ECONOMY

Government’s frantic search for revenue through sell-offs

The search for new sources of revenues coupled with the pressures exerted by a tight budget and rising expenditure is proving to be a major headache for the government. In recent years, privatization of state-owned entities has provided a significant way out as well as millions of euros for the State. Nevertheless, like all sources, this one is not inexhaustible. According to the government’s calculations, this year’s privatization program is expected to bring in 2.34 million to 2.5 million euros, which will be used to reduce public debt. Despite the problems, principally practical in nature, this year’s program is expected to go ahead as planned, says Yiannis Kousoulakos, general secretary in charge of fiscal policy at the Finance Ministry. The raising of revenues has always been one of the biggest problems for the budget. The General Accounting Office not only has to look into all methods of raising revenues, but it also has to search for new sources and new ways of bringing in funds. Kousoulakos admits that the traditional way, namely privatization of state-owned entities, has exhausted all possibilities, which means the government has to look for other methods. He says that on one hand, the government has reduced its stake in public utilities but on the other, there is the danger that it might create a new form of state-owned company which operates according to private-sector criteria. Examples are the new airport at Spata, the Metro subway, the Egnatia Highway in northern Greece and others in which the State maintains a 51-percent stake and bears all the responsibility. Even some projects connected to the 2004 Olympic Games could be seen as companies that could be privatized, among them the Olympic Village, which in any case will be sold off by the State after the Games. According to Kousoulakos, the State has contributed substantial amounts to these projects via the public investment program. Given the existence of this concept, and in light of the government’s decision to shed public utilities, it is not possible to say with any certainty how these newly created state-controlled companies will end up in future. The State is projecting revenues of at least 2 million euros from next year’s privatization program. It must specify the list of companies to be sold off and how this will be carried out. It is currently exploring all avenues. Kousoulakos points to the newly created «societe anonyme» companies which are currently carrying out public projects, and are funded from the state coffers. The issue is that part of the funding needs to be found from the private sector in a way that will not affect public debt and the budget deficit. As these projects are partially financed by the EU, a solution will need to be found which will not run counter to Brussels’s regulations. One of the proposals currently under discussion involves letting private sector companies participate in share capital increases. This method would let state-controlled companies raise funds while at the same time allowing the government to reduce its holding via an issue of convertible bonds. As the government will need to finalize the budget for 2003, we can expect decisions in the immediate future on the type and form of future privatizations. For now, Economy and Finance Minister Nikos Christodoulakis has ordered that the current privatization program be speeded up and be completed by the end of the year. In the next three-and-a-half months, we can therefore expect to see developments regarding eight companies in which the government holds substantial stakes. The first of these is the Public Power Corporation (PPC), in which the State will launch a secondary offering of 15 percent. This is projected to take place in mid-November. The sale of a 23-percent stake in oil refiner Hellenic Petroleum to the consortium of Russia’s Lukoil and the Latsis group is expected to be finalized shortly. Sources said the two parties have found a solution regarding Petrola, the oil refiner owned by the Latsis group. The sell-off prospects of Hellenic Tourist Properties, the asset management arm of the Greek National Tourist Organization, is also seen as favorable, with interest shown by a number of companies. Legal issues, however, could hold up the sell-off of Hellenic Exchanges, the holding company for the Athens Stock Exchange. Another company facing problems is the Piraeus Port Authority, though sources say these appear to be temporary. Gas utility DEPA recently launched a tender for a strategic investor. The competition is scheduled to conclude next year. The last issue is the substantial stakes held by the Postal Savings Bank in National Bank and Commercial Bank. The Postal Savings Bank is projected to be transformed into a «societe anonyme» company. Once this is done, its stakes in the other two banks will be transferred to the State. Christodoulakis has said the State will hold on to these shares until next year.