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"Eureka" plan for the Greek economy by Roland Berger

28 September 2011 / 21:09:34  GRReporter
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The consulting firm Roland Berger presented a plan of six stages at the end of which not only the problem with the debt crisis of Greece will be solved, but also its foreign debt will be below 60% of GDP and there will be a positive growth of 5%. It sounds like a fairy tale, but its base is the idea of ​​the Greek state to transfer publicly owned real estate worth € 125 billion to a European institution established particularly with that purpose.
 
In the first stage, this institution will take over the sale of the transferred property to international investors. The second condition for successful implementation of the "Eureka" plan is the agency to be based in Strasbourg and the profitable sale of the assets will be its only priority until 2025. The third part of the plan assumes that funds from each asset sold, after deducting a commission for the service, will be allocated to Greece with a single purpose - the state to use them to buy back its own government bonds absorbed by the European Central Bank (ECB) and the European Financial Stability Facility (EFSF). Thus, the Greek foreign debt can fall relatively quickly to 88% of GDP from the current approximately 145% of GDP, and impaired Greek government securities owned by European citizens can drop to zero through the European Central Bank.  

The fourth stage assumes that due to the operating plan the agency will allocate around € 20 billion for the restructuring of company assets to increase the value of privatizations. It is believed that this could bring further € 40-60 billion. They will double or even triple the actual investment, which leads to the fifth stage. In it, euro structural funds to stimulate domestic growth will allocate 8% of GDP to support the economy like the now frozen National Strategic Development Framework (ESPA ). These funds will transform the growth of the Greek economy and from -5% - recession as of today there will be a +5%-growth and tax revenues will rise by 4% of GDP. In the sixth stage, increased tax revenues will be used directly for the purchase of bonds amounting to 1% of GDP annually. This will further reduce the debt and improve the solvency of the country and interest rates will fall by at least 50%.

Thus, the debt will end up below 60% of GDP in 2018 and the debt crisis that now threatens the foundations of the euro zone will be just a historical fact. Greek banks will be able to "clear up" the Greek government bonds and even record profits of around € 30 billion. Roland Berger states that the CDS-securities market will collapse and all who have accepted the default option of Greece, Ireland, Spain and Portugal will lose the game, and the rapid and bulky privatization of part of the Greek public property will bring new long-term investments in the local economy, guaranteeing positive economic growth.

The whole plan seems more than promising, but because economic models are never exact as mathematics, there is a slim chance to implement the plan to succeed, especially considering the "effectiveness" and prejudices of Greek politicians and society to changes, privatizations and European intervention in their internal affairs.

While abroad they are plotting how to quell the Greek problem quickly enough before becoming a pan-European issue, the representative of the European Commission officially announced that the Troika will finally return to Athens on Thursday morning this week to finish the long lasting fifth inspection on the progress of reforms in the Greek economy. Statements made it clear that this time the Europeans and the International Monetary Fund are not inclined to exchange money for promises and want to see in black and white not only the compensation for the obligations outstanding so far, but the exact action plan by the end of 2013.

Once the supervisory Troika of the European Commission, the European Central Bank and the International Monetary Fund clear the situation in Greece, it will become clear whether the mission will give the green light for the next financial injection, which this time is € 8 billion. Meanwhile, an extraordinary meeting of euro zone ministers, Eurogroup, is expected, which most likely will be held this weekend. This is the supposed date based on statements by the European Commission according to which the ministers should meet as soon as possible to discuss the Greek issues, which means that this meeting will be held before Monday, October 3, 2011 when the regular session of the organization will take place.

Tags: EconomyMarketsGreeceRoland BergerEureka planEurogroupDebt crisis
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