P.M. COMMUNICATIONS: I would like to begin the discussion your vision on the security and regional cooperation over the past few years, and how they are affecting the defence industry?

MR. TENEKOUDIS: In my opinion, the defence sector in any country relies on two major pillars. The first one is the industrial infrastructure, and the second involves the means by which we support this infrastructure to fulfil our requirements. We must fulfil our country's military requirements and at the same time, reap the economic benefits of being part of this sector of the international economy. Greece itself spends a lot of money in military expenditure to sustain our resources in an acceptable and operational level.

P.M. COMMUNICATIONS: Historically, Greece has always spent a large part of its budget on defence expenditure. Do you think there has been a change in the focus and an increased effort to ensure that the national economy benefits more from the defence industry?

MR. TENEKOUDIS: Greece used to spend a lot of money for defence and military expenditure. Just five years ago, we were spending almost 6% of our gross dometic product, and proportionally were one of the highest spenders on security globally, but that was clearly unacceptable. Today, all the countries have changed their priorities and the governments are more focussed on how to offer the people a better quality of life, because we live in the 21st century and the requirements are different to what they used to be. The Internet and the globalisation, as well as the major political alliances have transformed the world. Take the European Union as an example and the questions that it raises. How much European can we get? The requirements of the European Stability and Growth Pact have changed our priorities. For instance, we have implemented new policies and are seeking to contain our costs. In terms of procurement, we are also seeking to focus on quality rather than quantity. With this in mind and in order to fulfil the new priorities and requirements, it was necessary for the military budget to be reconsidered.

Nowadays, new smart and sophisticated equipments create the quality products. If one were to visit a military exhibition ten years ago, one would discover manufactured goods such as tanks, vehicles and guns. Today, at a modern exhibition we can only see the photos of these products! Instead, we see computers, software systems and lots of high technology. This is not only the case in Greece, the same transformation is occurring other EU members, not to mention countries like the United States and Canada. The new philosophy is quality versus quantity, and technology instead of traditional mass-produced products.

The Ministry of Defence runs in four different spheres. The first sphere is the national one, the second is the international environment the third is NATO. Greece is also part of the recently established European Defence Agency (EDA) which is the fourth one. The idea for this organization was developed by the European Union during the 2003 Summit in Greece. EDA is the tool of the European Union to harmonize and coordinate all the European Union Defence Industry environments and structures, including research and technology infrastructure, nation's military equipment needs, as well as laying the foundations for the new European Army and the creation of a common European policy for security and defence. Based in Brussels EDA is managing the four separately distinguished environments and Greece is obliged to cooperate, as well as other European member states.

Our domestic defence industry network is included within these environments as well as our efforts in relation to research and technology. Our national defence industry consists of around 150-200 companies, the majority of these institutions are small to medium sized enterprises and only six of them are actually large industries that employ well over 1,000 people. Two of these companies are state-owned, the Hellenic Aerospace Industry and the Hellenic Defence Systems. There is a company is in Thessalonica called ELVO where the state holds the majority of 51% shares. The management of the company and 43% of the shares belong to METKA and 6% to other companies. There are three other corporations: INTRACOM, specialized in electronic and electrical equipment, ELEFSIS Shipyards and another large company worth mentioning is SKARAMANGA Shipyard, which is fully owned by the German HDV. Each one of these companies employs over 2,000 people.

P.M. COMMUNICATIONS: The Defence Industry plays a significant role in the New Democracy government's push to improve the competitiveness of the Greek economy. The government is focused on research and development and is keen to promote more high-tech industry and jobs within the country. How do you see the role of the Defence Industry in Greece's wider economic policy especially given the changing market conditions and greater collaboration on the European level?

