Is there then a solution for the financial troubles the Greek government is in? I am talking about the idea for Greece to step up its privatization agenda and sell more stakes in various partly of fully state-owned companies. According to the International Monetary Fund, the original plan for sale of some 50 billion euro worth of assets is only 20 percent of the value of assets the Greek government owns.
Add to that the real estate Athens owns (supposedly more than 200 billion euro worth) and a few tens of billions worth of gold in the vault of the Greek central bank and, hey presto, Greece is able to pay off all of the emergency loans it has received from its European partners ánd other loans as well ánd even keep some money after all the bills are settled. The total Greek debt amounts to little under 400 billion euro.
It’s the assets stupid
Greece is fortunate enough, according again to the IMF, in the sense that its government ‘has an extraordinary portfolio of assets.’ That is true. The Greek government owns (wholly or partly) the nation’s banks, airports, railroads, water companies, postal services, telephone company, power company, gas company, gambling monopoly, casino’s and electric power generation and distribution company, to name a few. If not sold immediately, then it could at the very least be a very valuable collateral for new emergency loans the country is most likely to need in the future.
But will the sale of those assets really solve anything in the long run? While it could solve the financial trouble, it would most likely cause another, much deeper problem in Europe.
Cheated
Just think for a second about this privatization proposal. As an economist I support privatization of a large number of the aforementioned companies, as I think they would be more efficient in private hands. But this Greek privatization wave is c.q. would be forced upon the Greek people. Chances are that the new owners would become companies from the same sectors from other European countries. Deutsche Telecom for example already owns 30 percent of the Hellenic Telecommunications Organization and I am sure would be more than willing to expand its share.
Let us approach this subject from another angle. If you are from France, Belgium, Finland or the Netherlands, how would your feeling towards Europe and European integration change if Europe would force your government to sell the electric power giant EDF or Aeroports de Paris, the telecom company Belgacom, airline Finnair, Finland Post, or Schiphol Group (owner of airports in Amsterdam, Rotterdam/the Hague and Eindhoven)? Moreover, assume that the proceeds would fall short of the real value, because the interested parties know that they must be sold or else… (fire sale)? I would say you would be infuriated at the very least. And your support for European integration, European Union and the euro would melt faster than a snowball taken inside a warm house.
The same, of course, applies to the Greek people. They would feel cheated, to put it in neat terms.
Internal affairs
When recently a team from the IMF and the EU criticized Greece for its slow privatization efforts and some European ministers agreed, the Greek government replied that those organizations were ‘asked for help, not to meddle in our internal affairs.’ The Greek people would, no doubt, choose other words or deeds to let Europe know how they feel.
In short, the fire sale of the Greek family silver would surely solve a large part of the Greek financial woes. But, first, given the sorry state of the Greek economy and its government, it would not take long before that country would find itself in new troubles, only now without any family silver to sell. And second, chances are that European integration, which is already under threat, would suffer even more. The chance that all over Europe border guards would return to their years ago abandoned posts – and thereby nullify some of the largest gains European integration has given us all – would increase fast.
#1 by Brutus on May 19, 2011 - 12:12 pm
The faster they sell, the better.
Sure, there might be some twisted chauvinistic discontent at first. After some people will realize how much better deutsche telecom is at managing a telecom company, they will be ok.
Capital has a way of finding its most productive uses. The faster Greeks stop trying to hamper, the faster they will exit this mess.
#2 by Anonymous on May 20, 2011 - 5:18 am
Brutus,
That line of thinking should be thrown back to the 90s and locked up there. Look at most of the post-Communist countries where they have no tax base and the largest firms operating there are foreign. How is Hungary supposed to support its growing pension obligations if the Germans growl when they throw out the idea of raising taxes?
Lithuania’s census came out the other day and it revealed that they lost a whopping 10% of their population over the last decade. The combination of shrinking workforces, aging, food and utility prices, lack of services (which have been privatized or closed thanks to the IMF), young people leaving, and low wages will cause many countries to snowball into penury.
