End of electoral uncertainty will give market a deserved breather

The government’s nomination of former foreign minister Karolos Papoulias as candidate for the president of the republic yesterday removes a major element of uncertainty clouding the country’s prospects of political stability and is bound to hearten the country’s business sector. Papoulias, a member of the main opposition PASOK party, is almost certain to be elected with the support of both major parties in Parliament. Therefore, his nomination virtually puts an end to speculation about early elections in the spring, as would have been likely in the case of a controversial candidate. The business sector has fretted long enough at the possibility of early elections. As a matter of fact, the economy avenges itself upon politicians who neglect it for too long, some people say. This is illustrated by the example of banks’ social security problem, which, should the government not solve the dilemma within three months, as two state bank presidents have said, could turn into a bomb in the foundations of the Greek banking system, turning foreign investors away, and with unknown consequences for the stock market and the listed public companies. Despite all this, the government does not seem particularly worried, neither about the impressive swelling of the public deficit nor the delays in structural decisions or the slowdown in the economy’s growth rate. This can easily be corrected, claim aides of Economy Minister Giorgos Alogoskoufis, who will be starting in the first months of 2005 an extensive program of partial and full privatizations, both to bring in sizable cash benefits for the budget (and to drastically limit deficits) and to be a lever for restructuring the economy with private investment, boosting competitiveness and economic growth. The range of options the government is considering include selling a large share of the state’s majority stake in Athens International Airport and privatizing Olympic Airlines, provided there is specific interest by a consortium of credible Greek entrepreneurs. Such moves may sound nice, but planning or announcing is one thing while practical results are quite another. Yet Alogoskoufis’s aides suggest that 2005 will be a year when crucial decisions will be made, changing a great deal in the economy, albeit a little late. This strong message will be conveyed, they say, to Greek and foreign investors through the privatization program, a shake-up in the Greek banking sector and the resulting bolstering of prices on the Athens Stock Exchange. They consider it almost certain that Emporiki Bank will be privatized, probably sold to its foreign partner, France’s Credit Agricole (after its social security problem is solved) and that the privatization and merger chain will affect all banks. The same sources say an immediate privatization is scheduled for the Postal Savings Bank. In parallel, they add, the second engine to power the economy’s growth will also start, by this they mean major construction projects. Emphasis will be placed on large self-financed projects, both road network work (the Maliakos Gulf detour, the underwater tunnel in Thessaloniki and the Ionian highway) and projects of social infrastructure, such as the building of hospitals and schools by the private sector, which will then profit via long-term leases to the state. To be sure, this is not the first time we have heard such plans and most economic observers are not optimistic for their fruition. This is especially true for likely interest from the private sector in acquiring long-term leases for the Olympics installations – an interest on which the government is placing a great deal of hope for fear it might be stranded with them.