Greece’s golden shares at risk from judicial obstacle

The government’s plans to sell off a majority stake in companies deemed critical to the country but maintain control via a «golden share» could take a hit following yesterday’s ruling by the European Court of Justice, which invalidated the legality of such special voting rights held by the French and Portuguese governments. Observers said that in the short term the ruling could hold back the government’s privatization program, while over the long term it could force it to change tack and actually give up control of state entities. «This is an impediment for the government’s privatization program,» said Christos Avramides of Proton Investment Bank. He said the State could decide to hold on to majority control of companies slated for privatization in order to maintain control. Avramides said the justification for a golden share needs to be seen on a company-by-company basis and that opening up markets could actually benefit former monopolies, as in the case of telecoms operator OTE and the mobile telephony market. In the long run, the court ruling could force changes in Greece’s privatization strategy, forcing the government to give up management and control of state entities, said Schroder Salomon Smith Barney economist Miranda Xafa. The European Court of Justice yesterday overruled golden shares held by the French and Portuguese governments, saying that the French justification for special voting rights in oil refiner TotalFinaElf lacked precision. It also outlawed Portuguese rules hindering foreigners from acquiring capital in privatized companies. The court said that both countries had violated European Union law by restricting the free movement of capital. However, a decision upholding the legality of the Belgian government’s golden shares in its transport and gas utilities means that all is not doom and gloom for European governments seeking to hold on to control of key state entities. The court said Belgium’s case was justified because it was in the «general interest» and is «proportionate» to the objective pursued. Germany, Spain and Italy are some of the countries that have resorted to golden shares in order to maintain their influence, and consequently could fall under the court’s spotlight in the future. The UK is already under investigation for a law capping shares in airport operator BAA Plc at 15 percent. The Greek government has stressed that it plans to hold a right of veto in privatized companies serving the public interest, among them the Public Power Corporation, OTE, water utility EYDAP, gas company DEPA and Hellenic Exchanges Holding. Legislation submitted to Parliament last week sets out a golden share for the State, with an interministerial investment committee determining the instances where the State could exercise its veto. The State’s stake in PPC, OTE and EYDAP would be a minimum 35 percent and include management control.

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