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Greece to sell stakes in state-owned groups
FT.com By Dimitris Kontogiannis and Kerin Hope in Athens and Joshua Chaffin in Brussels
Published: May 24 2011 03:49 | Last updated: May 24 2011 03:49
The Greek government announced on Monday that it would sell stakes in state-controlled companies and form a sovereign wealth fund, to stem criticism that it has dragged its feet on measures to raise revenue and cut spending.
The cabinet had “reaffirmed its determination to continue with the fiscal consolidation programme”, finance minister George Papaconstantinou said in a statement, with measures amounting to more than €6bn ($8bn) – or 2.8 per cent of gross domestic product – intended to bring down the budget deficit from 10.5 per cent of GDP to 7.5 per cent by the year’s end.
Government would immediately proceed with sale of stakes in OTE Telekom, Postbank, the ports of Athens and Thessaloniki, and the Thessaloniki water company “to frontload its ambitious privatisation programme”, Mr Papaconstantinou said. The government gave no indication of the price it expected for these assets, and no firm timetable for the sales.
A sovereign wealth fund composed of privatisation and real estate assets would speed the process, he added.
Analysts have long said Greece could swiftly sell another 16 per cent stake in OTE Telekom to Deutsche Telekom, which holds 30 per cent, but they were more cautious about the other companies named on Monday.
“A credible calendar for privatisation should be announced, and the government should use the proceeds to buy back government bonds, which are trading at a deep discount,” said Riccardo Barbieri, chief European economist at Mizuho International.
European officials have stepped up demands that Greece provide a clear plan for selling assets before they discuss extending maturities on the country’s debt. “This is a prerequisite ... what are the deadlines, what are the practicalities? When we know that, we can see how to help,” a Brussels official said on Monday.
Athens announced the appointment last week of international advisers for seven sell-offs, including the state lottery and football pools operators.
The country faces an unprecedented challenge to achieve the €50bn target in privatisation revenues by 2015, set by the European Union and IMF. Despite efforts over two decades, no Greek government has managed to sell either public real estate for tourist development or a majority stake in a state corporation rated as a going concern.
At strong union opposition, governments have opted instead for “salami-style” offerings of equity tranches in state-owned companies – a process that attracted only one international strategic investor to date, Deutsche Telekom. “There has been no momentum so far,” said Theodore Pelagidis, economics professor at Piraeus university.
Greece had planned to raise €7bn by asset sales, say European officials, but this year expanded its target to €50bn after the IMF, the European Commission and the ECB concluded other fiscal reforms were not bearing fruit. Complaints about Athens’ inability to implement became louder in recent weeks – particularly as European leaders have confronted the likelihood that the country could require more help to meet funding obligations. “We haven’t seen a single euro yet,” a diplomat said after a meeting of European finance ministers in Brussels last week.
Formation of a privatisation agency including non-Greek officials to oversee sales has been suggested, but the idea has not gained traction at concern it could trample sovereignty. “The possibility to create a trust fund or a privatisation agency is one option we are exploring,” said Olli Rehn, Europe’s top economic official, in Vienna on Monday.
Jan Kees de Jager, Dutch finance minister, has proposed that any more loans to Greece should come with collateral arrangements, in which European state lenders would take over Greek assets in the event of a sovereign default.
Extensive privatisation could improve Greek competitiveness, officials say. But it will take time to reap the benefits – the bulk of projected revenues would be from sales of long leases on state-owned real estate that could be contested through the courts, jeopardising the EU-IMF timetable.
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