Daily Management Review

Greece set to privatize its largest port


To pay back creditors the Greek government has to eat its words

Mired in economic difficulties, Greece is now looking into privatizing the country’s largest port and regional airports to attract investment for other state assets.
The country’s economy Minister George Stathakis announced the decision to the media. The process is already underway and the first port to be signed up for privatization is the Piraeus Port Authority which operates Greece’s largest harbor. The next step in the agenda is to privatize 14 regional airports. “We’re trying to revise some elements of these privatizations in order to improve them and I think we’ll get a sensible agreement for both,” Stathakis noted.
The sale of the Piraeus Port would be a reversal on the part of Greece’s Syriza party-led government. The left government came to power asserting that it would not privatize government properties. But the government has buckled under the pressure from its creditors. Greek’s European creditors have also asked for more specific policy proposals. The policy asked for includes labor market deregulation, a pension-system overhaul, sales tax reform and privatization of state-held assets. But Stathakis negated any notion that the government will sell other assets at the moment.
The Port sale is part of the bailout negotiations and the fact that the government agrees to privatize the port is a compromise to creditors, according to Athens.

A venture led by Fraport AG won the right in November 2014 to use, operate and manage the 14 regional airports after it offered 1.2 billion euros ($1.4 billion) for 40 years and promised to pay an annual, guaranteed leasing fee of 22.9 million euros. Fraport also pledged to make 330 million euros in investments over the next four years. Greece is talking to Fraport and a decision should be reached “very soon.”
It’s “definite” that Greece won’t proceed with selling other state assets on a list that had been agreed on by the previous government such as water companies, the post office or Public Power Corp, Stathakis said. “We’re trying to work on a different model than privatizing to attract capital and investment such as for the country’s railways and other ports” and Greece is looking at “alternative options to 100 percent privatization.”
“The negotiation process has gone well recently and an agreement can be reached in the next two-to-three weeks,” Stathakis said. “The gap between Greece and its creditors has been closed on most issues and while there are some areas of concern to do with the pension system and reform of value-added taxes, there are ways to bridge this difference and come to an agreement.” The sale of land at Hellenikon, site of Athens’s old airport is also an issue under discussion, Stathakis said. Realtor company Lamda Development last year agreed to buy the property for 915 million euros while also committing to spend 1.2 billion euros on infrastructure at the site.

Currently, all the decisions concerning bailout plans for the country will be coordinated by the European Commission, the European Central Bank and the International Monetary Fund, which are called as the Troika. The Eurogroup itself comprises of the finance ministers of the 19 countries which are part of the European Monetary Union.
While the country is still ridden by the debts taken for bailout, its newly-elected government came to power only with triumphant promises to the voters that it would wipe austerity measures put upon the economy by the Eurozone creditors.