Weak ASE endangers privatization revenues

The abysmal performance of the Athens stock market during the past three years makes it much more difficult for the government to get as much revenue as it would like from privatizations or partial sell-offs of shares in state-controlled companies. Economy and Finance Minister Nikos Christodoulakis boasted on Wednesday, in presenting his draft 2003 budget to the Cabinet, that the government had secured 2.5 billion euros in 2002 from privatizations, «a success in such difficult times,» as he said. However, even this amount is in jeopardy. The ASE’s image, plus the international economic downturn and the threat of a military strike against Iraq are obstacles in the government’s plans to sell an additional 15-percent stake in the Public Power Corporation (PPC) by the end of the year. Economy Ministry officials say that both international and domestic conditions do not favor state company sell-offs. The sale of a 23-percent stake in state refiner and oil products retailer Hellenic Petroleum (ELPE) may not require searching for investors willing to put their money into the stock market, but it is becoming doubtful whether the winning bidders – a consortium made up of Russian oil company Lukoil and Greek refiner Petrola – still want to buy the stake under present circumstances. A failure to sell the stake in ELPE would also complicate the part-sale of natural gas provider DEPA. Further difficulties await the government in 2003, when the government, according to Christodoulakis’s draft budget, expects 2.05 billion euros in sell-off receipts. A decision by the European Union’s statistics agency, Eurostat, obliging members to include revenues from the sale of share-convertible certificates and bonds issued in exchange of future receipts into their debt, makes the use of these financial instruments prohibitive, given Greece’s high debt level. If the ASE index continues stagnating at low levels, or keeps falling, it will also be difficult for DEKA, the state’s portfolio management company, to sell shares in National and Commercial banks, as the government has planned for next year. Selling these shares would not only sever the remaining ties of the formerly state-controlled banks with the State, but would also provide the state budget with considerable revenues. However, no rebound is forecast for the ASE and, in the end, the government may be forced to sell the shares, in any case at a level far below the desired one. This will happen if matters get really desperate. Once, DEKA was able to stem the decline of the ASE by using privatization receipts to buy back stock at high prices. This lasted until the April 2000 elections. Having won them narrowly, the government saw no reason to continue with this expensive tactic.

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