ECONOMY

EU says OTE deal broke rules

European Union Internal Market Commissioner Charlie McCreevy has told the Greek government that its agreement with Deutsche Telekom (DT) over the management and ownership of OTE violates EU rules, according to sources. In May last year, DT agreed to buy a 25 percent stake in OTE for 3.2 billion euros and share management of the Greek company’s 10-member board. In the event DT decides to sell its stake in OTE, the Greek government also retains the right to reject the buyer, demanding that any future investor must be of «a similiar size and standard to DT.» McCreevy’s letter, sent to the Greek government in mid-April, says the deal violates rules on the free movement of capital and breaches other EU regulations. The agreement for the two sides to control the board leaves no representation for minority shareholders, the letter reads, according to sources. The government’s power to reject a future potential investor in OTE is also being disputed, sources added. Greece has been given until mid-June to respond to the letter when the Commission will decide whether or not to take legal action against the government. It is the second time Greece has got into hot water over its handling of the OTE sale. The government has also been instructed to change a law used to block a takeover of OTE last year. The law stipulates that anyone wishing to own more than 20 percent in a strategic firm, such as the telecom company, must obtain authorization from the government. The law was used to prevent buyout company Marfin Investment Group from obtaining a controlling stake in OTE.