Monday, May 23, 2011

Cash-strapped Greece set to begin privatizations

Monsters and Critics

Athens - Greek Prime Minister George Papandreou on Monday said his cash-strapped government will accelerate privatizations of government holdings in an effort to raise money and cut the country's massive deficit.

Greece only has enough cash to prevent default until mid-July, making it imperative that the country convince its foreign creditors to approve the scheduled release next month of its fifth tranche of emergency funding.

Inspectors from the International Monetary Fund (IMF), the European Central Bank (ECB) and European Commission have asked Greece to speed up reforms, which would clear the way for the next loan instalment of 12 billion euros (16.8 billion dollars) to be given to the cash-strapped country. 

During marathon talks with cabinet ministers, Papandreou promised to speed up reforms and set into motion yet a new round of belt-tightening under the government's midterm fiscal programme. It would include more consumer tax increases, cuts to public sector spending, and an ambitious privatization drive to avoid default.

Athens is also seriously considering the firing of full-time civil servants for the first time, as well as deeper cuts in public sector wages.

'The battle to save the country is continuing,' Papandreou told a cabinet meeting.
'We averted the threat of the country's bankruptcy and placed the country on a track of streamlining and growth. ... we have a duty to the country and to the Greek people to ensure our future course,' the prime minister added.

The government will move ahead with a 50-billion-euro privatization programme, which will include selling off the country's two biggest ports of Pireaus and Thessaloniki, as well as: the Public Power Corporation; Hellenic Postbank; OTE Telecom; gas company DEPA; gaming group OPAP; and the Athens water utility.

Reports said the additional emergency measures may include halving a current 12,000-euro tax exemption and cuts in other exemptions on medical expenses and interest on home loans.
Other austerity measures may also include adding a one-off levy on high incomes over 80,000 euros, a tax on large real estate property and higher taxes on food and electricity.

Visiting international inspectors, who had been in Athens for the past two weeks, suspended their work on May 20 and said they would return only when Greece adopts more measures under the mid-term fiscal and privatisation plan.

Talks with EU/IMF inspectors are scheduled to resume later in the week after the bill goes to parliament.

Despite receiving a 110-billion-euro (155-billion-dollar) bailout last year from the EU and IMF, Greece is again on the brink of insolvency as efforts to meet tough targets are being hampered by a deep recession and weak revenues.

Greece managed to slash its deficit last year by nearly five percentage points, but it needs to cut its deficit to 7.6 per cent of gross domestic product this year under the terms of the bailout.

Last week, Europe's top financial officials considered a soft restructuring of Greece's debt for the first time, adding that it will also have to rapidly execute the 50-billion-euro sell-off and privatization plan to which it has already committed itself.

Many analysts believe that Greece will have to restructure its massive debt of more than 340 billion euros, as it looks increasingly unlikely to be able to raise new loans from next year as originally planned.

On Friday, Fitch warned that it would consider any kind of debt restructuring as a sovereign default.
Faced with an ongoing recession and rising unemployment, the government is increasingly losing public support according to a new poll, which showed more than 80 per cent of Greeks will not accept additional measures.

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