The Greek economy’s black hole

What do you call a company which owes more than it earns and pays its employees two or three times as much as its rivals? In Greece, the answer is obvious: A public corporation. For decades, Greek governments have followed a social policy that has meant serving party interests through the growth of state companies, which offer debts instead of profits and have become a chronic problem for the Greek economy. Regardless of whose fault this is, public corporations (usually referred to by the acronym of DEKO) today owe in excess of 14 billion euros, for which the Greek state, i.e. Greek taxpayers, have vouched. Loan after loan For 2005 alone the borrowing requirements for all DEKO are projected at 1.447 billion euros and their operating revenues just 281.52 million euros! At the same time, they receive grants from the state budget amounting to 226.72 million euros and are hoping that this year their total revenues will reach 508.24 million euros. Yet this can only cover a third of their borrowing needs. Worse, their investment requirements come to 2.8 billion euros, «other needs» to 1.4 billion euros while «other resources» are estimated at 1 billion euros. In 2003, the state’s guarantees totalled 1.8 billion euros. Forfeitures came to 663 million euros, with 603 million euros of them burdening the state. Public corporations are expected to record a decline in profits in 2005, with the financial results estimated at 508 million euros (or 0.29 percent of the gross domestic product), against 560 million euros (0.34 precent of GDP) last year. This development is attributed to the further rise of the deficits of railway operator OSE and bus company ETHEL, as well as the drop forecast in the profits of gaming company OPAP and water supplier EYDAP, both listed in the stock market. Total investment will rise to 2.8 billion euros this year against 2.7 billion euros in 2004, showing an increase of about 4 percent, mainly in the energy and transport sectors. Gross borrowing is expected to reach 2.1 billion euros in 2005 from 2.5 billion euros in 2004, posting a decline both in absolute figures and as percentage of the GDP (from 1.54 percent in 2004 to 1.2 percent in 2005). Notably, gross borrowing had risen in 2004 to 2.5 billion euros from 1.9 billion euros in 2003, as a result of the need to fund expanded investment programs in the domains of railway and city transport, as well as to cover the increased needs for serving their loan obligations. For DEKO, 2004 was a good year in terms of profits and revenues. However, DEKO’s positive results do not reflect the terrible reality in some cases. Last year, the sum of DEKO’s revenues came to 10.23 percent of the GDP – 16.81 billion euros against 15.2 billion euros in 2003. This rise was not the outcome of service rate increases but was due to the higher demand for OPAP’s services and the greater turnover of Hellenic Petroleum because of the rise in crude oil prices. This way, the negative developments in the financial results of city and railway transport were offset. The above revenue amounts for 2004 include budget grants that come to 210 million euros, just down from 211 million euros in 2003. As for expenses, they recorded a slight rise as percentage of the GDP, reaching 9.88 percent in 2004 (16.3 billion euros) from 9.71 percent in 2003 (14.9 billion euros). This is due to contained operating expenses and the small rise in salary expenditure, despite the financial burden caused by hosting last summer’s Olympic Games. Investment posted a 9 percent rise in 2004 compared to 2003. This rise derived mainly from the transport sector and balanced out the drop in investments by ODIE, the horse racing organizing company, due to the completion of the transfer of the racing course within 2003, and by Hellenic Petroleum, which had recorded particularly high investments in 2003 owing to incorporating the fixed assets of Petrola SA. Even more impressive are the average DEKO salary figures, compared with the rest of the market. Economy and Finance Ministry data show the average salary expenditure in public companies is disproportionately high. For instance, the lower average salary is at the Educational Books Publishing Corporation (OEDB): It stands at 26,184 euros per year, which is 112 percent more than the average in the Greek economy. The highest average salary is to be found at Hellenic Petroleum, at 64,387 euros per annum, or 276 percent more than the Greek economy average, which is calculated at 23,326 euros per year. Although you won’t hear officials talking about this problem, everyone privately agrees that even the basic rules of management were not applied to public corporations. As a result, thousands of DEKO employees are facing the risk of losing their jobs, while voluntary retirement programs are coming thick and fast, deemed fairer but more expensive. Hot potato Today, top economy officials in the government lay the blame on previous governments, who uncontrollably hired people to win votes and who exercised their social policy at the expense of productivity and efficiency. The government’s plan for DEKO rehabilitation, with quantitative targets and penalties, combines social policy with improvement in the companies’ finances. 2007 is its target date for implementation. The blueprint includes cutting expenses, boosting revenues, making it easier to maneuver around red tape and improving internal auditing. Also, the government wants to invest with its own resources, while absorbing national and EU subsidies. Borrowing will only be allowed after exhausting alternative ways of securing funds.

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