MR. TENEKOUDIS: Before I answer this question, let me explain to you how the research and technology infrastructure is set up. Greece's research and technology infrastructure is incorporated into three homocentric circles. The first circle is the research and technology capacity of the Ministry of Defence, which consists of three separate centres - the Army, the Navy and the Air Force. The second circle consists of the research and technology departments, divisions and laboratories in the companies that I mentioned before. The third outer circle includes the Greek academia, the universities and the polytechnic institutes. We are more focused on the polytechnic schools because they are more linked to what we are doing and they maintain several laboratories headed by specific professors. The schools and laboratories are doing a great job because at the same time they are educating new scientific researchers capable to serve the defence sector.

If we multiply these capabilities, we can observe a large spectrum of activities and challenges. The potential is great but with the advent of globalisation we face strong competition all over the world. We have realised that in order to compete, the Ministry of Defence must implement a comprehensive strategy in both pillars of the Defence Industry - its industrial base and the research and technology infrastructure. This strategy involves what I call the three C's: Consolidation, Cooperation and Co-production. They must be simultaneously implemented at the national and international level. This same strategy applies for all our counterparts in other countries and this is one of the reasons why the EU founded EDA. We must synchronize and rationalize all the assets and budgets that we have to avoid complications, overlapping and conflict of interests for the best of our people in the European Union as well as on a global level.

Subsequently, this will affect the national defence and research and technology sectors. On May 19th, we will reach a very significant milestone where the member states of the EU who belong to EDA, will decide whether or not to enter the so-called Code of Conduct. The Code of Conduct will be set up by July 1st 2006, and by this day we will be ready to implement all of the measures relating to the code. It will directly influence how the EU member states will apply their defence policies and even how we sell military equipment. The code of course works on a voluntary basis, but those members that sign up will have to follow its measures on a mandatory basis.

On the other hand, one must distinguish between the Commissions of the European Union and the EDA, which is an organization within the European Union. The European Union has established laws governing European general trade, but by next year the E.U. will create a new European law for trade inside the defence sector, which will then be mandatory for all members. Anybody who is not satisfied with these national requirements can take his grievance to the European Court of Justice. All the nations in the EU have to be prepared for this.

On the other hand, the national priorities exist constantly in our daily lives and we must fulfil the daily operational requirements of our nations. This is the reason why, when the Rome Treaty was written, a specific article was included in the treaty, the "famous" 296. This article allows the member states of the EU to bypass the European laws made by the Commission in case that any nation feels that its national security is endangered. However, when the EU implemented this article, it was supposed to be used in exceptional situations, and yet the article was systematically violated by many member states in contravention of open competition, the free market and the free means of collaborating among nations, thus disturbing and disorientating the defence market and competition.

Once they realized that, the EU decided to synchronize the EDA and produce European laws in order to counteract this violation by the member states. As you see, things are changing. We use a diverse approach whilst staying within the jurisdiction of what is demanded from the Commission.

However, we have to decrease unemployment and inflation, as well as to be more productive in developmental and technological challenges. We are moving in the right direction but only if we all work together will we remain successful. Through cooperation, friendship and a common understanding we can establish a European defence equipment market and a pulling research and technology base, instead of a pushing one to smooth and trim out a more wealthy defence market. At the same time, we must not ignore our national security, principles and history, and maintain a peaceful and stable environment.

P.M. COMMUNICATIONS: Another interesting development is the New Procurement Law. Can you assess how this new piece of legislation will affect the domestic industry in Greece?

MR. TENEKOUDIS: This is a national law and it will have an impact on our income from the Greek environment. It updates the previous Presidential decree and makes it more adaptable to the competition and more workable to our own discretion. Soon we will have to apply this new law so we don't have any indications right now of how positively and effectively it will work. Bear in mind that we still have a lot to operations to monitor and new regulations to implement. In order to have a successful transition to the 21st century,

P.M. COMMUNICATIONS: I'd like to give you the opportunity to send a final, direct message to the readers of The Sunday Telegraph. Please go ahead…

MR. TENEKOUDIS: I would just to say that we live in a new era and we have to face the reality and capture the challenges, otherwise you are going to miss the future. Clearly, it is a matter of correct and speedy reaction in order to be proactive and not reactive.