Gov’t sends revised plan for defense firms as troika favors bankruptcy

Following objections by the troika to the government’s plans to overhaul three state-owned companies – Hellenic Defense Systems (EAS), mining company Larco and the Hellenic Vehicle Industry (ELVO) – Greek officials Wednesday sent a revised proposal to the representatives of the country’s foreign creditors who appeared to favor the option of liquidating the firms.

An e-mail sent to the Finance Ministry by European Commission representative Matthias Mors, and leaked in the Greek media Wednesday, set out the troika’s doubts about the credibility of the government’s plan for overhauling the three firms while they are still in operation. Instead, the troika proposed liquidation for EAS and ELVO and, in Larco’s case, the possible splitting of the firm into two before its attempted sell-off. “The proposed restructuring plans are in our view not viable or realistic,” the e-mail said. “In our view, the option of closure/liquidation must be considered for all three companies,” it added.

In the case of Larco, the chief concern highlighted was that the company’s smelter and mines are “not fully independent from each other,” which would mean potential investors would be saddled with the responsibility of returning illegal state subsidies. The troika also wants to see a reduction in the number of staff at the firm, which employs about 1,000 people.

The government’s original proposal for EAS would cost 144 million euros “additional to the already inherited liabilities from the past,” the e-mail said. “The proposal is basically calling for a rather generous early retirement and exit scheme which would have implications in terms of fiscal space and the program,” it said. If Athens argues that the company cannot be liquidated due to national defense concerns, “this has to involve a substantially downsized/restructured company.” The troika also wants to see the EAS work force scaled down to 350 from 850.

As regards ELVO, the troika appeared more categorical, deeming that the government’s proposed liquidation plan would be more costly than bankruptcy. “We consider that an outright bankruptcy of the company is the most desirable and realistic solution,” the e-mail said.

Earlier in the day, Finance Minister Yannis Stournaras said the liquidation of the companies over a period of five years would “be more valuable to the state” than bankruptcy. He said the government would try to avert a scenario involving staff being laid off without compensation, claiming that “at least certain parts of the businesses are valuable.”

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