Greece is scrimping and saving, but still failing to get its debt crisis under control. The government plans to raise 50 billion euros through a privatization program, but faces massive resistance from Greeks worried about selling off the nation's assets. Experts also doubt whether the strategy will work.
Good news still sometimes emerges in Greece these days. Take Hellenic Petroleum (Helpe), which owns a number of refineries and some 1,200 gas stations in the country and made a net profit of €150 million last year. It earned €43 million in the first quarter of 2011 despite of the crisis. Helpe is "an example of efficiency and stable management," company chairman Anastasios Giannitsis said. "We're constantly trying to increase
productivity."
The model company, barricaded behind mirrored windows in its futuristic Athens headquarters, is among the few economic pearls of the crisis-ridden country. But paradoxically, Hellenic Petroleum is also a prominent example of the Greek disease -- excessive generosity to the few, at the expense of the many.productivity."
It is a worker's paradise. The company's 2,500 employees receive the equivalent of 17.8 monthly salary payments in a year, 3.4 of which count as "productivity bonuses." The average yearly salary is between €65,000 and €70,000, according to official figures. Drivers and doormen make an impressive €90,000, a fact that left one of Helpe's top managers "a bit surprised" when he took his own post at the company, he said. Meanwhile chairman Giannitsis said the high wages are justifiable because of "very specific business and the major dependency on international price and profit margins" in the oil industry. Besides, personnel costs
account for "less than three percent" of turnover, he said.
account for "less than three percent" of turnover, he said.
Hope and madness are close together in Prime Minister Georgios Papandreou's battle against his country's crisis -- and his room for maneuver is shrinking. Despite drastic savings programs and structural reforms in public services, and despite tough tax increases and pension cuts, public revenue is shrinking. In late March, Greece's public debt increased to some €354 billion, and the budget deficit is currently at 9.5 percent of GDP, above the government's target of 7.5 percent.
Now the government wants to stave off bankruptcy with an ambitious privatization program aimed at raising some €50 billion by 2015.
Resistance from Workers
But public resistance to the measures has been tremendous, and isn't just confined to the daily demonstrations. GENOP, the union of workers for energy provider DEI, is among the most radical opponents of the sell-off plan, and is threatening to switch off the nation's electricity supply. Some 51 percent of the company belongs to the state, which plans to sell 17 percent. With profits of €950 million for 2010, the company is viewed as a lucrative prospect for investors. But the union's 20,000 members have much to lose. Their average yearly earnings of €40,000 are high when compared to other professions -- a high school teacher makes just €20,000 per year, for example. DEI workers also get discounts of around 70 percent on their energy costs, with some even getting their electricity for free.
"We're not fighting for our privileges," union leader Nikos Fotopoulos says in his office, where posters of Che Guevara, Marx, Trotsky and Rosa Luxemburg decorate the walls. "We want to protect the poor customers," he adds, saying the privatization is tied to a "gigantic increase in prices."
But the union profits handsomely from the company. Since 1999, it has received about €31.3 million in direct and indirect financial aid from the firm, according to a 100-page report released in late April by the general inspector of public administration, Leandros Rakintzis. The government corruption hunter found that about €20 million went directly to the union, while the rest went to their organization for "social purposes," the OKDE, where it was spent on travel for union members, for example. In the last three years alone the energy provider has also given the union €115,000 just for demonstrations against its own shareholders, the government and the austerity measures.
But the powerful labor leader can chalk up at least one victory so far -- DEI is the last company on the government's privatization list, and isn't scheduled to be put up for sale until the final quarter of 2012.
Unrealistic Expectations?
Meanwhile, Hellenic Petroleum isn't on the list at all, a surprise considering it is 35.5 percent state-owned and should be considered a desirable investment. "We don't fear privatization," said Giannitsis, adding that the government profits handsomely from Helpe.
Athens' plans for privatization spark a number of questions, including whether they are realistic or not. The sales of state holdings such as utility companies, ports, the postal service and even international airports would bring in €15 billion or less, according to favorable estimates. And in the current crisis, who would want to invest in a stake in the state lottery, the horse track or the gaming company Opap?
The majority of the total package is said to come from state-owned real estate, with an estimated total worth of €272 billion. But just which homes, market squares, military facilities, or tiny islands would actually be sold to private investors remains uncertain.
The majority of the total package is said to come from state-owned real estate, with an estimated total worth of €272 billion. But just which homes, market squares, military facilities, or tiny islands would actually be sold to private investors remains uncertain.
The Greek government doesn't even know exactly what it owns, according to a study by Athens political research group, the Andreas Papandreou Institute of Strategic and Development Studies (ISTAME). "Numerous institutions and private people" make unauthorized use of government-owned property and don't pay for it, the study said. Of the some 71,000 properties, including 538 islands, only 100 at best could be "realized," the study says. There's no mention of outright sales.
The grounds of the old Athens airport, valued at €6 billion, serve as an example of just how hard selling state land can be. Years of negotiations with investors from Qatar have been bogged down by bureaucracy and protests by residents. Meanwhile the state-of-the-art sports arenas built there for the 2004 Olympic games are decaying. The Olympic white water facility for canoes and kayaks, assigned to a Greek consortium for the next 30 years, has dried up and lies baking and flaking in the sun. There's no water park or aquarium, and consequently no revenue.
The nearby 5,000-seat beach volleyball stadium with a sea view was rented to an Athens car dealer who had planned to pay about €10 million per year for the privilege. But so far he's failed to come up with a marketing concept due to crisis-related concerns -- there is no money.
The baseball arena went to second division football team Ethnikos Piraeus, which faces relegation due to financial problems. The softball facilities and hockey stadium are considered unsellable. The only real money coming in is from the former Taekwondo hall, which makes about €15,000 each day for hosting events, trade fairs, parties and concerts. But how many event halls does a city like Athens need?
Exactly how privatization proceeds will add up to €50 billion remains a mystery to many experts. But perhaps the journey is the destination. As a popular Athens taunt goes: "We sell fairy tales in order to buy time."
By Manfred Ertel in Athens
