Tuesday, February 15, 2011

From where I sit: The €50 billion flap

From where I sit - an incredibly infrequent set of observations on various affairs from Athens, Greece.

            I-R-P-C - The Iron Rule of Press Conferences: you will hear far more yawns than gasps. 

       So when a room full of Greek journalists went into a simultaneous conniption at last Friday’s EU-IMF-ECB, i.e. Troika, press conference it was a good sign that something had gone horribly wrong.

    The O2 suckage in-question was induced by European Union representative Servaas DeRoose’s announcement that the Greek government plans to privatize some €50 billion in state-run enterprises and property over the next few years, €15 billion this year, mainly from the sale of state property.

            “Excuse me, Mr. DeRoose,” one Greek journalist asked, apparently disbelieving the translation coming through her headset. “Did you say 5-0 or 1-5 … billion?”

            “The first one was 5-0, the second one was 1-5,” DeRoose replied.

DeRoose’s smirk did not seem so much arrogant as it was excruciatingly uncomfortable. This presser was about to take an ugly turn and with it, perhaps, damage the cordial relations that had existed thus far, at least at an elite level, between the Greek government and its international lifeline. Relations between the Troika and the Greek public, on the other hand, are about as good as, say, those between Hosni Mubarak and Tahrir Square. 

You see how that worked out.

            The IMF’s Paul Thomsen immediately went into damage control before fielding the first salvo of journalistic zingers. Loosely paraphrased: Of course we do not expect Greece to sell off its cultural heritage, like the Acropolis, but … 

            Too late.

            WARNING: Foul language ahead, unsuitable for younger audiences, international technocrats or potential employers. (You can see my other lovely writing samples here.)

            €50 billion is a lot of F***ing money, especially in Greece.

Granted, OSE, Greece’s train operator has about €10 billion in debt and probably about €1 billion in assets (the first number is official, the second one not-so-much), so in theory that’s a good chunk of the target. But what are the odds that some Greek or international investor is going to take on all of that debt? Not likely. Granted, just getting that annual red ink off of Greece’s books would be an accomplishment even if the state has to deal with the current debt.

It’s hard to imagine what else the Greek government could move, and quickly, that would have an impact in so many billions of euros without an even greater social cost. As the Greek media reminded anyone paying attention, moving property in Greece is a murderous, chaotic bureaucratic process that takes years.

            The reporters in the room reeled with the realization (which, by the way, was not included in either the Greek or the English press release handed to us at the start of the conference) and tried to come to grips with exactly what €50 billion would mean. Western European jokes about selling islands and monuments from spring 2010 collide with memories of the ‘Washington Consensus’ that led Eastern Europe on the road to privatization, and some would argue, nowhere. Balkan cousins Bulgaria, Romania, Albania and Yugoslavia, like Greece, possessed woefully underproductive industries and utilities that the locals wanted to fiercely defend and international buyers weren’t sure were worth much at all. 

            When the zingers came, and boy did they come, Thomsen became uncharacteristically vehement. Again, loosely paraphrased: Do not be fooled by those who have a vested interest in controlling these social goods.

            More than ever before, Mr. Thomsen seems to be suffering from the Athens strain of Stockholm Syndrome; that disease that afflicts foreigners who come to rescue Greece in a crisis and then fall hopelessly in love with this strange, beautiful, and-did-I-mention strange country. He is in good company with a host of former American and British officials this reporter has come across over the years who are taking up do-good causes that the Greeks seem to have little interest in themselves.

            (This reporter, it should be noted, has been diagnosed with a similar contagion.)

             Thomsen’s scoffing at quasi-state fat-cats who mobilize their respective masses by talking about capitalist fat-cats will and clearly did fall on deaf ears. After a bit of a lull, Athens is due for another bruising week of transport strikes (transportation being probably privatization target numero uno, αριθμό πρώτο) and marches.

            Thomsen spoke of privatization being a benefit to Greeks. That’s one tough pill to swallow for a wanna-be-socialist country, literally. Take pills. There are a number of price controls that suit Greeks just fine, especially in pharmacies. It’s amazing the kind of drugs you can get in a Greek pharmacy for about €1 that in the States you would pay an arm and a leg for. Sure there are no 24-hour Walgreens, but you can find a Pharmakeio on almost every block and sometimes even more. These professions should be more open, in theory, but it’s not clear that Greeks have an issue with pharmacies as they are. (feel free to comment)

Or take transportation. A train ride between Greece and Thessaloniki is about €20. A bus from the airport to Athens’ center, just €5. Until recently, 90 minutes on all inner-Athens public transport cost just €1. It’s still less than €1.50, which puts Athens below Rome, Paris, London and New York. A month card used to be €35 and now it’s €45. Annoying, but not back-breaking. All of these brand-new forms of transport are perennial money-losers, with state subsidies. Sure, an international company would love to have all of these physical assets – bought thanks to the 2004 Olympic spirit and kept ‘well-maintained’ (read: under-utlized thanks to strikes). But there’s no way a private company could or would keep the fares at the level they are now. A lot of people would suffer.

Such is the dilemma between social and market pricing of goods.

            Perhaps the biggest question this reporter walked away with was what happened to the big issue that was supposed to dominate this press conference?

Will Greece have to re-structure its sovereign debt?

Several think-tanks and many more analysts have said yes. Others say Greece can do a mild re-structuring by lengthening or delaying re-payment (something that’s going on informally with many Greek institutions already, based on anecdotal evidence and observations). At the 2nd Troika review joint press conference (this was the 3rd) the same cast of characters (minus translators) adamantly rejected both a restructuring or Greece leaving the EuroZone. We don’t know if they feel that way now because no one at the presser asked (though perhaps they did in side interviews).  Sure people know what the reps there would say but it’s surprising no one really tried.

The Greek government responded vehemently that Deroose’s comments were ‘inaccurate’. What does that mean exactly? Past flaps have been a combination of miscommunication, too much communication and ‘Greek duplicity’ i.e. the government makes up its mind about something and then finds out right-quick that it just won’t fly with the Greek public and acts like it was misrepresented. The brief Troika statement issued on Saturday didn’t really clear things up. As of today, the consensus seems to be that the Troika should have waited for the government to say something first.

International followers of Greece’s ongoing, yet now largely forgotten crisis (thank you, Ireland, Portugal, Egypt), may be disappointed that the big question regarding their countries’ and companies’ investments in Greece went unaddressed. The Troika representatives present were clearly disappointed that their message of ‘respect for the Greek people’ for some reason got overshadowed by the €50 BILLION privatization of socially-priced assets.

That’s what you get when you make a press conference way too interesting.

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