22nd May 2022

Greece unveils fire-sale of government assets

  • Greek parliament: Tensions in cabinet are increasing (Photo: EUobserver)

The Greek government has announced a speed-up of its plans for a public-asset firesale, aiming to convince both markets and other European governments of its commitment to tame debts.

On Monday (23 MAY), the cabinet of leader George Papandreou backed a sale of the country's holdings in the national telco, its postal savings system, its power company and ports.

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Athens is to move forward straight away with a sale of a 10 percent stake in OTE, the telecommunications company, to German telco giant Deutsche Telekom and consider a further sale of a six percent holding in the firm.

A stake of 17 percent in the Public Power Corporation is also to be offloaded as well as a 34 percent stake in the Hellenic Postbank while another 10 percent may be listed on the stock exchange.

Holdings of three quarters of the Piraeus and Thessaloniki Port Authorities will be spun off, as well as a further proportion of the government's holding in Athens airport.

Details of the timing for the privatisation programme however remain vague.

The government also announced the creation of a sovereign wealth fund containing proceeds from privatisation efforts and real estate assets, a move that aims to accelerate the privatisation process and appears in keeping with pressure from EU leaders.

On Monday, European economy commissioner Olli Rehn said that a Greek privatisation agency was under consideration while on Saturday, the head of the eurogroup of nations, Jean-Claude Juncker, said that Athens needed to establish a trustee institution for privatisations.

However, despite the government announcements, Rehn added that he did not believe Greece would be able to achieve its goal of a €50 billion asset sale.

"We estimate that meaningfully Greece cannot privatize 50 billion euros worth of its assets in the course of the coming years, which represents more than 20 percent of its GDP," he told a meeting in Vienna.

The Greek cabinet also unveiled additional budget cuts and taxes worth 2.8 percent of GDP and amounting to some €6 billion.

The measures will include a hike in VAT on some items from 13 percent to 23 percent, new taxes on natural gas and fizzy drinks and an increase in road taxes. Those with pensions of above €1,700 a month will see a fresh levy imposed and companies will be called on to pay a further one percent in social security contributions.

However, the cabinet meeting where the additional measures were discussed was described locally as bitter, with strong criticism coming from the defence minister, Evangelos Venizelos, who accused the prime minister of keeping details on cuts and privatisation secret from other ministers.

Separately on Monday, Belgium saw its its credit rating outlook lowered from to negative by Fitch Ratings, as a result of the country's ongoing political crisis, while yields on 10-year Spanish and Italian bonds climbed, erasing hopes that Madrid had 'decoupled' from other peripheral eurozone economies.

Spain's 10 year bond yields rose to 5.5 percent on Monday, up from 5.2 percent last week, while Italy's equivalent climbed to 4.8 percent, up from 4.7 percent.

The development comes on the heels of a shift to a negative outlook for Italy from Standard and Poor's rating agency on Friday.

Rome is expected to respond to the growing worries with further austerity measures to be introduced next month amounting to €35-40 billion.

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