The unhappy state of public sector firms

The year 2005 inherits a host of problems as regards enterprises and organizations of the broader public sector (DEKO), whether fully or partly state-owned, listed on the Athens Stock Exchange or not. The new government that took over after the March 7 elections has seemed unprepared to manage the crucial issues affecting it. The period of political «truce» leading up to the Olympic Games, even though it afforded the government time for recording, diagnosing and prioritizing problems, was not gainfully utilized for the substantial assessment of the real state of DEKO. The logic of «mild adjustment» for the fiscal situation was combined with the seeking of political consensus – achieved in the end with the nomination by the government of Karolos Papoulias, a former opposition minister, as candidate for president of the republic. However, it seems the problems could not wait, they swelled and survival for many DEKO organizations has become an urgent issue; for others, their orientation remains to be clarified and, significantly, strategic plans to be drawn up. Government officials are now timidly indicating that the first examples of a new policy will be visible after the first quarter of 2005, most likely in combination with a government reshuffle, and not avoiding collisions, if necessary. At any rate, the first nine months with the new government in power has shown a shortage in competent management of the issues, problematic choices of senior personnel, suspicious support to people previously involved in cases of mismanagement and a lack of transparency, contrary to pre-election promises. Soon, the issues of the privatization of Olympic Airlines and what is to become of its debt-ridden predecessor, Olympic Airways, will be at the top of the list of government priorities. Both companies are now likely to be in the last two months of their existence, as the European Commission is heightening its probe into their past finances, continuously revealing new illicit state financial support. Already, a new privatization tender for Olympic Airlines is being drawn up but the rumored interest from a variety of sources is expected to dissipate when the prospected investors see that the revamped carrier’s deficits exceeded 130 million euros in 13 months. OTE OTE Telecom ran up losses in 2004, largely due to the Olympic Games and its evident inability to adapt to new market conditions. It is expected to report losses for the entire year and not to pay out a dividend, while in 2005 it will have to log on its balance sheet (if International Financial Reporting Standards come into force, as planned) the cost of a large early retirement program. Its performance this year will naturally be affected by developments in the broader telecoms market, where a number of alternative providers are already considering investing in their own independent network, rather than depending on the purchase of wholesale capacity from OTE. According to sources, a number of business deals for mergers or partnerships are under way among them. OSE Hellenic Railways (OSE) is perhaps the typical problematic DEKO, with debts of more than 3 billion euros and cumulative losses approaching 1.4 billion. Its network has been in the process of being modernized in unorthodox ways for 20 years now, while its infrastructure project management subsidiary, ERGOSE, has been struggling to control projects, cost overruns and games among contractors. In recent years, OSE was converted into a sponsor of technical studies without limit or benefit. Recently, plans for the creation of a western rail axis were revived, but without officials furnishing clear answers to questions as to the viability of two axes in a small network such as Greece’s, with considerable geophysical and geographical difficulties and a small potential pool of customers. OSE and ERGOSE officials are now reportedly in a state of anticipation for an estimated 1 billion euros in European Union investment subsidies, without any certainty that the sum will be absorbed, at least for the completion of the main eastern axis and the Athens suburban railway.