With a rescue plan for
Greece
’s
economy agreed at the eurozone leaders’ summit on July 21, and the country’s
huge debt stabilized for the time being, the socialist government of George
Papandreou is now turning its attention to the implementation of an ambitious
privatisation programme already voted through the Greek parliament early in
July. Adoption of the programme, which seeks to raise substantial funds from
the disposal of state holdings in large public companies and from the sale-lease
of state owned land property, was a
precondition for the latest bail out ‘midterm’ financing deal offered by the
Troika (i.e the IMF, the ECB and the EC) According to the bail out rules all
proceeds from privatisations will all go towards reduction of the public debt
which currently stands close to 360 bn euros and corresponds to more than 150%
of GDP.
Moving at a phenomenal speed, by Greek standards, the
government went ahead last month and set up, through a special government
decree, passed through parliament in the form of law, a Fund for the
Utilisation of State Assets and has appointed a five member board of directors.
The Greek Finance ministry, to which the Fund reports, announced the
appointment of Costas Mitropoulos, an experienced bank executive and former
head of Kantor Consulting Co., as the
Agency’s CEO. Mitropoulos until now headed Eurobank Equities, the investment
arm of
Greece
’s
second largest lender, EFG Eurobank.
Athens
is under pressure from its international lenders to sell stakes in key state
controlled firms to raise 50 billion euros from privatisations by 2015 to pay
down its debt mountain. A whole range of state assets has now been earmarked
for sale over the next four years including electricity,gas and water
companies, ports, airports, marinas, banks, the former telecommunication
monopoly, train operators and a variety of other companies where the state
holds sizeable stakes such as OPAP, one of
Europe
’s
largest lottery and sports betting firms.
According to the government’s plan, as approved by the
troika, proceeds from the sale of state assets by the end of 2011 must raise no
less than 5,5 bn euros, up from an initial target of just 2 bn that the government had been aiming for
just few weeks ago. Such is the urgency and concern for the speedy
implementation of the programme, and hence the start of capital inflows into
the Fund’s coffers, that strict monthly targets have been set implying almost
one sale every 10 days, with some 1,7 bn euros now expected from sell offs by
the end of September this year; of which already 400 million euros have been
received from the sale of a 10% state holding in OTE, the telecommunications
company. The programme further foresees the sale of assets totaling some 15 bn
euros in 2012, 22 bn in 2013 and 10 bn in 2014.
“This is an overtly ambitious, complex and over
extended programme especially if we take account the proposed land sale and
lease plans and therefore it is highly unlikely that it will succeed in its
target of raising all this money”, notes a senior executive from an
international accounting firm based in Athens and with experience in
privatisations in central and eastern Europe. It cannot be coincidental that
EU’s economic and monetary affairs commissioner Olli Rehn has also voiced
similar concerns. Speaking at a conference in Vienna last week he said, “ We
estimate that meaningfully Greece cannot privatise 50 billion euros worth of
its assets in the course of the coming years, which represents more than 20 per
cent of its GDP” He further added that Greece had not made sufficient progress
with its budget steps to allow it to return to the markets in early 2012, as it
was envisaged last year, and hence it was necessary to agree on a second bail
out package to see it through 2014.
Sources close to the Fund’s management admit that the
task ahead is quite enormous and indeed complex as a number of operations will
have to be carried out simultaneously if more than 100 companies and
organizations are to be to privatized and considerably more acts of sale of
public property concluded in the course
of the next three and a half years. Adding to the difficulties of what appears
to be a Herculean operation are the considerable bureaucratic hurdles lying
ahead, especially since all decisions must comply strictly with EU laws and
directives. In this respect the European Commission’s involvement, on an ongoing basis, in the
Greek privatization programmme is inevitable.
In addition to the usual EC and Greek government red
tape there is a number of other serious obstacles which sooner or later will
start acting as deterrent and may cause even the derailment of the whole
exercise, note industry sources. Union militancy is a very real danger as was
witnessed earlier this year with an eight day strike by the power sector
workers which brought the country to its knees with several hour long daily
power cuts throughout the country. Furthermore unresolved legal issues in many
companies related to the conditions of state ownership will hinder the transfer
of the rights of their sale to the Fund, note legal sources familiar with the
situation. Also, the lack of a properly organized nation wide land registry and
the need to obtain the dozen or so planning licences which are necessary in
Greece in order to develop property, is bound to create a heap of problems when
it comes to offer state owned land to Greek and foreign buyers for tourist
development , note real estate experts active in the sector.
However, the biggest challenge which right now faces
the Greek government and is bound to have a negative impact on its privatisation programme, is the international
turmoil in the financial markets and the sharp fall of most exchanges as witnessed over the last few days
and which did not leave unscathed the Athens Exchange which plunged to an all
time low on August 8 with the Athens
General index closing at just above 1,020. This sharp dip has meant that billions of
euros worth of stocks have now been wiped out and it remains to be seen as to
when and how fast the market will recover. “Should the government and the
troika insist on going ahead as planned with the selling off of state listed
companies it is doubtful if they could raise even half of the targeted 5.5
billion euros for the last quarter of the year”, notes a stock analyst who
tracks the FTSE/ASE 20 large cap companies. It appears that right now the
government in
Athens
has been caught in a deadly spiral, not of its own making, which threatens to
throw off board the whole privatization effort with grave consequences for the economy, as a substantial part of debt
repayments in the coming years is to come from privatisation proceeds.