#3 by Betterworld on May 20, 2011 - 3:46 pm
And don’t ever forget the Greek national identity: they defeated the Italians and were occupied by the Germans within living memory – all with enormous loss of life and terrible suffering. Living room walls all over Greece have framed pictures of those who fell to the German warmacht.
Just below the skin of any Greek citizen is a proud anti-imperialist ready to kick back against anyone who dares to tell them how to run their affairs.
The Greek government may be tugging the forelock in Berlin, but at home they are playing a different tune, and may be forced to play an even more nationalistic tune in due course. If the Greek government implodes, the Euro may not survive its nationalistic replacement.
Merkel would do well to keep her Gestapo-speaking mouth shut or maybe even learn a few encouraging words of Greek. There are many, and not just in Greece, for who the rasping sound of that particular tongue still represents tyranny. This time the weapons may be different, but the effects on the Greek economy may be similar. There is even the danger of reigniting civil war politics.
Add to that mix the left’s view that the debts are not legitimate in the first place but the result of nationalising bad lending decisions made by private German bankers and their resulting demand that the loans be repudiated (note: not defaulted on, repudiated), and you have a heady cocktail of forces being stirred up by Madam Merkel’s careless tongue.
Not since the time of Plato have dictators had much respect in Greece.
#4 by Aff on May 20, 2011 - 5:18 pm
Privatising the lot would be a stealth tax on the Greeks, and they know it. Deutsche … would of course run Greek … much better, but that wiould not transform into lower prices but into higher profits and less employment. Just look at Baltic states or Germany itself.
#5 by Marcel on May 20, 2011 - 7:48 pm
This ‘selling the table silver’ didn’t work for all those African countries the IMF imposed it upon, why should it now suddenly work in Greece?
The IMF is a criminal organization engaging in human rights violations by imposing corporate control over peoples lives. What DSK did to that woman is what the IMF does metaphorically to the countries it ‘helped’.
But we can also see an example of when you ignore them, just ask Argentina who were better off once they finally decided to tell the IMF, World Bank and the rest of the corporate political crowd to get lost and defaulted. And remember, back then too the corporate banker crowd cried wolf and warned for impending collapse and doom. The only thing that will cause collapse is if you do what IMF and World Bank want.
#6 by costas on May 20, 2011 - 11:18 pm
Mr. Mujagic,
I am Greek and I very much enjoyed your article. Sadly, I can assure you that your assumptions about the impact of the massive privatizations scheme in Greece will be proven right. It is heartening to read a foreign pundit who understands our plight so well.
#7 by Pantelis on May 21, 2011 - 5:46 pm
It seems to me that the financial “experts” all over the world are not experts at all. An expert doctor knows exactly how to cure an ailment, and an expert engineer knows precisely how to fix a technical problem. Yet, the financial “experts”, still cling to the notion that they can hatch a solution behind closed doors, and a bunch of spreadsheets with fancy graphics and projections. An expert doctor, of course, needs to consult other doctors and a few X-rays, and an expert engineer still needs to have access to technical manuals, but for the most part, a real doctor needs to see the patient, and a real engineer must get his hands dirty with the equipment that he is trying to repair. The solution to the Greek financial crisis, is not a remotely-imposed set of guidelines devoid of the human factor, but a thorough assessment on the ground. Which one of those experts spent time in the streets talking to ordinary people? If they do not understand the underlying problem, how are these experts be able to understand the solution? If any suggested solution will adversely affect 10 million people, shouldn’t we at least take their opinion into serious consideration?
#8 by Corto Maltese on May 23, 2011 - 12:22 pm
Reading this article from Mr. Mujagic was actually a very sad experience.
History showed a over and over again the effects of IMF dictated “privatizations”:
1. high unemployment rates (mass lay-offs),
2. lower salaries,
3. major cuts on working and social rights,
…
Actually, I will not even list the “side-effects” as the list would be too long.
Anyways, don’t take my word for it. Former Senior Vice President and Chief Economist of the World Bank (also, recipient of the Nobel Memorial Prize in Economic Sciences) Joe Stiglitz is just one of many worldwide recognized economists who exposed IMF and the World Bank predator policy on nation states.
