Officials at the Ministry of Economy and Finance predict that revenue from selloffs in state enterprises will begin to diminish from next year, because of the continuing stock market crisis.
In 2003, these revenues will reach 0.9 percent of Greece’s gross domestic product and will be used in their entirety to reduce the public debt, which after the revisions imposed by Eurostat, the European Union’s statistics agency, will reach 105.1 percent of GDP, instead of 96 percent.
Officials at economic ministries regognize that privatizations in the form of partial sell-offs, used extensively over the past five years, have exhausted their potential.
This week, the Greek State is selling a 13 percent share in electricity company Public Power Corporation, (PPC), which is a monopoly utility in the electricity sector, bringing the total stake owned by private investors to about 29 percent.
Economy and Finance Ministry officials are now considering other ways to privatize the remaining public enterprises. These could include selling the whole enterprise to private investors, or selling a smaller stake and giving the management to the private sector.
This had been the tactic of the previous conservative government in 1990-93, but it was thwarted in its attempts to sell off companies such as OTE Telecom by stiff opposition, and was ultimately brought down. Greece’s Prime Minister Costas Simitis had proposed keeping OTE as a single-share company, with the golden share remaining in the State’s hands.
The dramatic reduction in revenues from privatizations is attributed to the continuing decline, for over three years now, of the Athens Stock Exchange, which makes partial sell-offs very difficult. Officials believe it will be very difficult, even in the best of circumstances, for privatization revenues to exceed 2 percent of GDP in any given year. Even this would require a partial recovery of the stock market and a return of the investors who deserted it en masse two years ago. This comes at a period when the European Commission is demanding that Greece reduce its overall debt by about 4 percent of GDP annually. By contrast, in 2001 privatization revenues reached 7.1 percent of GDP.
This drying-up of privatization as a source of debt reduction will make spending cuts imperative. So far, however, spending has never decreased from one year to the next. True to practice so for the 2003 state budget, currently under discussion in the Parliament, foresees an increase of state expenditure on several sectors.