Greece to start immediate privatizations
Tuesday, May 24, 2011
ATHENS, Greece (AP) — Greece will “immediately” start selling state assets in several major enterprises and take more than 6 billion in additional fiscal measures this year to tackle its debt crisis, the finance minister said Monday after a seven-hour emergency cabinet meeting.
Prime Minister George Papandreou chaired the meeting as Greece’s borrowing costs surged, with yields rising above 17 percent for Greek 10-year-bonds, hitting a new record margin — or spread — over the benchmark German rate.
The measures were aimed at easing strong criticism from the European Union, which is demanding faster reforms before considering the possibility of additional help for Greece, which is facing a critical funding gap in 2012.
“The government is determined to continue and accelerate the path of fiscal consolidation and structural reforms,” Finance Minister George Papaconstantinou said.
Greece has been dependent for the past year on a 110 billion package of bailout loans from the EU and International Monetary Fund, and has been implementing strict austerity measures in return.
Papaconstantinou warned that Greece faces default unless its secures the next installment of international rescue loans, worth 12 billion ($16.8 billion), late next month.
“The country would stop paying salaries, pensions and its other expenses — the shutters would come down,” he told private Skai television in an interview late Monday.
But he added: “I have no doubt that we will wrap up these negotiations (with the EU and IMF) and secure the next installment.”
Greece has been steadily slipping on its targets, and many analysts doubt the country will be able to pull itself out of the crisis by the time the bailout loans run out in 2013 without extra outside help.
Prime Minister Papandreou conceded over the weekend that initial plans to return to bond markets next year may not be achievable.
As part of efforts to raise funds, the government announced an ambitious 50 billion ($70 billion) privatization program in February — but has not made progress since. The delay has been one of the key issues raised by European officials, with EU Monetary Affairs Commissioner Olli Rehn becoming the latest, urging Greece on Monday to urgently speed up the program.
Papaconstantinou said the government would “immediately proceed with the sale of stakes” in the OTE telecoms company, Hellenic Postbank, the ports of Thessaloniki and Piraeus, and the Thessaloniki water company.
The minister said the much-awaited details of a previously announced midterm program, which aims at savings worth about 22 billion ($30.84 billion) to 2015, would be announced after the end of a review of Greece’s finances by international debt inspectors, due in the coming days.
However, he said the cabinet “reaffirmed its determination to continue with the fiscal consolidation program by taking additional measures of over 6 billion or 2.8 percent of GDP in order to achieve the 7.5 percent deficit target for 2011.”
Greece’s deficit stood at 10.5 percent of gross domestic product in 2010.
The fresh cuts are expected to sweep away tax exemptions and possibly slap additional ones on wealthy home owners. The government is also to consider layoffs in the traditionally well protected civil service — a sensitive policy U-turn that could spark protests.
A government official with knowledge of the workings of the meeting said the main focus of the talks was to find ways to reduce the size of the state. The official, who spoke on condition of anonymity to discuss details of the cabinet meeting, said a reduction of 150,000 civil service staff — of the total of more than 750,000 — was an attainable target that didn’t necessarily involve layoffs.
The midterm plan will seek to trim the public sector through the “reduction of employees and payroll costs, the merging and abolition of agencies, the modernization of utilities, reduction of operating costs and defense spending,” government spokesman Giorgos Petalotis said.
The EU also wants cross-party support in Greece for the midterm austerity program, arguing that political bickering could derail the effort. Papandreou was to meet opposition leaders Tuesday in an effort to seek consensus.
“The midterm fiscal framework and the policies that accompany it form part of the road map for our country to exit the crisis and change radically,” Petalotis said. “It is therefore necessary to achieve the broadest possible ... consensus regarding the targets it sets and the means of achieving them.”
Elena Becatoros and Nicholas Paphitis in Athens contributed.