Privatization dictated by these institutions are the worst thing that government can do to it’s people and the country as these privatizations are not pursuing the social interest but the interest of the private kapital/investors/banks exclusevly.
Nation states should follow Argentina and other countries which kicked out IMF and The World Bank as they are proven economic predators and true financial terrorists of the world bringing nothing but misery to the working people and extreme wealth to the few.
I would like to extend support to the people of Greece in their just struggle against IMF, World Bank and their corrupt government. Do not give up on what belongs to you. Do not allow privatization. Follow the Iceland example. It is time to stop the IMF and World Bank terror once and for all.
#9 by Roger Cole on May 23, 2011 - 4:34 pm
“Family Silver” is stuff you put on the sideboard. State owned assets that are assets owned by the people that create wealth. Selling them has no connection or comparison with selling family silver but is all about ensuring rich people become richer as Ireland’s sale of its telecommunications sector clearly shows. The decision of Ireland’s rich and powerful political/media elite to force us vote again on the Lisbon treaty, after we rejected it the first time round was based on their belief that the Irish people would suffer in order to ensure their rich banker friends (the bondholders) were paid off, so they had the money to buy the assets of the people as cheaply as possible. The same is happening in Greece, Portugal and soon it will be Spain’s turn, followed by Italy, Belgium and in time France and Germany as well. If we are to defeat the rich and build a social Europe, then those of us who believe in a social Europe, a Partnership Europe, without a military dimension need to work more closely together.
should be paid at the expense of their own people
#10 by Ronald Gruenebaum on May 23, 2011 - 8:44 pm
Sorry, but the whole concept of state-owned companies is against the spirit of the EU and its internal market. The only problem I see is that those Greek companies are probably not particularly attractive given the boneheaded unions and the nepotism in the management.
The Greeks should not moan about privatizations, but repent. They have cheated at every possible occasion and are holding endless records in non-compliance with EU law. Name one area of EU policies where the Greeks did not bend the rules !
The only credit I give to them is that they are cheating their own state even more than the EU.
We should stop pretending that Greece has fallen on hard times. The situation is the result of corruption and a total lack of civic pride. Not paying taxes just isn’t clever.
And don’t forget that others, such as the East Germans or recently the Latvians, had to go through much more dramatic changes although they were certainly not as much to blame for their situation as our oh so nonchalant Greek friends.
#11 by Ronald Gruenebaum on May 23, 2011 - 8:51 pm
@betterworld
Pride is just a materialisation of human stupidity. Not sure what Greeks can currently be proud of,anyway.
And insulting the Germans is a sport that is not nearly as popular as you may think. After all, there are some other nations in the EU which are fed up with parasitical EU members.
It’s pretty unfair to bring in the old Nazi argument after what Germany has done for Europe in the last 60 years. Such argument typically reveals that the person who uses it is rather short of real arguments.
#12 by Lawrence on May 23, 2011 - 11:33 pm
I am of the same opinion as Corto Maltese.
It is about time the eu and the obsequious politicians in the member countries stop taking the people for a ride and tell them the truth that the eu and the euro are on the way out and nothing can stop them. They can lengthen the time a bit, but they cannot stop them from failing and collapsing.
Now today Fitch has also cut Belgium’s outlook to negative.
So now we have Greece, Ireland, Portugal, Spain to follow, Italy downgraded by Standard and Poor and Belgium’s outlook downgraded to negative by Fitch today, Greece downgraded to below junk status, Romania being investigated on suspicion of doctoring its accounts and the politicians keep telling the people that everything is under control.
Germany and France are doing their utmost to save the euro because first of all the loans are not to help the people but to save the German and French banks that loaned money without any restriction even when the recipients were not credit-worthy, but they continue to loan them money because they were buying German and French goods.
Secondly, because as soon as the euro is declared to have failed the European people will rise against the politicians and the eu will also be scrapped. In other words it will be the end of the euro and the eu.
It is madness to keep trying to prop them up at the expense of making the people penny-less because the euro is already not worth the paper it is printed on like the Deutschmark was prior to WWII.
