ECONOMY

No escape route for Olympic

Far-reaching changes are expected in the sector of Greek public transport utilities, under pressure from the European Commission. By all accounts, the long saga of ailing Olympic Airlines appears to be coming to an end with the closure of the carrier for breaking competition regulations and amassing huge debts, while the Commission is now turning its scrutiny on Hellenic Railways (OSE) and is expected to put pressure for an extensive deregulation of rail services. European Transport Commissioner Jacques Barrot last week said the Commission would launch a new probe into Olympic, likely to bring Greece under new threat of being referred to the European Court. The subject of the new investigation is the continuing hidden state subsidies to the carrier, particularly the government’s last two moves: the balancing out of its debts with state debts to the carrier and measures designed to protect it against creditors. The Commission has refused to accept the split of the carrier into «Olympic Airways – Services» and «Olympic Airlines,» which was designed to rid the operating carrier of the huge debts in order to make it more attractive for privatization – and maintained that both remain an indivisible whole and must share the same fate. ‘Favors’ The Commission’s probe is centered on four issues: the government’s tolerance of the airline’s evasion of tax and social security contributions since the end of 2004, the subsidization of the leasing of aircraft since May 2005, the balancing of debts and the legal protection against creditors, granted by special law in 2005. As regards the balancing out of debts in particular, the Commission estimates that Olympic has gained 778 million, which it describes as «overcompensation» and about which the Commission was not notified in order to consider its legality. Concerning the protection against creditors, the Commission said in a statement that, «according to all indications, this legal protection is not offered to any other entity in Greece» and can therefore «be considered as state support.» The government must reply to the Commission within a month and competitors will be invited to participate in the probe. The findings are expected to be issued in the next few months, as the Commission wishes to have them ready before the European Court issues rulings on the suits already filed over illegal subsidies in the period 1998-2004. The Commission’s new probe makes things easier for the government, in the sense that it makes any new attempt to save the airline futile. It seems that in the labyrinth that is Olympic Airlines, there is only one way out, and that is its closure and the formation of a new company. The particular form that this new company will take will be determined by close deliberations between Athens and Brussels but senior officials here say that the basic requirements for its endorsement are a complete break with the existing carrier (which will probably mean the loss of both name and logo), the participation of private investors and on a scale appreciably smaller than Olympic Airlines. The last requirement is fully indicative of the Commission’s logic: The new company must be small in size so that the main competitor, Aegean Airlines, can grow without facing unfair competition in the form of subsidies by the taxpayer which Olympic has enjoyed for decades.