Posts Tagged ‘privatization’

Catastroika made in Greece

In News on July 8, 2012 at 1:47 pm

According to Greek Finance Minister Yannis Stournaras, the Greek government will pursue an aggressive plan of privatisation, in an effort to satisfy international lenders, the European Commission- ECB – IMF troika. Privatisations have always been part of any IMF lending agreement in the world, as have trade liberalisation, reducing the budget deficit and the public sector and generally following a neo-liberal economic agenda (see here).

The rationale behind the IMF’s SAP (Structural Adjustment Programs) have been toe reduce the state in order to “unleash” the private sector to create growth, but in reality to allow – primarily the US and Western – multinationals to enter the developing countries’ markets on a privileged basis.

For Greece, Stournaras’ list of companies to be privatised the former Airport at Hellenikon, the Public Gas Corporation (DEPA), the National Gas Transmission System, the Greek Petroleum (ELPA), the General Mining & Metallurgical Company (LARKO), the Greek Organization of Football Prognostics (OPAP), airports, ports, marines and the Greek National Railway (OSE) and many other assets.

It is a no-brainer that since Greece is essentially a bankrupt country in all but paper, the Greek assets will be sold at bargain prices. But even so, for anyone who still doubts how privatisation harms citizens, both as consumers and as taxpayers, there is the Catastroika documentary to watch.


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.

What if Greece defaults?

In News on June 20, 2011 at 12:47 pm

Greek default a.k.a. Lehman brothers II? 

Eurozone ministers meeting in Luxembourg over the last couple of days, agreed on a second bail-out for Greece. They acknowledged the fact that Greece cannot borrow from the international markets and have on principle agreed on a second aid package. But they have postponed a €12 billion EU/IMF loan (and last payment of the €110 billion aid package which was agreed in May 2010) for mid-July, and on the condition that the Greek parliament agrees on the new austerity programme. Without this new loan, Greece will not be able to make debt payments. So, what Europeans in effect did was to create even greater pressure to the Greek government to approve the greatly unpopular measures, which foresees privatizations of €50 billion until 2015.

The greatest fear shared between market analysts and politicians across Europe is a Greek default. Earlier this week, as Greeks were demonstrating on the streets against the austerity measures and Europe’s leaders were indecisive regarding the form of the Greek bail-out, the fear of default spread across financial markets.

So, what if Greece defaults? First of all, there will be a shockwave spread in the banking sector in Greece and Europe. Greek banks will lose billions as they hold a great part of the Greek debt and they will immediately be downgraded by credit rating agencies. French and German banks will also lose billions of euros, as they are also greatly exposed to the Greek debt (€56 billion and €34 billion respectively). (Here there is an overview of which banks are exposed to the Greek debt). The greatest fear lies in the unknown. What if there is a so-called “Lehman Brothers moment”, when the financial markets panic and the lending taps are closed?

As Greece defaults, the perceived risk of Portuguese and Irish bonds will increase, which will lead to a massive sale of these assets by foreign investors. The same thing, to a smaller extent, will happen to the cost of borrowing for Spain and Italy, as doubts are increasing over about the sustainability of their debts. More importantly, the Greek default will have now set a precedent. So, other highly indebted European governments, also pressured by their electorates and public opposition, may start considering the option of default. It doesn’t matter if these governments would not actually consider this option. For the financial markets and the credit rating agencies, it matters that the option is now on the table.

The third repercussion of the Greek default will be that for the first time in the European Union’s history, European integration will unravel. European integration has stalled, has gone through periods of Eurosclerosis, has suffered from lack of political leadership, indecision and inertia. The European Union may be considered a two-tier, or even three-tier economic area, depending on how one reads the levels of cooperation between the countries, but never in its history has there been an actual “step back”. If Greece leaves the eurozone, European integration will have unravelled.

The consequences of a possible Greek default are the reasons why the Europeans reached an agreement on a second bail-out loan for Greece. However, postponing the last payment of the first bail-out and making it conditional on the present austerity programme is highly problematic. First, it creates huge pressures on the Greek government to pass a highly unpopular programme. Second, this will only represents a short-term solution. The magnitude of the Greek debt remains. The debt is now heading towards 153% of GDP. There are many economists who argue that the question of Greece defaulting on its debt is not “if” but “when” (whether now or in 2015).

The austerity programme which was agreed last year simply did not work. And why would it? How can a shock austerity programme, which depresses aggregate demand while the government cannot devaluate its currency, be successful? Unemployment has gone up to 16%. The Greek economy shrunk in 2010 by 4% and industrial production decreased by 11%. How can a new austerity programme, which will follow the same rationale work on an already depressed economy?

Athens, 15 June

In News on June 15, 2011 at 5:31 pm

Today, 15 June 2011 is the day when the Greek Parliament debates on the new austerity measures (medium-term programme) requested by the EU and IMF in return for a second bail-out package. The austerity programme (€28 billion in cuts)  is to be implemented from 2012 to 2015 and includes a list of privatizations and tax increases. These measures are demanded by the EU and IMF in return for the release of another €12billion, which will allow Greece to pay off maturing debt. Today was also the day on which the trade unions (both of the private and public sectors) had called for a general strike, the third in 2011.