Stop taking the people for a ride and declare the end of the euro and the eu or be looked upon as the traitors of the people in history
#13 by Wim Roffel on May 24, 2011 - 7:18 pm
@Ronald Gruenebaum
“the whole concept of state-owned companies is against the spirit of the EU and its internal market”
I don’t know what the “spirit of the EU” is. I do know that if it implies that people of our countries loose the right to do investments for the common good we all should get out as fast as possible.
#14 by Panagiotis on May 25, 2011 - 11:31 am
@Ronald Gruenebaum
‘Pride is just a materialisation of human stupidity.’
I don’t agree, yet it is pride driving your words.
A parasite is an organism leaving of of its host, I think this description fits better to the countries that receive currently the benefits of this crisis.
German nation did what it did for its own benefit and never to help its allies. It has been helped many times and supporteed in many occasions throughout history.
Most cases of corruption that you mention in Greece start from German companies: Deutsche Telecom, Siemens, Ferrostaal to name the most recent cases uncovered.
Germany has also its part of corruption, and we both could take some lessons from Scandinavian countries.
But the worst is that Germany shows that a part of its public opinion is selfish, and easily manipulated by local parties and this is a dangerous trait for a nation as history has shown.
One recent argument of Merkel was that Greeks and southern european nations receive pension earlier and have more holidays per year than Germans. Please google it and see that it is totally wrong. Did any German journalist point this out to your chancellor?
Finally it is a pitty that Merkel believes that winning the elections is more important that Europe, and in this regard I am afraid that many european leaders do the same.
#15 by Felix on May 25, 2011 - 11:28 pm
When the cheater gets caught, it’s payback time! Party’s over, time for Greeks to actually do some real work. Does Greece actually produces anything else than olive oil? I don’t know any Greek brand whatsoever…
#16 by Anonymous on May 26, 2011 - 5:11 am
@ #14
My dear friend, if Greeks work the same amount as Germans and they find themselves in the current mess, it only leads to one conclusion – Greeks are incompetent. There is no other option I’m afraid.
Stop complaining and get some REAL work done.
#17 by morokas on May 26, 2011 - 11:21 am
I am a greek and I honestly believe that privatisation plans only bother the related strong labour unions.
they are the ones who get paid with german wages when most of the workers in the private sector work much harder, longer hours and get much lower wages.
A silent war among private and public sector employees is in progress but no one seems to be willing to talk about.
And yes Germans are right but is not for the Greek working people to blame
#18 by Panagiotis on May 26, 2011 - 12:53 pm
#15,
Who is the cheater in the financial crisis?
Is it the Greeks or US & EU financial institutions that skrewed up?
Greece produced knowledge, democracy and open mind. You obviously miss all 3.
#16,
Please dont generalize and don’t be rude by insulting Greeks, Greek people and southern countries people in general are very productive people on average and are working harder than average.
Dear Morokas I don’t understand why some Germans should have a problem and why they are right, they loan money at a good interest rate.
It is a moral issue?
Or perhaps they are jealous and they fear they get robed of their free time?
Germans have on average most holiday days in the EU, many Greeks leave and work in Gremany why is that? Would someone leave their country to go in a foreign country to work more and get paid less?
Crisis is here to stay until people understand what caused it: Greed (Not Greece
) .
#19 by Lawrence on May 26, 2011 - 1:23 pm
Just a small note.
On RAI News TV ticker.
Greece. Tens of thousands protesting is the streets.
Yesterday
On RAI News TV news ticker “Grecia, Commissaria UE, l’uscita dall’Ewro è sul tavolo” Greece, EU Commissioner, the exit from the Euro is on the table.
#20 by Alan on May 27, 2011 - 7:21 pm
Signed, Joseph Goebbels?
Lest anyone forget, this sale of Greek assets is a suggestion by Germany’s leaders. The European Union is their new empire. The ECB (a carbon copy of the Bundesbank writ large over the eurozone; note that its headquarters is in Germany) kept interest rates at 2 percent to allow Germany to rebuild its economy; then after that, they raised interest rates eight times in a row so that everyone else’s economy could be wrecked.
