ForewordΤhis booklet was created by the radiobubblenews team in order to inform the public about the pro-gram of mass privatizations that Greece is currently trying to fast-track. Its goal is to deconstruct themyths through which social acceptance for the biggest sellout package of public property in the his-tory of the Greek state was achieved, to break stereotypes promoted by mass media outlets and toreveal the truth, both with regard to the results of past privatizations as well as the purpose of thenew ones. These are privatizations that have nothing to do with benefitting society, but will insteadeliminate Greece’s huge and valuable developmental capital with dire consequences for its future.

Under the fast-track privatization program, the powers that be put a gun to society’s head. But it isin society’s hands to prevent the State from pulling the trigger. The obligation to keep oneself informedand, most importantly, to participate in decision-making is a personal matter for each one of us, asis realizing what handing over the public sphere to private hands and transforming the social Stateinto a private enterprise oriented exclusively towards profit truly mean. The information is available,as are numerous international examples.

However, understanding what the sellout of public property means is not enough. It is not sufficientto realize that giving away infrastructure and public control eliminates all the development tools thatare normally under the indirect control of society and leads to a Third-World economic model fromwhich this country's citizens have nothing to gain. We must investigate alternative uses of public in-frastructure. We must analyze its yields for citizens, with methods of social economy and public anddemocratic control. We must examine ways of restructuring production through real utilization ofpublic wealth. And most importantly, we must promote the participation of every citizen as a memberof society and not as an isolated unit seeking individual gain, in this new productive model. If thesethings don't happen and we confine ourselves to drawing conclusions, then, and only then, will publicwealth have been truly squandered. Then we will have pulled the trigger...

THE RADIOBUBBLENEWS RESEARCH PROJECT

This on-going research project about privatizations began in the spring of 2012 and its first phasewas completed last October. It was carried out by citizen-journalists, but also by professional jour-nalists who all volunteer with the radiobubblenews team. The research material gathered about pri-vatizations (articles, radio shows and interviews) can be found on the web page:http://international.radiobubble.grThis study was conducted with financial support from the Isvara Foundation.

Paving the Way with Myths

Since the dramatic collapse of the Greek economy in 2010, Greeksociety has been in a state of permanent confusion. This environ-ment of a deep economic crisis, together with brutal changescaused by Memorandum policies, acted as fertilizer in a fieldplanted with myths, which had been systematically cultivated forseveral years with a view to extort social consensus for a seriesof changes oriented towards granting benefits to the private sectorto the detriment of the public sector. Greek society is acutely frag-mented since the 1990s, when this systematic effort to invert theeconomic model of the 1980s began.

The fundamental confusion concerns the very meaning of thewords we use: its origin goes back to the fact that we fail to differ-entiate between the State and the public sector and, even worse,we fail to differentiate successive governments from the Stateand, as a consequence, from the public sector as a whole. Publicwealth, enterprises, forests, rivers, mineral wealth, seas and lakesdo not belong to the State in the sense of an owner who can de-fine as he wishes the fate of his belongings. Governments on theother hand have a mandate to manage public wealth to the benefitof its legitimate owner, who is none other than society as a whole.Even if we admit that a government can sell at will any of theabove assets, its minimum obligation is to secure gains in excessof the asset's loss for the citizenry. Furthermore, equality, andequality before the law are essential preconditions.

Because however the recent past is rife with instances of scan-dalous concessions of public infrastructure to private individuals,in combination now with a deep recession which annihilated mar-ket values, these things cannot be taken for granted. Nonethe-less, the dominant line pushed forward on a daily basis by mostmass media outlets reverses the logical order of things and hasmanaged to convince a majority of our fellow citizens that the na-tional economy, and by extension the citizenry itself, will benefitfrom unburdening itself of public wealth.

The purpose of this booklet is to dismantle the five basic mythsthough which social consensus for privatizations was built overthe last few years. Recently in particular, this consensus was builtunder tremendous pressure.

