Mr. Stournaras’s credentials

Yesterday, Greece”s new Finance Minister  Prof. Yannis Stournaras made his first policy speech since taking office. He said that Greece must implement the measures it has agreed upon its international lenders and he announced that he would speed up privatisations. Some key points of his speech include (here, in full, in Greek):

• speeding up the privatisation programme and including new assets in the existing one
• concluding the privatisation of the Public Power Corporation (DEI)
• developing the land from Faliro to Sounio in Attica through privatisations
• 90% of the privatisation programme will include selling or renting land and infrastructure
• creating a modern social state through combatting tax evasion and tax avoidance
• reducing uncertainty in the economy and improving the economic climate
• greater transparency in the tax system
• battling corruption
• creating social consensus to accept that staying in the eurozone is the only road available

Like any critical reader and thinking citizen, one should always check the sources of his information. Prof. Yannis Stournaras full cv can be found here. The highlights include a strong academic record (Master’s and PhD from Oxford) and a long list of publications.

In addition, he has worked in many respected positions in the Greek public administration. In particular, Stournaras worked as a

• 1986-1989 Special Advisor to the Ministry of Economy and Finance on Public Enterprises and Incomes Policy issues
• 1989-1994 Special Advisro to the Bank of Greece on Monetary Policy issues. During that period he represented the Bank of Greece as an alternate member in the Meetings of the Governors of European Union’Αs Central Banks.
• 1994 – July 2000 Chairman of the Council of Economic Advisors at the Ministry of Economy and Finance. He participated in the design of macroeconomic and structural policies (especially in the design and implementation of the Convergence Programmes) and represented the Ministry of Economy and Finance at the Monetary Committee (now Economic and Financial Committee) of the European Union. In this capacity, he participated in the negotiations for the entry of Greece in the Economic and Monetary Union. He was responsible for the consultations with international organizations, such as the International Monetary Fund, the European Commission and the Organization for Economic Cooperation and Development (OECD).
• 1994 – 1997 Vice Chairman of the Public Gas Corporation
• 1998 – July 2000 Member of the Board of Directors of the Public Debt Management Office
• 2000 – 2004 Chairman and Chief Executive Officer of Emporiki Bank and Vice-Chairman of the Association of Greek Banks

Which side do you think he will be on? The people’s?

What is wrong with Greece’s privatization programme?

The package of austerity measures that the Greek government will try to pass through parliament next week, includes spending cuts, tax increases and privatizations. All these measures are set as a condition by the EU and IMF in order for new funds to be released to Greece by 3 July.

According to the new medium-term programme, there will be a rapid reduction in hiring civil servants (for every ten civil servants retiring, one civil servant will be hired for 2011 – this ratio will change to 5:1 for each year till 2015). Civil servants will not see any wage increases, while their working hours will increase from 37,5 hours to 40 hours per week. 150,000 people will lose their jobs in the public sector, in a country where the unemployment has gone up to 16% in 2011. These changes will be accompanied by spending cuts in the provision of healthcare and a long list of public companies to be privatized.

According to the Mr. Papandreou’s privatization programme, over the next two years (2011-2012) the Greek government will be selling  the remaining stocks that the Greek states owns in the following companies: Hellenic Post Bank (34% of total stocks), National Lottery (100%), Greek Defence Systems (EAS) (99,8%), General Mining & Metallurgical Company (LARKO) (55,2%), Greek Agency for Horse-racing (100%), Greek Casino in Parnitha mountain (49%), Greek National Railway (OSE) (100%), Hellenic Vehicle Industry (72,6%), Greek Organization of Football Prognostics (34%) and Greek Petroleum (35,5%).

In addition, the government is planning to sell further stocks in the following companies. It will sell  the Greek state’s remaining stocks in the Hellenic Organization of Telecommunications (OTE), retaining only 6% of total stocks. It will sell 23,1% of 74,1% of stocks of the Piraeus Port Authority, 26,2% of its previous share of 77,3% of Agricultural Bank of Greece (ATE), 17% of its previous share of 51% stocks of the Public Power Corporation (DEI). It will also sell more than 40% of its stocks of Hellenic Posts, effectively losing control (it previously owned 90%), as well as 55% of its 65% stocks of Public Gas Corporation (DEPA) and 31% of its 65% stocks of National Gas Transmission System. Finally, the Greek government will be selling the old Athens airport in the Ellinikon area, as well as four Airbus planes. (Presumably the Parthenon, Delfi and Olympia will be sold in the 2013-2014 wave).

There are many problems with the Greek privatization programme. First and foremost, there is no guarantee that the Greek government will find any buyers. Second, it is unlikely that the prices at which the Greek companies will be sold, will be anything above a sell-out price. Thirdly, there is absolutely no guarantee that this privatization programme (of €50 billion) combined with the spending cuts will reduce the country’s debt. According to many economists, the Greek economy has now reached a point, where even if everything goes according to plan and better, the debt will still be at unsustainable levels.

Finally, the main argument in favour of privatizations is that inefficient companies can be run by the more efficient private sector, while the state sets and implements rules to safeguard the provision of these services to citizens. Can the Greek government act as a watchdog, and set and enact the necessary regulations, when it has been unable to collect taxes and fight corruption? Can it guarantee that whoever buys the Greek utilities will not increase prices and lower the quality of services to Greek citizens without any control? I am afraid the answer is painfully obvious.

P.S. For a Greek version of this article and a link to the actual austerity programme, please visit ddos.