Publications

Greek Chapter to Euromoney's "International Privatisation" (Review 2000/2001)

GREECE

Dimitris E Paraskevas

Elias Paraskevas Attorneys 1933

Privatisation in Greece started in the early 1990s and the title of relevant law (2000/91) “on denationalisation, simplification of liquidation procedures, strengthening the rules of competition and other matters” demonstrates how hesitant politicians were at the time even to use the word privatisations. The then conservative administration introduced the concept, established the framework, had a few successes, but eventually lost power over the attempt to sell Hellenic Telecommunications Organisation (OTE) and Public Petroleum Corporation S.A. (now Hellenic Petroleum) to strategic investors.

The socialist administration that came into power in the last quarter of 1993 was equally hesitant. Many in the government realised that a number of companies had to be transferred to the private sector but they were reluctant to face the presumed political cost, given the fact that the domestic capital market was shallow and weak and that the entrepreneurs who were more likely to appear as potential strategic investors were the former owners of the now government-controlled enterprises, the very individuals that the socialists of the 1980s accused of mismanagement and fatal underperformance that led those companies to near bankruptcy and liquidation.

The Ministry of Industry, Energy and Technology (now the Ministry of Development) started to prepare the group for the privatisation of a small shipyard in the island of Syros and the sale of a goldmine in Northern Greece at the beginning of 1994. Both were successfully sold and the government was encouraged, especially having noticed that in the respective polls people had started to support privatisation (originally as long as it did not affect the company in which they themselves were working).

The Ministry of the Development continued to sell one by one nearly 100 companies in the portfolio of the ‘Organisation for Reconstruction of Companies’ (OAE), a holding company established in 1983 with the mission to reconstruct and turn around the so-called ‘problematic’ companies. Another Ministry, the Ministry of National Economy, responsible for overall economic policy in Greece, gradually took the lead in privatisation. Under the leadership of Yannos Papantoniou, who refers to himself as the “socialist of the future,” the privatisation of the banking sector, utilities, and state organisations accelerated and resulted in the full or partial sale of 14 companies during 1998-99 for approximately USD7.5bn of which was collected in 1999 alone (Duty Free Shops, Athens Stock Exchange, OTE, National Bank of Greece, Bank of Crete, Hellenic Petroleum, Hellenic Industrial Development Bank, Olympic Catering). In parallel, the Ministry of Development concluded the sale of all the companies within the OAE’s portfolio, including the complex privatisation of Athens Paper Mills S.A., the largest paper tissue produced in Greece, known for its ‘Softex’ household brand to a consortium composed of Bolton Group, Bain and Co and certain Goldman Sachs’ funds.

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PRIVATISATION PROGRAMME FOR 2000

The most high-profile transactions scheduled for 2000 are the flotation of Public Power Corporation S.A. (DEH), Agricultural Bank, Hellenic Petroleum III, Piraeus Port Authority, Salonica Water & Sewage, Salonica Port Authority, and COSMOTE, the mobile telephone operator, subsidiary of OTE.

Concession contracts have been announced for Corinth Canal and Hellenic Horse Racing Organisation, Strategic sales will be effected for OTE, Olympic Airways, Hellenic Vehicle Industry, Post Office, Hellenic Aerospace Industry, International Exhibition Hall, Thessaloniki, Gaming Organisation, and Commercial Bank.

All the time of writing, however, there are only a few days to the next election, the results of which may add fresh momentum to the privatisation programme since any newly elected government is always in a better position to make critical decisions.

The deregulation of the telecom and electricity markets at the beginning of the year 2001 is a major step in the full liberalisation of domestic markets, with substantial expected benefits in term of enhanced productivity, competitiveness and lower prices. Relevant OECD estimates put this medium -and long- term benefits at 10% of GDP in terms of higher output and 1% in terms of lower consumer prices.

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Greece has been successful in reducing the public deficit from 13.8% of GDP in 1993 to 1.6% in 1999. Further, inflation currently stands at 2.1%. Thus, Greece has met all the Maastricht criteria and is entering EMU with optimism. However, though according to the Ministry of Employment, 210,000 new jobs were created, they have not been enough to stop unemployment increasing.

The year 2000 will be the year of truth for the government which will be formed following the elections of April 9. Although there is no doubt that much progress has been made, market conditions may not encourage the sale of further tranches of shares in government-controlled entities to institutional investors and the general public. Will the new government take the initiative to sell blocks of shares to strategic investors and extend the privatisation programme to other sectors like health, education etc? Will the new government continue to support the policy of restructuring before privatisation? These are some of the questions that only time will answer.

There is no doubt that unless the programme accelerates further, Greece may lose its privatisation momentum. However, one may be optimistic given the changes that have been implemented in the last 10 years that GNP growth will continue to exceed that of the average European country, leading to real convergence and real opportunities in Greece. Or not.

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