Gov’t determined to stem state companies’ losses

Economy and Finance Minister Giorgos Alogoskoufis is trying to persuade state companies and organizations to save as much as they can of more than 1.5 billion euros in expenses, which this year will be met either through the budget or, mostly, through borrowing by the companies themselves under state guarantees. The endeavor is difficult and the results doubtful, as the public sector on the whole is known to have its own spending logic, largely independent of what the government may press for. In recent meetings with Transport and Communications Minister Michalis Liapis, Alogoskoufis has been trying to find ways of trimming subsidies to the particularly costly public transport utilities, which are perennial lossmakers. These subsidies in the government’s budget this year total 213 million euros, against 2002 million in 2004 and 177 in 2003. The biggest lossmaker of them all is the Hellenic Railways Organization (OSE), which has budgeted for a borrowing requirement of 1.08 billion euros in 2005, up from 793 million last year and 679 million in 2003 – accounting for about two-thirds of public enterprises’ total borrowing requirement. The prospects for making OSE pay its way are dismal and sources say officials are even mulling the possibility of shutting it down in the future and replacing it with a concern that will be rid of past debts. There is also serious concern about state companies related to arms equipment, which have traditionally been staffed by governments on the logic of political clientele relationships, with scant respect for considerations of viability. Hellenic Aerospace (EAB) is perhaps the best example of mismanagement and intransparency, and has been plagued by repeated failures to get on a sound footing, after absorbing millions of euros to no avail. The Hellenic Vehicles Industry (ELBO), privatized in 2003 and expecting orders for the Greek army, does not fare much better. The new owner, the Mytilineos group, is said to be exerting pressure for the orders to be put through, suggesting it may have to proceed to layoffs. Another source of heavy burden for the budget has been public hospitals, whose debts totaled 2.1 billion euros last December. So far, 1.2 billion has been repaid and the government is instituting a new procurement system for certain hospital supplies next month, hoping to save 25 percent of the costs.

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