May 29, 2011
According to Maria Damanaki, Greece’s European Union commissioner, the nation may be forced to leave the eurozone and reintroduce the drachma unless it implements the austerity measures and economic reforms demanded by its international creditors. While not responsible for economic matters, her message leaves no room for doubt about the threat posed by the Greek debt crisis to Europe’s monetary union. It serves as a stark warning to those forces in Greece’s ruling socialist party and their trade union allies that are resisting the reforms.
Particular controversy surrounds the government’s promise to raise €50bn in privatisation proceeds by 2015. State holdings in utilities, banks, the former telecommunications monopoly and other businesses such as Opap, the lottery and sports betting company that is the biggest in Europe, are supposed to be put up for sale. Eurozone governments and the International Monetary Fund are determined to hold Greece to its word. Some policymakers even want the disposals to be placed under the control of an external agency to ensure the integrity of the process.
Greece would certainly benefit from the higher levels of competitiveness and efficiency that would emerge from scaling down the state’s role in the economy. A robust privatisation effort would also buy Greece time and the goodwill of its creditors as it seeks extra financial support to offset its exclusion from capital markets.