Business English: German shipowners left in Greek wake

When George Xiradakis talks about Germany, he uses a very different tone from most Greeks.

While Berlin's role setting the harsh terms for Greece's eurozone bail-out has made it a subject of both awe and resentment for many in the country, Mr Xiradakis, a shipping consultant, adopts a tone close to pity.

Most shipowners in Greece - home to the world's second-largest fleet after Japan - look set to emerge from the global shipping crisis in a strong and competitive position; many of Germany's ship-owning funds, however, are facing bankruptcy.

  A container ship in Hamburg harbour

The contrast is a source of pride for Mr Xiradakis and many others in Greek shipping.

"When you compare German shipping with Greek shipping, it's the level of competitiveness and dynamism that makes the difference," he says.

Greek shipowners, Mr Xiradakis says in his office overlooking Piraeus port, are uniquely entrepreneurial, willing to invest at apparently unfavourable times and owning a wide variety of ships. Most German shipping companies are cautious and rely heavily on now-scarce funds raised from private investors.

The result is that Europe's two biggest shipping nations face strikingly different fates as they attempt to navigate the rocks of the deepest, longest shipping recession in 25 years.

In Germany, the world's third-largest ship-owning nation, the industry's problems are a source of embarrassment.

Carsten Wiebers, head of ship finance for Germany's KfW IPEX-Bank, says he expects far more bankruptcies among the funds that own nearly all German ships. The unusual structure of these "KG funds" - which are owned by hundreds or thousands of small, private investor funds, where no one person has control - is a significant part of the problem, he says.

"The situation in Germany is more severe than in other countries," Mr Wiebers says. "It has a lot to do with the corporate structure of the borrowers."

Greece's shipping industry appears, according to many involved, to be coming through the downturn in better shape than its rivals thanks to a factor usually identified as a weakness in the country's wider economy - ship-owning is dominated by private, family-controlled companies.

Many family-controlled groups recognised the signs of an unsustainable boom when China's export and import booms were sending earnings for most ship types to record highs in 2007-08, and most quietly put money aside to prepare for the inevitable bust, according to Michael Bodouroglou, chief executive of New York-listed Paragon Shipping.

"It is something they've lived through before," he says of the Greek owners. "The downturn in this cyclical business is something to be expected."

Greek shipowners are "not overly concerned" about the slump in earnings, which has sent rates earned by oil tankers, dry bulk carriers and container ships to below operating costs at points during the past year, Mr Bodouroglou adds.

"Most traditional Greek shipping companies are cash-rich. They will not only weather the storm but come out, I think, stronger."

German shipping companies, by contrast, are often run by anonymous managers, running operations on behalf of the hundreds or thousands of investors that hold stakes in the funds that own most ships. Buoyed by strong investor demand, these placed vast orders for ships before the 2008 financial crisis, expecting to find private investors later to pay for them.

A sudden fall-off in investor interest following the crash has left ship managers scrambling to persuade banks to lend them the Euro10bn they now need to make up the difference.

Jochen Döhle, a partner in Peter Döhle Schiffahrts, a major shipowner, attributes Germany's problems to the lack of strong hands controlling the shipowners.

"Out of the 700 shipowners in Greece, probably around 600 are playing with their own money and around 100 with other people's money," Mr Döhle says. "In Germany, we have around 400 shipowners, of which 370 are playing with other people's money. That's the fundamental difference in the two markets."

Mr Wiebers expects a wave of insolvencies among KG funds as a worldwide glut of ships and their high debts exhaust their remaining cash.

"Your borrower is highly leveraged and depending on market risk," he says. "In a crisis, it runs quickly out of liquidity if there's no employment."

Mr Bodouroglou says he believes Greece's shipowners' relative success might prompt wider reforms in Athens. Although some argue that the industry also benefits from generous tax breaks, he insists: "It is really an example of how well businesses can do in Greece if they are allowed to operate without too much state bureaucracy."