Greece Privatization Hellishly Hellenic

Greece’s ongoing foot-dragging over its failed privatization program that has brought in only a fraction of the 50 billion euros ($67.9 billion) goal set almost four years ago has drawn sharp criticism in an editorial from the news magazine The Economist, which is based in London and carries a lot of weight in the financial world for its coverage of fiscal issue.

The magazine stated that: “Greece is a bad advertisement for government ownership—and for privatization. Its state holdings are poorly managed and mostly subject to political meddling. The privatization program, launched through gritted teeth when the economy imploded, is woefully behind schedule. The government managed to miss its revenue target for 2013 even after scaling it back twice, to just €1.3 billion. Everyone knows that sell-offs could do little to close Greece’s 12-figure financing shortfall. But they could help, and the country’s creditors are impatient.”

The scathing review was blistering for Prime Minister Antonis Samaras’ uneasy coalition of his New Democracy Conservatives and their partner, the PASOK Socialists, and for the privatization agency that has had its head replaced twice in the last year and with every indication it will never meet the targets set by its international lenders, the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB).

The program is under review, but the magazine noted that, Greece’s institutions and polity are so dysfunctional that “nothing short of a bone-marrow transplant” will do,  a Troika consultant said. Greece shot down the idea of transferring the management to foreigners, a holding company in Luxembourg, fearing it had already ceded away enough national sovereignty.

It was further noted that government advisers are pushing alternative proposals that might allow Greece to raise funds while avoiding fire sales. Some believe big sums could be raised from private investors by pledging state assets’ expected future cash flows—say, ticket sales or rents—as security against new bonds.

At the transaction’s maturity, the asset could either be sold in the market and the loan repaid, or handed to the lender. Some of the funds raised could be used to pay down debt, others to develop the asset in the hope of increasing the price. An added advantage is that it would get Greece back into the capital markets, closed to it since 2010.

This instrument could work best for property, argue consultants commissioned by the European Stability Mechanism, the Eurozone’s bail-out fund, to examine the options. “But many properties lack clear title, and there is no proper land registry. Even with political will (lacking so far), setting up the necessary legal structures could take years,” the Economist opined.