State reform slow but steady

The strategy of «mild adjustment» chosen to implement reform in state-controlled companies is beginning to bear fruit. Economy and Finance Minister Giorgos Alogoskoufis seems satisfied by the way the reforms are proceeding in state enterprises. This is, in fact, one of his biggest projects to contain excessive public sector spending. During the past few days, the ministry’s seventh floor has been deluged by state companies’ business plans, which are part of requirements imposed by a law voted in late last year and to which the state companies must adhere strictly, provided they are approved by the ministry. There is a single exception: The Greek Film Center, through which film directors are generously subsidized by the state, has balked at being included among the «public utilities» and insists that it is a cultural foundation without an obligation to submit a business plan, apparently preferring to spend freely without any outside monitoring. This exception notwithstanding, the business plans mark a quiet revolution in the public sector, since this is the first time that state company managers are bound to follow a plan with predetermined tasks and targets. This reform has put Alogoskoufis sometimes at odds with some of his colleagues, notably Transport and Communications Minister Michalis Liapis, who feels that the supervision of «their» utilities is being taken away by the centralizing Alogoskoufis. The latter, however, is determined to use his new powers of supervision fully: One of his priorities is to install an information system which will unite all the state companies’ accounting departments with the Economy Ministry. The system will enable the companies’ monitoring on a daily basis, although it will deprive them, as well as the various ministries, of the one prerogative they have used in the past to its fullest extent, that is, the ability to respond as late as possible to requests for information. Two sectors are of particular concern to Alogoskoufis: the defense industry and public transport. One of the two major defense companies, Hellenic Defense Systems, had in 2005 higher losses (91 million euros) than turnover (90 million). The other, Hellenic Aerospace, lost 9.8 million on turnover of 215.9 million. The Athens Urban Transport Organization (OASA) has losses exceeding 300 million euros and the price of oil leaves little room for hope. Alogoskoufis is aware that tickets are subsidized but would like to see their prices increased to cover, at least, operational costs. This is unlikely to happen less than three months before local elections. Doubling the ticket prices, which would make the company profitable, is out of the question. A major change is that state companies can now hire quickly to cover their needs: New hires are for seven months only and then sign an open contact, on private sector terms.