Government admits sell-off proceeds were illegally used

Just days after it had formally denied that it used revenues from state company sell-offs for any other aim than to pay off the public debt, the government yesterday admitted that in the first nine months of the year, it had used nearly all the proceeds for other purposes, mainly to cover the liabilities of public bodies. This embarrassing admission that the government actually violates the law and European directives was made yesterday in a reply to a query by Left Coalition Synaspismos MP Panayiotis Lafazanis. The diversion of proceeds from, mostly partial, privatizations occurred in 2001 and 2002 as well, the Economy and Finance Ministry admitted yesterday. Specifically, from the 1.55 billion euros earned through the privatization program between January and September 2003, just over 1.48 billion went to cover gaps in the current budget. In 2002, 1.21 billion out of 3.01 billion in privatization proceeds were used to shore up the budget, and in 2001, 1.4 billion out of 3.3 billion euros were used for the same purpose. Last week, the ministry had denied that proceeds from privatizations were used to keep a lid on the budget deficit. «Everyone knows that, according to Eurostat rules, using revenues from selling shares (in state-controlled companies) to reduce the budget deficit is not permitted,» the ministry had said in a statement. Where do these proceeds go? The largest segment (940.8 million euros) went to DEKA, the state portfolio company, which used it to buy back shares in National Bank (actually, to pay for maturing share-exchangeable certificates whose holders did not use to buy shares, the price of which had plummeted in the past three years). The certificates represented 16.01 million shares. This month, the State sold 28 million National Bank shares – 11 percent of the total – for 490 million euros, a reflection of the stock market’s drop since 2000 and of the, ultimately disastrous, decision to issue the certificates. Privatization revenues were also used to help pension funds – notably the artisans, small traders and self-employed professionals’ fund (TEVE), which received 32 million euros, and the OTE Telecom employees’ fund, which received nearly 95 million euros. The Culture Ministry received 178.7 million euros and Olympics organizers Athens 2004 got 35 million. Until recently, the high level of debt did not overly concern the government, thanks to a flexible interpretation of European Union criteria which accepted even a small reduction each year. Now, with much more emphasis on reduction, the government’s methods may rebound badly.