Little revenue expected from privatizations

Officials at the Ministry of Economy and Finance predict that revenues from selloffs in state enterprise will begin to diminish from next year, because of the continuing stock market crisis. In 2003, these revenues will reach 0.9 percent of Greece’s gross domestic product and will used in their entirety to reduce the public debt, which, after the revisions imposed by Eurostat, the European Union’s statistics agency, will reach 105.1 percent of GDP, instead of 96 percent. Officials at economic ministries recognize that privatizations in the form of partial sell-offs, used extensively over the past five years, have exhausted their potential. This week, the State is selling a 13 percent share in electricity company Public Power Corporation, bringing the total stake owned by private investors to about 29 percent. Economy and Finance Ministry officials are now considering other ways to privatize the remaining public enterprises. These could include selling the whole enterprise to a private investor, or selling a smaller stake and giving the management to the private sector. This had been the tactic of the previous conservative government in 1990-93, but it was thwarted in its attempts to sell off companies such as OTE Telecom by stiff opposition, and was ultimately brought down. Current Prime Minister Costas Simitis had proposed keeping OTE as a single-share company, with the share in the State’s hands. The dramatic reduction in revenues from privatizations is attributed to the continuing decline, for over three years now, of the Athens Stock Exchange, which makes partial sell-offs very difficult. Officials believe it will be very difficult, even in the best of circumstances, for privatization revenues to exceed 2 percent of GDP in any given year. Even this would require a partial recovery of the stock market and a return of the investors who have deserted it en masse. This comes at a period when the European Commission is demanding that Greece reduce its overall debt by about 4 percent of GDP annually. By contrast, in 2001 privatization revenues reached 7.1 percent of GDP. This drying-up of privatizations as a source of debt reduction will make spending cuts imperative. So far, however, spending has never decreased from one year to the next.

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