Greece: Selling off the silver #Beekhaybee

Greece has agreed to the creation of a new
independent fund that will manage assets to
privatise. The target is to generate a total of €50bn (£35.5bn,
$55bn). But the cash won’t come quickly. The aim is to
generate that kind of money over the “life of the
new loan”. We haven’t been told how long that will be – that
will be part of the detailed negotiations that the
summit agreed to launch. But it is likely to be several decades. The final
payment under the second bailout is due in 2054.
Bailout number three, if it does happen, is also
likely to have a long repayment period. Efficiency Privatisation has been an element in the Greek
bailouts from the beginning, when the first one was
agreed back in 2010. There were two reasons why the lenders – the
eurozone and the IMF – were keen to include sales
of state owned assets. One was to improve
economic efficiency. The IMF put it like this in a review of the Greek programme in 2011: “The asset transfer [in other
words privatisation] would create a basis for new
investment and growth; indeed the state
enterprises involved already represent about 15%
of total Greek investment and 2-3% of value added,
and new owners would have an incentive to make them more productive.” Deja vu The other consideration was to raise money to ease
the financial strains on the Greek public sector. If you have a feeling that you might have heard
that €50bn figure before in this context, you are
right. Back in 2011, that was the target for
privatisation receipts- an objective to be achieved
by the end of 2015. It won’t be. Even then, in 2011, the IMF described
the target as ambitious. More recently (about a year ago when the IMF last completed a review of the Greek programme) the
assessment was: “performance on privatisation
continues to fall short of expectations”. Underlining the judgement, in that review the IMF
projected total privatisation receipts of €22.4bn,
less than half the earlier figure and by the much
later date of 2022. Frustration The latest incarnation of a privatisation plan
envisaged by the eurozone leaders in their post- summit statement reinstates the €50bn target. But it is even further into the future. It also plans a new agency. Greece does already
have one – the Hellenic Asset Development Fund. The desire for a replacement reflects eurozone
frustration with the missed targets. Originally, the
eurozone were seeking an agency based outside
Greece. But they gave ground on that and have accepted
that the fund will be based in Greece and managed
by the Greek authorities but “under the supervision
of the relevant European Institutions”. Not attractive Greece does have things it can sell. There are
businesses. Plans to sell airports in the islands and
the Port of Piraeus are already well advanced and
there are other infrastructure operations that could
be sold. Eventually, there could be an opportunity to sell
public stakes in the banks. But they are likely to
receive further injections of capital as part of the
next bailout, so the short term prospect is for
increased public ownership. Significant money The current weakness of the Greek economy is
bound to affect their borrowers’ ability to repay. It
will be a long time before they are attractive to
investors. There is also a large portfolio of properties – 70,000
according to the IMF. But information about them is out of date, and
many have contested ownership or illegally
occupants. A great deal of preparatory work is needed to
make them ready for sale, but they could in theory
yield significant amounts of money. They include sites that have strong potential for
tourist development. So, let’s suppose the money does eventually come
into this new fund. It will be used to repay the
eurozone money used to prop up the banks. Some will go towards reducing the government’s
debt burden and some will, according to the
eurozone summit statement, be used for
(unspecified) investment.

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