Since this morning, thousands of Greeks were gathering in Athens’s central square (Constitution square) in front of the parliament. At the same time, the Police’s special force units or Public Order Restoration units (MAT) were barracking themselves and the parliament building, behind plastic protective walls and iron barriers.

The protest started peacefully with the demonstrators shouting “bread, education, freedom”, the same phrase which was shouted in the falling days of the Greek junta (1967-1974). But soon enough there were clashes between police and rioters, who threw Molotov bombs. Naturally, the police replied with tear gas and flash bangs.

There was a great debate in the Greek media about whether the rioters were citizens with seeking to express themselves violently, anarchists, hooded thugs or provocateurs, i.e. men who were intentionally placed among the demonstrators (by the government? By the police?) with the aim of causing trouble and in effect breaking up the demonstration. Photographs released this morning by several Greek blogs show hooded youngsters among policemen – a common picture in previous Greek demonstrations – and men carrying stick poles under the eyes of special forces units (See here and here). The police denies the accusations.

Whatever the truth is, there was one result. By 4pm Greek time, the centre of Athens was soaked in tear gas, there were eight people hurt (the total toll by now is twenty nine), the Constitution square was empty, while rioters and police were playing hide-and-seek in the streets leading to the Constitution Square. The demonstration was broken up.

Meanwhile, Prime Minister George Papandreou is holding talks with the President of the Republic Karolos Papoulias and the opposition leader Antonis Samaras  with the aim of forming a government of national unity. The Greek media is filled with special reports about the new government’s possible ministerial posts and guesses on whether the new “unity” government will last six months or three years (the full length of the austerity programme). Presumably, the Greek PM seeks to secure consent across the political spectrum in order for the medium-term programme to be implemented in full.

The question arises: What is the value of a democracy when the police are guarding the parliament with iron walls and barricades, in order to protect it from the demonstrators? What is the quality of a political system where its political elites protected by armed forces conspire to go ahead with the exact programme which the majority of Greeks oppose? Is this bail-out worth this degradation of Greek democracy?

P.S. More pictures from today’s demonstrations (from indymediademotix, and the Boston Globe).

Second bail-out package for Greece

In News on June 13, 2011 at 3:52 pm

Greece is heading for a second bail-out package. In May 2010, Greece received a €110bn euro bail-out by the EU and the IMF. Like in all the situations when one lends and the other borrows, the lender imposes his conditions. And the greater the need of the borrower, the harsher the conditions which the lender can impose. So, as the Greek government refused to borrow from the international markets (at what were admittedly very high interest rates), it borrowed from the IMF and the EU.

The borrowers’ conditions were the usual IMF structural adjustment policies it has so often demanded from African and South American states (minus the devaluation of the currency which cannot take place as Greece is a member of the eurozone).[1] In 2010, the Greek government cut spending and raised taxes amounting to 5-7% of the GDP. The idea was that in 2012 Greece would return to the capital markets, issue new bonds in order to pay off the maturing ones.

However, the scenario of borrowing from the capital markets is no longer a realistic one. There is a real risk of default if further funds are not released soon. In particular, according to a report from EU-IMF-ECB inspectors in Greece (the so-called troika), which was leaked to Reuters, the recession [in Greece] “appears to be somewhat deeper and longer than initially projected”. In 2011, the Greek economy is shrinking by 3.8%, following last year’s reduction in GDP by 4.5%.

In the light of Greece’s undiminished debt, there is a new aid package on the way. According to the leaked document, “the Greek government is one of the European sovereigns with the richest portfolio of assets,” which, however have not provided any revenue but are instead a burden on taxpayers. So, the mantra is privatization, in order to reduce the government deficit. So, the Greek government prepared a new medium-term programme which includes more tax increases and a long list of privatizations.

The list of privatizations includes the Hellenic Organization of Telecommunications (OTE), the National Lottery, the Greek Defence Systems (EAS), the Public Gas Corporation (DEPA), the National Railway, the General Mining & Metallurgical Company (LARKO) , the old Athens airport in the Ellinikon area, Airbus planes, the Agricultural Bank of Greece, (ATE), the Hellenic Post (ELTA), the Public Power Corporation (DEI). The medium-term programme was endorsed by the Greek cabinet on 9 June and it is expected to be placed to popular vote on 15 June, amidst a general strike and protests which have been running in the central square of Athens (Constitution Square) since the 25th May.

[1]  These policies include reductions in public expenditure (austerity), balancing budgets, increasing taxes but reducing corporate taxes, privatization, trade liberalization, devaluation, removing trade barriers to boost exports, making the domestic environment more open to Foreign Direct Investment (FDI) e.g.  by enhancing the rights of foreign investors vis-a-vis national laws, removing price controls and state subsidies. Many of these measures were unnecessary as Greece’s borders were already open as part of it being part of the European Union and the single European market.