Myth 1: The last Soviet State in Europe

It is not the purpose of this analysis to define what the Sovietswere, which is only distantly related to what proponents of priva-tizations imply with their favourite line “Greece is the last SovietState in Europe”. We will therefore analyze directly what thesepeople actually mean, which of course constitutes a tremendousmyth. In the last two to three years, in order to extort social con-sensus for looting public wealth, which has already started, thespokesmen of mainstream opinion aim at activating the anti-Stal-inist reflexes of a western society like Greece and at persuadingpeople that the State is unduly operating as the one essential en-trepreneur who holds a monopoly over all key production activi-ties. Moreover, they say, the State blocks private investors fromparticipating in the production process, either by confining themto a supporting role or by forcing them to engage with the State-entrepreneur. Of the five myths we will analyze here, this one isthe crudest but also the most ridiculous.

The following paradox can be found in the post-World War Twohistory of Greece: right-wing governments conducted nationaliza-tions while centre-left governments conducted privatizations. Dur-ing his two longest periods in office, the historical leader of theliberal wing, Konstantinos Karamanlis, conducted nationalizationof key infrastructure in the sectors of energy and water. In 1955,more than 400 private enterprises producing and distributing ofelectricity were merged in the Public Power Corporation of

Greece, which had been founded just five years earlier. In 1974,Karamanlis ceded the rights of ULEN to the National Bank ofGreece. Then, in 1980, the Athens Water Supply and SewerageCompany was established. Earlier, in 1949, the Hellenic Telecom-munications Organization was founded and within a few years alltelecommunications services were unified under the control of theState. In general, the reconstruction of Greece after WWII and theCivil War was channelled through the creation of bundles of Statecorporations for all basic infrastructure. It is no exaggeration toclaim that the recovery of the country after the 1950s was basedon these public utility companies.

A second wave of nationalizations was conducted by Andreas Pa-pandreou during the 1980s. This time however, they had nothingto do with promoting the public interest, but aimed at consolidatingtens of faltering private companies, also known as problematiccompanies. This policy created bigger problems for the economythan it actually solved, since the boosting shots they received didnot make them any healthier. As a result, these companies wereequally loss-making for the state.

Governments took a decisive turn towards privatizations in theearly 1990s, when it became a steady central policy to give away,one way or another, State companies and public wealth. Konstan-tinos Mitsotakis may have failed in the first experiment of massprivatizations in 1990-1993, but Andreas Papandreou pickedthings up from where Mistotakis left, despite being re-elected withthe slogan “save Greece from mass sell-out”. The brains behindthe new liberalization economic programme was Papandreou’sMinister of Finance, Alekos Papadopoulos, and the mainspokesman of the wave of privatizations that followed was the so-cial-democrat leader of PASOK, Kostas Simitis. Greece has con-stantly proceeded with listings, privatizations and integration ofprivate businesses in the management of state monopolies forthe past twenty years.

“Privatization, denationalization, listing in the stock market, sale,clearance, utilization: the Greek language is rich in words forevery (propagandistic) set of circumstances. And the (once rich)Greek state has a million ways to become poorer (...) From 1987to 2006 Greece was proven to be a champion in bank denation-alization relatively to the size of its domestic market. The Greekpublic sector collected €4.5 billion (2.5% of GDP) from bank de-nationalization alone”. (1)

The above quote was not taken from a speech of some commu-nist member of parliament or from an analysis by a journalist fromthe SYRIZA-affiliated newspaper Avgi. These are the words ofjournalist and New Democracy MP Sofias Voultepsi.

De-Sovietization began with the listing of public utility companiesin the stock exchange in the 1990s. That is when the fundamentalcharacter of public enterprises changed, as orientation towardsbusiness became their main feature. Their management didn'thave to be accountable to society, but to shareholders and ofcourse to political supervisors. The enterprises weren't evaluatedanymore on the basis of their ability to provide services to societyas a whole, but on the basis of their profits (or losses) at the endof each year. The costs of their services, their quality and theircoverage were henceforth linked to economic and technical pa-rameters.

From there on, the full divestment of the State became much eas-ier. It only required a law that would concede the management ofcompanies through the stock market. Then another one to con-cede over 50% of companies to private investors. And finally an-other one to allow the full withdrawal of the State from public utilitycompanies, which was voted in November 2012 by the GreekParliament. Oftentimes, one or more private individuals were in-volved in this process, acting as middlemen to transfer a Statemonopoly into private hands. This allowed for avoiding the public

relations shock of a fast-track privatization and, moreover, the pit-falls of Europeans control mechanisms for competition.

