Athens Plans Asset Sales to Pare Debt


  • MARCH 17, 2010

By ALKMAN GRANITSAS And SEBASTIAN MOFFETT

ATHENS—The cash-strapped Greek government is putting a host of state assets on the block, but has drawn the line at off loading islands in a bid to reduce its crushing debt burden.

Officials plan to sell some of the country’s eclectic holdings, which include jumbo jets and stakes in banks and a famed casino. Prime Minister George Papandreou recently dismissed a suggestion by a few German politicians that Athens sell some of the country’s uninhabited islands, telling the Financial Times, “There are more imaginative and effective ways of dealing with the deficit than selling off Greek islands.”

[greekbond0316] Bloomberg NewsGeorge Papaconstantinou, Greece’s finance minister, in Brussels on Tuesday.

Instead, the government figures that by selling its stakes in a bank and a betting company, as well as its share of the national telecommunications company, it can raise €2.5 billion ($3.76 billion)—the equivalent of 1% of gross domestic product, its target for this year. That would only scratch the surface of Greece’s debt—which has surpassed the country’s €250 billion-a-year GDP—but would underscore for financial markets that Athens is serious about fixing its public finances.

The government also may put up for sale its shares in 15 other companies, including the water utility in Athens, a leading oil refiner, and several casinos. The Finance Ministry also wants to get rid of some Airbus A340 planes that it owns from the years before the country’s debt-ridden national carrier, Olympic Airlines, was privatized.

Although the ruling Socialist party enjoys a substantial majority in Parliament, it is divided about privatization. Economic concerns are more likely than political ones to derail any deals. With confidence in the Greek economy low and the rest of the world stumbling through an uncertain recovery, investors might undervalue the assets, meaning the government would raise less money than in a normal year.

“The privatization plan sounds excellent in theory. If you sell all of the state assets and maybe throw in the Acropolis too, it’s possible the government could hit its targets,” says Constantine Michalos, president of the Athens Chamber of Commerce and Industry. “But at current market rates they will be going out on the cheap. Because, let’s face it, it’s not just Greece that’s in recession, it’s the whole world.”

The government has yet to present details of its privatization plan, but has said it is looking at selling or reducing its controlling 34% stake in gambling monopoly OPAP SA as well as the 34% it owns of Hellenic Postbank, a savings bank that initially was allied with Greece’s postal service. Many analysts reckon that the government also will exercise an option to sell 10% of Hellenic Telecommunications Organization SA to Germany’s Deutsche Telekom AG, which owns 30% of the company and has said it wants to buy more.

The most valuable asset to be unloaded is the government’s stake in OPAP, the gambling company whose name translates roughly into the Organization for Prognostication on Soccer Matches. Officials estimate Greece would fetch €1.63 billion from selling its stake in the enterprise, which was established in the 1950s for betting on soccer. But with a current share price around €15, OPAP’s market value has tumbled by more than 30% in the past 10 months and is down 50% from five years ago.

There are other financial considerations. OPAP—like the state gas monopoly, the country’s leading electric utility and others—is a profitable company that pays dividends. OPAP’s dividends to the government add up to as much as €200 million a year. Selling the government stakes would come on the heels of Greece’s latest austerity plan aimed at narrowing a budget deficit that hit about 12.7% of GDP last year, more than four times the EU’s 3% ceiling.

While the majority of Greeks are resigned to difficult measures, unions—incensed by the government’s planned wage and benefit freezes—are resisting.

That opposition surged during the recent privatization of the container terminal operations at the Athens port of Piraeus. China’s Cosco Pacific Ltd., which won a 25-year concession to manage one of the container terminals, was blocked from taking control of the operation in October after port workers staged a monthlong series of protests and disrupted business at the port.

“Broader society will accept the need for privatizations,” says George Kyrtsos, political commentator and publisher of the Athens newspaper, City Press. “But there will be some union opposition.”

In the case of Cosco, the worker protests ebbed amid a €56 million voluntary-retirement package, a formula followed by previous Greek governments in an effort to prepare state-owned companies for privatization. Similar deals have been struck at Hellenic Telecom, several state-owned banks and Olympic Airlines.

The problem is that in many cases, such programs have transferred the burden of early-retirement costs to Greece’s bankrupt state pension system. In January, Greek Labor Minister Andreas Loverdos, who has been given the task of fixing the country’s pension system, ordered Hellenic Telecom to pay an additional €100 million that he estimates the company owes the government for its voluntary-retirement program.He says that several state-owned banks owe more than €400 million for the same reason.

“Yes, privatization should go ahead, but it needs to be done correctly. We can no longer afford the old system of taking pension benefits off the books of state-owned companies,” Mr. Kyrtsos says. “Because by doing so you have a double problem: Not only do you have a debt problem, but you also have a pension problem.”

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