Monday, May 30, 2011

Why privatisation is not the panacea for Greece

by Paolo Manasse


May 30, 2011

How should Greece try to reduce its debt? Some say Greece should privatise some of its ports and tourist hotspots. While on paper such a move might significantly reduce the debt, this column argues that these calculations rely on some shaky assumptions. Such a sale could make Greece worse off overall.

George Papaconstantinou, Greece's minister of finance, announced on Monday a plan to create a sovereign wealth fund, a sort of Greek “Treuhandanstalt”1 that would implement the ambitious privatisation programme agreed with the EU and the IMF. The plan should raise approximately €50 billion by 2015.

  • About €15 billion, within 2013, should come from the concession of the port of Piraeus and the privatisation of a luxury resort on the Athenian coast;
  • The remaining €35 billion should come from airports, ports, the sale of the government share of the OTE telephone company (30%), the privatisation of public utilities, tourism, and a restructuring of the state-owned Greek Agricultural Bank (Hope 2011).

This is an ambitious agenda that would reduce Greece's outstanding debt €300 billion by approximately 17%.


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