–The Government Will Take On Debt Of Public Companies

By Angelika Papamiltiadou

ATHENS (MNI) – Greece’s Finance Minister George Papaconstantinou
has revealed that public debt will rise by 4 to 5 percentage points of
GDP because the government will assume the debt of heavily indebted
public companies, as requested by the European Commission, the European
Central Bank and the International Monetary Fund.

Speaking on Greek television station MEGA Thursday,
Papaconstantinou said that the Commission, the ECB and the IMF, which
are currently reviewing the Greek data, want the debt of certain public
companies (DEKO) added to the general government debt total because the
state has been paying the guarantees on it.

He said that the revision would push the debt to 148% of GDP,
though he did not specify which fiscal year the revisions would take
effect.

Greece’s deficit cutting and budget reform plan, published in May,
projected that debt would rise to 133% of GDP this year from 115% in
2009. It would then spike to 145% in 2011, even as deficits are
dropping, then peak at 149% in 2012 and 2013 before turning modestly
downward in 2014 to 146%, and to 140% in 2015.

Presumably those May figures, or at least some of them, will be
revised upward when the public company debt is added.

Some reports in the Greek press have said that the revision will
affect the 2010 budget, but others say it will be spread out so the debt
revision is gradual.

“In the last revision, there was a small asterix that spoke of a 4
to 5 point bump that remained to be defined,” Papaconstantinou noted.
“Those points are the guarantees and all projections of the debt” [of
the public companies], the minister said.

He added that after this revision, “there will be no more hidden
debt.”

Several DEKO companies in Greece, mainly in the transportation
area, have been feeding off the state budget for years because of
mismanagement. The train company OSE alone has a debt of 11 billion
euros, which the state guaranteed, Papaconstantinou noted.

On Thursday, employees of the bus company ETHEL went on strike
because they did not receive their June salaries.

Papaconstantinou said the salaries will be paid and “will take 2-3
days” to reach the banks. But he added that the indebted public
companies would be restructured in order to become profitable.

Their restructuring is part of the agreement signed by the
government with the IMF, ECB and Commission as a condition of the 110
billion financial aid package extended to Greece.

The restructuring plans will be presented by the government in the
next few days, but union workers heavily oppose the reforms, which are
expected to include a large number of layoffs and relocations of
employees to other sectors. Salaries and benefits were already cut as
part of the fiscal austerity package announced in May.

The Greek government is now trying to pass a package of social
reforms in the health, pension and labor sectors. Workers unions have
said some of the proposed measures are unconstitutional and they are
threatening legal action against the bill, which was presented in
Parliament Thursday.

Asked how the government will react, Papaconstantinou appeared
confident that the measures would not be judged unconstitutional and
that Greece would not face the same problems as Romania.

A few days ago, the Romanian government announced a 15% cut in
pensions, which caused heated protests. A Romanian court concluded the
decision was unconstitutional, but soon after that the IMF announced it
would freeze the next loan installment to Romania. The Romanian
government immediately announced it would raise VAT by 5% to offset the
decision.

As part of its austerity package, the Greek government raised the
VAT by 2 percentage points to 23%, a move that took effect today.
Consumers and businesses fear that the high VAT will bring a new wave of
price increases in products and services which, combined with the heavy
recession and shortage of liquidity, could asphyxiate the Greek market.

However, Papaconstantinou said he believed the recession in 2010
“will be smaller than what was originally expected” and that “no
additional measures will be taken this year, as long as the [deficit]
targets are met.”

“I don’t see that in 2011 we will have positive growth rates, but
it will be almost balanced. From the second half of 2011 we will have
positive growth rates and in 2012 we will return to growth,”
Papaconstantinou predicted.

–Angelika Papamiltiadou, +306-937-100071; a_papamiltiadou@hotmail.com

[TOPICS: M$X$$$,M$$CR$,MGX$$$,MT$$$$]