EU-IMF sets €50bn target for Greeks from asset sales
IN a move that will send shivers down the spines of many semi-state bodies in Ireland, IMF officials have told Greek officials that they could raise seven times more than previously believed by selling state-owned assets.
Greek Finance Minister George Papaconstantinou promised in November to raise €7bn from state holdings as European Union and IMF officials reviewed the nation's bailout agreement.
Now, the IMF and the EU say there's the potential to raise as much as €50bn. Raising the larger sum would reduce Greece's debt to 110pc of gross domestic product by 2020 from about 130pc without asset sales, the IMF estimates.
"The government clearly needs to return public debt to a more sustainable level," said Ben May, an economist at Capital Economics in London. "Asset sales could allow it to do this more quickly, but I don't think that they will ease solvency concerns on their own."
The bolder targets for asset sales have increased tensions in Greece where Prime Minister George Papandreou is under pressure to keep the budget shortfall below the ceiling demanded in the EU-led bailout agreement.
Cutting state wages and pensions has hurt Mr Papandreou's popularity and the government now needs to outline additional spending cuts for 2012 until 2014.
Here in Ireland, the €85bn bailout plan agreed in December calls on the state to sell some semi-state companies, with the proceeds being used to reduce the national debt.
The Government has hired economist Colm McCarthy to assess the value of our semi-state assets and highlight which could be sold off to private investors.
Most analysts estimate that the State could earn around €10bn by selling stakes in companies such as the ESB, Bord Gais, Coillte, Dublin Port and the National Lottery.
Publication of the McCarthy Report was delayed by the downgrading of Bord Gais debt by ratings agency Moody's.
Fine Gael has committed to selling some assets, while Labour has a far more limited appetite for privatisations.
In Greece, the government is reported to be considering the sale of gas, electricity and water companies although a new law rules out of the sale of beaches and other land.
Poul Thomsen, head of the IMF's Greek mission, told reporters in Athens last week that the programme was "on track, but it will not remain on track without a significant, broad-based acceleration of reforms". He added that the country must focus on an overhaul of the tax system and asset disposals to pay down debt.
The EU said in a report published in November that asset sales need to be bolder, with more transactions that generate "sizable" proceeds. The EU, along with the IMF and German politicians, has urged Greece to sell or lease state-owned casinos, golf courses and airports.
The country needs "to come up with a flagship achievement that can really catch the imagination of markets and reassure observers that Greece is on a sustainable reform path", said Jens Bastian, an economist at Oxford University.
Of the €50bn estimate, €1bn may be raised in 2011 to 2012, the EU and IMF said. The government's previous goal was for €7bn by the end of 2013. (Additional reporting Bloomberg)