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The optimistic recovery plan of Georgios Papakonstantinou

15 April 2011 / 21:04:53  GRReporter
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The government has announced pivatisation of 17% of the Greek national electricity company, part of the company for natural gas management, and the selling of a small part of a number of state enterprises. All this and many other general ideas are recorded in the medium term plan of the Greek Minister of Finance Georgios Papakonstantinou. Following the general talk of the Prime Minister George Papandreou earlier in the day, the Minister of Finance sent to journalists the plan for the recovery of the local economy in the form in which it was presented to the Greek ministers during the Council of Ministers meeting later this week.

Unfortunately, this plan outlined only the main features of the recovery program, many of which are known for months to the public, but little has been done to implement them. The medium-term program contains, on the one hand, a list of companies to be privatized and on the other, the percentage of the reduced budget costs so that the deficit to become 1% of the GDP.

Besides the partial sell-off of its share in the electric company, the government must reduce its stake in the national telephone company OTE and sell the remainder of its property in the state lottery company OPAP, which is currently 34%. The state will gradually reduce its presence in the national airport Elevteros Venizelos, of which it now holds about 50%. At the same time, a new limited company will be established in 2012, which will include the assets of the 29 airports on the fringes of the country, which should also become private. Papakonstantinou plans to recover the ports of the country through public-private partnerships. He hopes to attract private investment through them and to revive the remote port infrastructures, promote tourism and regional economic development.
The deeply troubled rail company OSE, which burdens the budget deficit by one billion also is included in the Minister of Finance’s list of the companies that need to be recovered. However, no specific measures are described. The plan promises the privatization of part of the lines and the property of the railway company. The state mining company LARKO that is also in serious condition, unlike its private rivals, will be fully privatised. All hope for double benefits from this transaction - on the one hand, the government to collect some money to cover the increasing debt, and on the other - to greatly improve the condition of the company so that it becomes competitive and profitable again. The companies for public waters management will also seek private investments, but Papakonstantinou does not specify what the state offers in return.

The modernisation of telecommunications networks through public and private cooperation is again on the agenda. Planned are the construction of modern infrastructure of optical fibres and the development and distribution of the frequency range, including digital broadcasting, by granting concessions to the private sector. Mobile operators’ authorization should be extended by the end of 2011. A new owner of part of the Greek government posts will be sought next year to modernise the postal service. On the gaming market, beside the sale of the public share in the Greek lottery OPAP, follow the sales of the government stakes in nine casinos in Greece. Urgent reform is also provided for the legal framework within which the games of chance in the country should operate. Due to severe violations on the market for gambling, Greece has been paying one million euros per month penalty fee for at least five years. A law to comply with the requirements of the union should be voted by the end of the year to save 12 billion per year cost of fines.

The overrated public property also should bring substantial revenue into the treasury. The hopes of the Minister of Finance Georgios Papakonstantinou is that the state will gather 25-35 billion from its stagnant property by the end of 2015. The tender for evaluation companies that will engage in describing the condition of the property and then make their market evaluation will be completed by the end of April this year. The first package of public ownership which will be marketed will be ready in June 2011, and the second one - in December. The other real estate will be offered in two further tranches, respectively, in the middle and the end of 2012. The initial assessment of the Ministry of Finance is that all these actions could bring Greece between 10-15 billion euros by early 2013 and a total of 50 billion euros by 2015. The government hopes that the sale of shares in public companies and the new concessions in infrastructure projects will bring 10-15 billion over five years.

The Minister of Finance Georgios Papakonstantinou presented the general framework of medium-term recovery plan to the Ministers of the Cabinet. It describes the specific institutions that will participate in the deficit reduction and the structural changes that should take place with them. In general, the measures should save the public sector around 26 billion euros, which are vital for the clearance of the budget deficit and for the improvement of the state system.

First, the Ministry of Finance notes that the cost of public sector wages should be reduced. This measure will save the state two billion euros over five years, or about 0.9% of the GDP. To achieve the figures in this column, Papakonstantinou plans to keep the rule for appointing only one person for five that left the state administration as well as to cut 10% of those working on civil contracts. The working hours of civil servants will be increased to 40 hours per week compared to the 37.5 hours now. The new thing is that there will be opportunities for part-time work in the public sector, and civil servants will be allowed to seek a second job in the private sector.

Tags: EconomyMarketsCrisisRecovery programGreeceGeorgios Papakonstantinou
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