ECONOMY

Let the owners of failing businesses pay

It seems there is no equality, even in unemployment. It is preferable to be facing dismissal as an employee of Olympic Airlines than as a worker in a textile factory in northern Greece, where the most you can hope for is some small and temporary unemployment benefit. There are two types of companies facing closure: those that will be left to their fate and those too big and important for that. Evidently, Olympic Airlines is of the latter type. Indeed, forceful arguments are advanced to justify the preferential treatment: Anyone taking the view that the carrier must be liquidated if it cannot make a profit is supposedly defending the interests of its privately run competitor, Aegean Airlines. In contrast, no one claims that when a factory is closing in northern Greece there is a conspiracy serving the interests of competitors. In practice, of course, Aegean benefits because Olympic has high operational costs, leaving comfortable room for any competitor to gain market share. To be sure, in both domains, air transport and textiles, the crisis is global. Competition is intense and many companies are facing an impasse. In both cases, employees are not responsible for management’s decisions. The crucial question, however, is how you deal with the problem. Perhaps the model being promoted by some for Olympic can also «save» the textile industry. If the ailing firms can limit their liabilities to the state to 51 percent of the total, they can file for protection from creditors. In this way, they will gain time in order to continue to operate, although their solvency problem will remain. At least, in this case there will be equality of treatment among the prospective jobless. The real solution to the problem of any ailing enterprise cannot be reached without its owners suffering some loss. The value of any enterprise can be determined with precision. It may be even zero if its liabilities exceed the value of its assets. If an ailing enterprise is sold, the new owners will retain some jobs – but no more than are required.