What is wrong with Greece’s privatization programme?

In News on June 21, 2011 at 5:14 pm

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.

  1. June 21, 2011

    Hey there,

    Don’t know whether you were aware of the following article.

    A good reference regarding the perils of privatization as seen in Greece today.

    If you would, please Facebook Like the link, Twitter the link, and post a link to the article at your website.

    Thanks and keep up the good work!

    A Greek Epic In The Making

  2. […] High Net Worth Individuals face some hard choices: should they purchase their own estate on Bora Bora [ht: ja] or one of the many Greek assets available in Papandreou’s privatization program? […]

  3. […] oil, gas, and power generation to rail, air, shipping, and warehousing.  There is a legitimate fear that Western companies will be unwilling to take on the problems – the political headaches, the […]

  4. […] oil, gas, and power generation to rail, air, shipping, and warehousing.  There is a legitimate fear that Western companies will be unwilling to take on the problems – the political headaches, the […]

    • This is true. But I think that as the selling prices of these companies fall, there will be some demand by Western companies. Besides, they can always count on some corrupt Greek official to help them solve the “political headaches”.

What do you think?

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: