Privatization Of Greek Assets Runs Behind Schedule

By Sylvia Poggioli

Published February 7, 2013 at 2:38 AM CST

Employees of Hellenic Postbank protest during a strike against the bank's privatization in Athens, in December.

In exchange for multibillion-euro bailouts, Greece was required to sell state-owned assets. But the sweeping privatization process is behind schedule. In addition, European governments are nervous that Chinese, Russian and Arab companies are lining up to take advantage of the Greek fire sale.

The website of the Hellenic Republic Asset Development Fund, the agency handling privatization, is filled with cheery slogans promoting Greece as an El Dorado for investors, rich in natural resources such as bauxite, marble and gold, as well as gourmet food.

But the International Monetary Fund was disappointed in its latest report, warning Athens that the asset development fund's managers might have to be replaced with foreign experts. In 2012, the agency completed only two sales worth $260 million — compared with a target of $4.16 billion.

Numerous independent analysts share the IMF's view.

"The projects are simply not well prepared," says Philip Ammerman, an investment consultant and co-founder of London-based Navigator Consulting Group.

"What we see coming out of the various government ministries or the office of the prime minister is simply not up to par on any international standards," he says. "The project concepts don't exist, the numbers don't stand up, there are no numbers supporting the project concept, and there is just too much ideology."

Daunting Domestic Obstacles

Greece has a long tradition of political party interference in state-owned companies; there is still an entrenched reluctance to give up total control over the state's assets. But Prime Minister Antonis Samaras is urging the privatization agency to hurry up.

Adonis Georgiades, a lawmaker in Samaras' conservative party, says he believes the state should not own anything.

"I would sell everything," Georgiades says. "This is the private economy. This is the 21st century. Communism is dead."

The list of what's up for sale is long: banks, utilities, the national lottery, ports, airports, motorways and other infrastructure. But the vast bulk is real estate, including prime beachfront land.

There are many interested buyers, but obstacles to closing deals are daunting. There are hardly any property registries, so land ownership is difficult to determine. In many places, public land is filled with illegal buildings, which require a long legal process to remove.

Most of all, Greek citizens — already paying a high price for draconian austerity measures — don't like privatization.

For 30 years, Dimetra Columbani has managed a branch of OPAP, the Greek national lottery, perhaps the most profitable state asset.

"I'm very worried. I have no idea what's going to happen, who is going to buy the lottery company, and how it will be operated," Columbani says. "I cannot risk losing everything I've invested here if a new company takes over."

Polls show that a majority of Greeks fear the country's assets are being sold off for too little, and many see privatization as an international takeover.

Geopolitical Issues Cause Delays

European governments, as well as Washington, are reportedly concerned over Russia's possible expansion into Europe. Gazprom, Russia's state-owned gas monopoly, has made a high bid for the Greek gas utility company. Media reports suggest the privatization agency has delayed choosing a buyer — under international pressure.

There are also other strategic concerns, such as conflict with China over Greek ports.

George Stathakis, an economist and lawmaker for the opposition leftist party Syriza, says China wants to expand its current control of a part of the Port of Piraeus and also buy the south-north railway link, raising fears China will flood the European markets with its inexpensive products.

"German and Dutch interests are opposing the idea of using Greece as the primary source of Chinese trade with Europe," Stathakis says.

The original IMF privatization target had been 50 billion euros by 2015, but it has already been sharply reduced to 10 billion. Stathakis says he believes it will be cut back even more.