As you can see, under "Twenty Years of Privatizations", during aperiod of just eleven years (1998-2009) the amount generated byprivatization reached 23 billion euros!

Another method of indirect privatization, which was developed inthe 1990s and flourished in the early 2000s was the so-calledPublic-Private Partnerships (PPPs). These consist, as their nameimplies, of public works projects co-funded by the State and pri-vate investors. The bridge of Rio-Antirrio, the Eleftherios Venize-los airport and the Attiki Odos Motorway were built through thisprocess, followed by most new national highways. It worth notinghere that the concession of the only national highway that re-mained in the hands of the State, Egnatia Odos, was decided re-cently. We will cover PPPs extensively further in this booklet, inorder to analyze how concessions of public infrastructure to pri-vate investors are socially harmful. All we need to emphasize atthis point is that, while the model theoretically stipulates threesources of funding for public works (the State, banks and privateinvestors), in practice the State shouldered the burden of projectcosts while private investors invested a minimum start-upamount of capital (usually in the order of 10%), collected revenueeven before projects were completed, secured profits throughlaws and finally transferred any risks to the public sector, who isthe guarantor of all loans for the whole of a public works project.

Consequently, the claim that Greece is the last Soviet State in theEuropean Union can be seen only as a joke and as we will seewith the following myths as a bad one.

Myth 2: The Oversized Public Sector

The second myth has to do with the size of the public sector andthe costliness of services provided by the State. The State, whichhas indeed a major part of responsibility for the economic situationof the country, is at risk of bankruptcy, allegedly because of theexpenditure it incurs to provide services to its citizens and, ofcourse, of the army of civil servants it maintains. With regards toboth parameters, the perspective of proponents of mass privati-zations relies on common creeds that were created by repeatingad nauseam a series of cliches and tossing around impressivenumbers which have little to do with reality. This myth also rein-forces confusion between the quality, quantity and cost of serviceson offer, as reality reveals that services provided by the GreekState are exceedingly expensive in relation to their quality as wellas their quantity.

In reality, Greece exceeds the mean averages of its Europeanfamily of States only with regards to a few parameters. There areactually crucial sectors of public expenditure in which Greeceturns out to be below the mean average, not only of European,but also of OECD countries, therefore including many countriesof which one wouldn't say that they enjoy European benefits,meaning a relatively powerful Welfare State.

Starting with public expenditure as a whole, not only did it remainestable as a percentage of GDP over the last two decades, it isalso close to the mean European average. This 45% ratio is a typ-ical percentage for a European country, whereas the stated goalof the Memorandum is to bring public expenditure down to 30-35%. This will take Greece to the levels of Latin American coun-tries, as one can see in the diagram below, which includes OECDcountries (Figure 1).

If we take a look at the statistics per sector (Figure 2), during theperiod where Greece is accused of excessive spending, our coun-try's social welfare spending remains close to the European av-erage (although private spending in this area is the highest of theOECD, together with the U.S. and the Netherlands). However, in

key sectors such as education and health, things are much worse,as our costs are lower than almost all OECD countries. As shownin Figure 3, in particular, public health spending, which was cutsharply in the last two years, was one of the lowest in the EU.Only in defense spending, Greece is in top position, namely thefourth after Israel, the U.S. and South Korea.

A common argument to force this particular myth down citizensíthroats is that the number of civil servants with tenure increaseddramatically during the five years where New Democracy was inpower (2004-2009). The truth is that the increase of the total num-ber of personnel in the wider public sector (not limited to civil ser-vants with tenure) has some very distinct characteristics, whichcannot be translated blindly as an overall expansion. A table froma study conducted by the Ministries of Interior and of Finance fo-cusing on 2006-2011 shows that the most spectacular increaseuntil 2009 (116%) was staff employed on Stage contracts, mean-ing with extremely low pay (€300/month) for the most insecurejobs. Incidentally, the transition from fixed-term employment con-tracts to work experience schemes (Stage) proves that job secu-rity in the public sector did not improve; quite the opposite, therewas an increase in job insecurity for the population as a wholeeven before the economic crisis. In terms of regular personnel,we can observe a radical increase in local administration jobs. Inthis case too, project contracts multiplied, meaning that in generalstaff recruited in this sector did not have tenure. We have to admithowever that a 20% increase in hiring implies that the practice ofrecruitment as a political tool spread to the lowest levels of thenational administration. But our most noteworthy finding may bethat State jobs actually kept expanding after the enforcement ofthe Memorandum, but only in the sector of security forces and thearmy, to whose size only few critics of the public sector have anyobjection. In any case, the overall increase in the number of jobsin the wider public sector never exceeded 3.9% over a four-yearperiod. The famous horrendous increase in the number of civilservants constitutes yet another myth, while the most typical ar-gument, mainly heard on TV, that civil service recruitments werenot limited even after the Memorandum came into force is nothingbut puff, since we can see that in 2010-2011 alone the number ofpersonnel employed in the wider public sector shrank by 80,000(Table 1).

