malta’s 1-million-euro passport program has come under growing scrutiny since journalist Daphne Caruana Galizia was killed by a car bomb in October 2017 while investigating corruption related to the program. An EU Parliament delegation in December 2017 said the “opacity” of the golden passport program risked importing criminals and money laundering to the EU.
Cyprus tightened its rules for issuing passports for investments of 2.5 million euros following the EU report last year, ruling out applicants who had been turned down by other EU countries and requiring them to have travel permission within the EU. In November, Cyprus revoked 26 passports.
A second-generation property developer, Kteniadis has strong opinions about the legitimacy of the Greek investor permanent residency permit. Most of those seeking such permits are concerned with the ease of travel afforded by the residency permit, he said, and little else.
“These people are millionaires but have to sign forms and prove they’re not elephants each time they travel,” Kteniadis said. “It’s humiliating.”
The golden passport schemes differ from residence, or golden visa, schemes, but the risks are similar, according to the EU commission report. And while Brussels has set up an experts group composed of national representatives to agree on minimum standards, these have yet to be rolled out.
In December, European Commissioner for Justice Didier Reynders reiterated the commission’s commitment to remaining vigilant to the money-laundering concerns that the schemes inevitably raise.
“Together, the member states create the conditions for enjoying EU citizenship,” he told the European Parliament. “This common achievement should not be exploited by individual member states’ risky investor schemes. We will evaluate if a legislation is needed to fight against the abuse of golden passports and if infringement proceedings must be introduced.”
Laure Brillaud, the senior officer on anti-money laundering policy at Transparency International EU, said the group recommends EU agreement on the minimum standards for security checks and controls, with effective implementation by member states, and that the entire industry be considered a profession subject to anti-money laundering obligations. Member states whose programs jeopardize or undermine EU values and objectives should be subject to infringement procedures.
For the time being however, for Kteniadis, it’s business as usual.
“Whoever wants to invest in Greece this way, they are welcome,” said Kteniadis whose company has offices in three Chinese cities. “We lost 30% of our GDP during the crisis. I didn’t see too many people interested in fixing that.”
Petrakis is a Times special correspondent.