Wednesday, October 10 07:54:13
As Greece's privatisation programme resumes this month, nearly half a year behind schedule, at stake is not just the billions of euros it needs to raise, but the credibility of its commitment to reforms demanded by its creditors. Greek politicians are under intense pressure at home to resist foreign calls to sell state assets on the cheap and raise fast cash to pay down government debt. More challenging still will be efforts to use privatisation as a tool to uproot corrupt business practices and restore foreign investors' confidence in Greece.
The 15-month-old Hellenic Republic Asset Development Fund aims to transform dozens of state businesses to increase value before leasing or selling them through a series of tenders. The first major sales - gambling company OPAP, state gas business DEPA and several prime real estate projects - could be completed as early as the first quarter of 2013, putting the fund back on track after wildly missing a 3 billion euro target this year. It now expects to generate just 300 million in 2012. Many hope privatisation proceeds will help break the cycle of austerity and recession in Greece, where economic output has declined by almost a quarter since 2008 and unemployment is nearing 25 percent.
Greece, the most indebted euro zone nation relative to GDP, has repeatedly missed targets set under its EU/IMF bailouts and risks being forced out of the single currency. If successfully executed, economists say the privatisations could add an annual 3.5 percent to GDP from 2013, enough to return Greece to growth, and create 150,000 long-term jobs. A leading fund official said the delays had been largely down to the need to get companies in a state to sell. "As the interest for Greece is waning, you can't proceed with tenders where the assets are not 100 percent clean and attractive," the official said on condition of anonymity. "We're having a deep dive in all the companies to single out all the major issues the companies have, to deliver them to the market," he said.
To create greater transparency and attract foreign investors, the fund was set up in July 2011 as an independent agency, with English as its official language. Its core task is raising 19 billion euros by 2015, but more important will be how Greece is perceived by international markets to be meeting criteria for its 173 billion euro bailout. "It is absolutely critical we send a signal of change," the top official said. The privatisation fund got off to a rocky start, with repeat general elections in May and June having stalled activity by more than five months. Its first head, Costas Mitropoulos, quit less than a year into the job, citing a lack of political will.
"The newly elected government has not given ... the necessary level of support," he wrote in a July resignation letter. "On the contrary, in an indirect but systematic manner, the government has acted to undermine the authority and credibility of the fund." A high-level Greek official speaking on condition of anonymity said the current privatisation target, down from an initial 50 billion euros, is still unrealistic because "the credibility of Greece is at a low". Investors are more interested in high-yield government bonds than sinking money into 30-year infrastructure projects with uncertain outcomes, the official said, citing conversations with major U.S. fund managers. ( C) Reuters