A halfhearted ‘privatization’

Within the framework of structural reforms, the government will sell a minority stake in the Postal Savings Bank through an open competition. According to sources, it is considering including the bank’s management in the offer. This, however, does not mean much, other than showing the government’s intention of having its cake and eating it, too. The Postal Savings Bank has been called a «prime cut» that will attract the interest of market heavyweights. The latter should be willing to pay a significant premium for a stake. However, before the State’s terms of offer are finalized, banks have made known their own terms and have informed the Ministry of Economy and Finance that they are interested as long as they can take advantage of the synergies. In simpler words, they want to absorb the Postal Savings Bank, something that Economy and Finance Minister Nikos Christodoulakis is unwilling, or unable, to offer. The rationale behind the apparent solution chosen, that of partial privatization, is not clear. The State will retain majority control but is offering the management. Why would such an arrangement be binding to any subsequent government, as it could easily take over the management again? The likely explanation is that the solution has been designed to minimize reactions, especially among the hidebound unionists for whom any privatization is undigestible. But the adopted solution constitutes neither a privatization nor a structural reform. Serious structural reform would be for the government to allow the Postal Savings Bank to become the most competitive part of the Greek financial system. This would, in the medium term, provide increased revenue for the State, would encourage competition and would rewrite the rules of the game. If the political will existed, the government could seek the best bankers available in the market, offer them private sector salaries and provide them with the opportunity to manage the bank free of interference, either from ministers demanding that so-and-so be hired or from a government wishing to exploit the bank to conduct its «social» or other policies. This move would require the State to sacrifice its dividend for a couple of years, at least, investing it instead in acquiring know-how, hiring well-paid, specialized personnel and creating new products and services. This way, the Postal Savings Bank would become directly competitive with the big banks in the Greek market. Until now, all governments had preferred to keep the Postal Savings Bank in a sort of hibernation, although its recent conversion to a corporation was one step forward. Perhaps the government would do well to study the example of Germany and what the government there did in turning around its own Postbank. Until 1999, Postbank was a lossmaker. The reasons? A personnel with a civil servant mentality; non-existent know-how; salaries too low to attract banking professionals; no risk management and no portfolio management. In 1998-99, the new government of the Social Democrats and Greens was under pressure to sell the bank. It decided to turn it around first and then sell it. In 2000, the government appointed new management, which invested, over the following three years, 300 million euros in the bank. It acquired private bank DSL, which had the near-top credit rating of AAA, offered higher salaries and hired specialized personnel, which now account for 70 percent of its work force. Now, Postbank is a profitable bank, with earnings of 400 million euros in 2002 and estimated 2003 earnings near 500 million. Next year, it will be listed on the Frankfurt Stock Exchange and the State will sell a 49 percent stake in it, expecting to get about 3.5 billion euros from the sale. In France, LaPostefinance, the subsidiary of the post office, is about to follow the German path. Both banks offer a full range of financial services. In Greece, the solution chosen neither strengthens the potential buyers nor offers much as revenue to the State. The government should either opt for a bold privatization, selling 67 percent of the bank, or for the German solution. In any case, a decision cannot be made under the pressure of possible opposition or union accusations about selling off state property, but according to the wider interest.