#21 by Anonymous on May 28, 2011 - 5:36 am
@ #20
Nope, signed by Anonymous. And for the record, I ain’t German.
As to the policy discussion, let me just say that if you dislike how the ECB / EC / IMF is handling the case, why don’t you bail out Greece with American taxpayer money? In other words, why don’t you put your money where your mouth is? Damn easy to make generous statements while others are paying the bill. I, for one, am footing in a hefty price because of Greek and other layabout. Somehow I don’t think you’ve got the right to criticize my posts until you’ve chipped in yourself.
#22 by Panagiotis on May 30, 2011 - 4:38 pm
#21
Anonymous it would be interesting to know your nationality, but your young age shows.
You see this as a poker game perhaps, you have perhaps never know unemployment while having family obligations.
Ask Spanish people with >30% unemployment what they think of your ideas.
And you as an individual are footing nada, zip , nill for anyone, you are footing for the banking system.
#23 by Paul cadier on May 31, 2011 - 10:02 am
Roger Cole.
As usual your observations are spot-on. Had the European elite listened to their people, and respected the NO votes in France Holland and Ireland, and the whistle-blowers within EU institutions this catastrophe ( poignant Greek word) could have been avoided. Had Helmut Kohl listened to the 150 leading German economists who signed a petition against joining the euro published in the press, ditto. The EU will fail not because of the idealism of the people but the cynicism of their rulers who treat them with utter contempt.
We have seen similar dictatorships fall in the Arab Spring and in the USA they are beginning to call the rioting in Greece and Spain the “European Spring”. Let’s hope they are right.
#24 by Freeborn Manuella on June 2, 2011 - 12:29 pm
Let us remember the words of Teresa Benns way back in 2003: “He let me down after voting for him.” Meditate gente, gente!
#25 by kjr63 on June 3, 2011 - 11:03 pm
“As an economist I support privatization of a large number of the aforementioned companies, as I think they would be more efficient in private hands.”
You mean that natural monopolies are better in private hands, as an economist?
#26 by Edin Mujagic on June 8, 2011 - 1:55 pm
@25: I try to choose my words carefully, that is why I wrote that I ‘support privatization of a large number of the aforementioned companies’ and not al of them. On utilities for example, I agree with you. Banks on the other hand is a different story, as are (air)ports
#27 by Gertkvist on June 9, 2011 - 11:04 am
The real idea behind the “force them to sell the family silver” suggestion is probably to make Greece to a varning example for the rest of the EU countries: either follow the EMU criteria, or be forced to do very impopular things.
And that is a good idea. Evidently both politicans AND voters are unable to do anything right without the threat of direct correction.
Hopefully Greece gets the message and leave the EU completely. It is very boring to hear “we were great 2300 years ago, so …” all the time.
#28 by Lawrence on June 16, 2011 - 10:46 am
Gertkvist all countries are going to leave the eu because both the euro and the eu are on the way out and nothing can save them whatever the politicians do or try to do.
They are all finished.
#29 by Peter on September 18, 2011 - 1:23 am
The solution to Greece has already been done before, namely in Argentina.
Argentina has always had a dual currency system, their official peso and the unofficial $US.
Same scenario could exist in Greece with some ginger manouvers.
1 Create a new greek currency ready to be installed.
2 When population votes against austarity install currency with specific range of conversion. At the same time announce default on debt and let the games begin.
3 Yes, there will be suffering, however as in the case of Argentina, the population will not revolt as they were the ones who chose default.
4 Eventually as in Argentina, the people will adjust to new financial realities and the country will prosper at the rate with which people produce goods and services.
#30 by EconRob on October 9, 2011 - 8:24 pm
I can’t say I have much sympathy for the greek people. They put these people in office and dare I say would be happier for an even big handout government.
And I do not think the government of Germany should be taking over assets.
But I see no reason for the bond holders to not demand collateral. If the bond issuer defaults then the bond holders should be able to demand payment in cash or kind.
That said why in the heck are the German people (or government) doing bailing out Greece. The should be allowed to sink or swim on their own.