OPINION

Monitoring our public utilities

The mammoth deficits of public utilities, also known as DEKO, have long been a major source of the troubles besetting the economy – troubles that recently put Greece’s economy under EU supervision. The problem is simply too acute to ignore. The path toward economic reform must come about through a change in the current situation. Bad management is not just a question of the lack of political integrity. Of course that factor also comes into play but the problem is mainly a structural one. It is no coincidence that over the previous decades, public corporations were notorious for poor management, corruption and entanglement with business interests. Certainly there were honest administrations that refrained from squandering public money on controversial contracts, but even these found it hard to resist political favors. As a result, they recruited excess staff. In addition, they easily yielded to union pressures for unreasonable pay hikes. This sick mentality, coupled with the absence of free market criteria, transformed the public utilities into deficit creators. At the same time, their quality of services was substandard. What is interesting about the government’s initiative is that it attempts to get to the bone of the problem. Under the new legislative framework, any public utility will not be under the exclusive supervision of the responsible ministry. It will also be overseen by the National Economy Ministry which, at the end of the day, has the responsibility of covering DEKO deficits. This type of a joint supervision scheme will not concern DEKO operations – it will be limited to funding and management. The above changes of course presuppose the adoption of international accounting standards and the principles of corporate governance. Public corporations will from now on be obliged to submit their business plans, on the basis of which they will be financed and monitored. The involvement of the Economy Ministry will make monitoring more effective. At the same time, it will curtail the bad habit of ministers tolerating the management’s poor administration while the management carries out the minister’s political favors. If this change is often viewed as a shift in the in-government power balance, in truth it marks an important institutional change.