Government in urgent need of extra revenue

The government is urgently looking for resources to spend in tough times, i.e. pre-electoral periods, but can find precious few, unless partial sales in state enterprises can come to the rescue. The 2002 budget has already been severely taxed by extra spending on farmers hurt by severe weather earlier this year and on anti-poverty measures enacted to shore up government support. In each case, about 300 million euros was spent over and above what the budget forecast. Economy and Finance Minister Nikos Christodoulakis has instructed the General Accounting Office to find ways to make budget cuts of about 250 to 300 million euros. According to its own forecasts submitted to the European Commission, the government had pledged a budget surplus equal to about 1 percent of the country’s gross domestic product. Achieving this, however, looks increasingly unlikely, even more so after the Commission warned Greece, and other countries, not to understate the extent of their debt by complex financial transactions. Moreover, the economy may grow at a slower pace than the forecasted 3.8 percent. On top of the need to present a surplus budget to the EU is an even higher need: catering to the electorate. There are local government elections scheduled for October and pro-government candidates are likely to lose several cities, towns, and prefectures, according to opinion polls. In a damage-limiting move, the government wants to increase spending before the elections. The likely reserves are going to come from sales of shares in state companies. Last week, the sale of an 8-percent stake in OTE brought 645 million euros to state coffers. Even though this was done through private placement and not through the stock market, the bourse reacted badly, because, experts say, the market is too narrow and will not tolerate more shares for sale. Despite fears of further depressing the market, the government is determine to press on with partial privatizations. It expects to earn a total of 4.4 billion euros from the proceeds, including 455 million from the sale of a 23-percent stake in Hellenic Petroleum to a consortium made up of Russia’s Lukoil and the Latsis Group and 470 million from the sale of a 20-percent stake in the state soccer pools and lottery organization (OPAP) to foreign investors. Other sales expected are of stakes in the Public Power Corporation, the Athens Water Board, the state natural gas company (DEPA) and Piraeus Port Authority. He said GaiaOSE is ready to take on strategic investors for each real estate project.