Greece faces difficult odds with privatization
By Michael Birnbaum,
MOUNT PARNITHA, Greece — The gods lived at Mount Olympus, but the gamblers live at a casino on Mount Parnitha, and, lately, Greek leaders have been praying to strike it big here.
The Greek government owns an unusual half-stake in this mountaintop casino, the second-largest in the country, and Prime Minister Antonis Samaras has vowed that selling it — along with dozens of other properties, buildings and companies across the country — will be a top priority in last-ditch efforts to save the Greek economy.
But with time ticking on Greece’s bailout, and the country’s future on the shared euro currency ever more in question, the odds are stacked against him.
Greece owns large swaths of sectors like gambling that in other countries are in private hands. The arrangement helped derail Greece’s finances in the first place, with powerful unions bidding up workers’ salaries to unsustainable levels and money leaking to politically connected contractors. Now, few investors want to bet their money on these properties in the middle of what Samaras has called “our version of the Great Depression.” And it is not politically attractive to sell off Greece’s crown jewels at fire-sale prices.
If Greek leaders don’t hit it lucky, though, international officials are more ready than ever to pull the plug on the bailout that is keeping Greece from collapse. The consequences would be even worse than the recession that by year’s end is likely to shrink the economy by more than a fifth of its 2008 heights.
“We do all we can to bring the country back on its feet, and they do all they can so we can fail,” Samaras recently said, railing against unnamed foreign leaders who he said were jeopardizing Greece’s economy.
Without the bailout, Greece would probably be forced out of the 17-nation euro zone. European leaders would then themselves be gambling that they could contain the subsequent panic that would strike far larger economies such as Spain and Italy. If they lost, a global recession might return. If they won, they would have a smaller but potentially stronger currency union.
Shortly after his inauguration as prime minister in June, Samaras swore to speedily privatize some big targets: the country’s money-losing train network, the power company and a prime seaside stretch of land. But even some of his allies worry that he is setting himself up for public failure.
“There’s just no market,” said Konstantinos Kollias, who was the head of a previous privatization effort during the boom years under a government led by Samaras’s center-right New Democracy Party.
“Many of these companies have many problems,” he said. “They’ve had poor management for many years.”
That poor management helped stretch open Greece’s budget deficit to 13.6 percent of the size of its economy in 2009, setting off
the crisis, and it continues to hamper the country’s recovery. Some state-owned companies are profitable, but many are money-losers. Taking them off public balance sheets would help stabilize Greece’s finances, its creditors say, and encouraging private investment would help its economy grow in the long run. International officials have said that speedy privatization would be one of the biggest steps Greece could take.
A daunting task
From the Regency Casino Mount Parnes, whose views sweep across Athens down to the glowing-blue Mediterranean, the scale of Greece’s tasks remains daunting. Some state-owned companies, such as the national train company, are billions of dollars in debt and have bled money for years. Others, such as the state lottery and betting company, are profitable but are trading on the stock market for rock-bottom prices and would not raise much money. Still others, such as the casino, make money but may face millions of dollars in fines from the European Union on charges that the government illegally gave them aid.
And they all have robust public workers unions that aren’t afraid to strike when they feel threatened. The casino was shut down for 32 days this spring while its union fought for better terms in its contract.
“The situation now is almost out of control,” said Costas Mitropoulos, who resigned last month from his post heading Greece’s privatization efforts, saying that the new government had undermined his work by making unrealistic promises. “Right now, there’s no market. It’s not a question of price.”
Proceeds from privatization have been wildly below targets. The country was initially supposed to reap $61.5 billion by 2015, a goal picked by Greece’s creditors not because it was an estimate but because it was the number needed to bring down Greece’s debt to politically acceptable levels. Privatization was expected to bring in $4.4 billion this year alone. Instead, it has made only $369 million, and Mitropoulos says that delays from the long election season mean that nothing else will be sold this year. Pushing back, the prime minister’s office has sworn to pull off a string of privatizations within months.
The privatization office, on the top floor of a tired building in central Athens, is filled with reminders of the obstacles facing Greece’s leaders. In the waiting room, a flat-screen television plays a marketing video on an endless loop showing “Reputation says: Investing in Greece? Disaster” and “Reputation says: ‘Who will work?’ Greeks are ‘expensive’ and ‘lazy’ ” before trying to persuade viewers that those assertions are false.
“Right now, all predictions have proven wrong. And in such an environment, you can’t privatize everything,” Mitropoulos said.
He thought it would take 30 years to develop the land that has been flagged for sale, not eight years as foreseen by the internationally agreed privatization plans. That land is 4 percent of Greek territory.
And some companies are politically sensitive. Some Greeks say the Public Power Corp., which supplies the bulk of electricity to the country and owns the entire grid, should be kept in public control to ensure low prices for consumers. Its union of 21,000 workers has been militant about refusing to implement tax increases and has threatened to strike — leading to power outages — if the government moves ahead with plans to sell its 51 percent stake.
Whether a sale would actually raise money is another question. Some analysts say the company has almost a quarter more employees than it needs. Their median pay is a third more than that of Greece’s private sector by some estimates, and the company loses money most quarters. Its stock price is down 93 percent from 2007 highs.
“For us, people and their needs are more important than the needs of the market,” said Nikos Fotopoulos, the head of the power company employees union.
For now, Samaras is trying desperately to implement enough measures to persuade Greece’s troika of international creditors — the International Monetary Fund, the European Union and the European Central Bank — that they should give his country an extra two years to meet its marks. Whether he will get it — and whether his ministers are committed to making the full level of cuts that the troika has demanded — is uncertain.
The decision about whether to issue another installment of the bailout money will likely come in September, and Germany, the biggest contributor to the program, is already signaling its reluctance to give the green light.
From the casino atop Mount Parnitha, where whirring roulette tables and chirping slot machines bring a Vegas touch to the Athens panorama, Greek leaders are betting they’ll hit the jackpot.
Elinda Labropoulou contributed to this report.
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