Figure 1: Total Expenditure OECD (2007 - % GDP

And thus we come to yet another, more important element of mis-information that we were exposed to in recent years, regardingthe total number of civil servants. Borrowing facts from researchconducted by the Ios investigative journalism team, we can seethat the Athens Chamber of Commerce and Industry (ACCI)played an important role in spreading stories of 1.1 to 1.4 millioncivil servants. With a so-called study which, it turns out, was morelikely a guesstimate, the ACCI fed to the media outrageous num-bers that have little relationship with reality, even reaching to apoint where they counted conscripts performing their military serv-

ice as civil servants. Even after the famous census of civil ser-vants came along to verify through a head count the numberswritten every year into the annual budget, and disproved tri-umphantly the reported millions of civil servants, most media out-lets didn't give up. The number was usually complemented eitherby an estimate of the number of people employed by public utilitycompanies, or, in an even more blatant generalization, by thosewho receive salaries or not (!) from the State's budget (To Vima01/08/2010).

The same Ios article also annihilates the myth of a constant en-largement of the public sector since the 1980s. It quotes figuresof a scientific study conducted under the auspices of the Euro-pean Commission's Competitiveness Report by four researchersof the Austrian Institute of Economic Research and the Universi-ties of Strasbourg and Magdeburg (The size and performance of

public sector activities in Europe). The table which records civilservants as a percentage of the total number of employed workersin each country shows that Greece comes in 14th position out ofa total of 17 European countries, at 11.4%. It ranks well belowSweden, which comes first at 30%, or Denmark (29%), both coun-tries which were invoked as an exemplary model by George Pa-pandreou in his election campaign. Greece also falls behindFrance (21.2%) and Great Britain (17.8%), despite the cutbacksimposed by the latter. It overtakes but only just only Ireland(11.0%), the Netherlands (10.7%) and Germany (10.2%). As the

study notes, the position of Greece in this classification remainedsteady over the last decades. (Figure 4)

Even if we add to proper civil servant the employees of public util-ity companies and of all public and local administration companies(including legal persons under public law as well as private law),so as to reach the desired million, we have there again figuresprovided by the OECD, which include all those listed above forthe landmark year 2008. Here again, one can see that SovietGreece was just above the mean average of European countries,and, incidentally, is placed well behind formerly Soviet, currentlycapitalist Russia (Figure 5).

It should be noted that according to the most recent census ofcivil servants in 2012, the total number of civil servants decreasedto 623,500. A simple subtraction from the 2009 figure (824,657)

Figure 2: Expenditure per sector OECD (2008 - % GDP)

Figure 3: Health Expenditure OECD (2009 - % GDP)

which was collected just before the implementation of the 1-to-5rule, the voluntary departure schemes and the exodus of thou-sands under early retirement for fear of cutbacks shows that thenumber of civil servants shrank by more than 200,000. All thosewho insist that employment in the public sector did not decreaseshould compare this figure with the following statement of then-Minister of Interior Giannis Ragkousis: at the end of our four-yearmandate, 200,000 civil servants will have left. It is worth notinghere that, had the Papandreou government not fallen prematurely,it would have completed its four-year mandate as late as 2013.

There is however an element of truth in the increase of the meangross salary, as according to the same study of Ministry of Interiorit rose by approx. 20% between 2006 and 2009 (over the sameperiod, GDP rose by 11%). But because mean averages don't al-ways tell the truth, we will look next at the actual distribution ofsalary costs in the huge public sector.

Myth 3: The civil servants’ guilds

The way the dominant narrative develops and evolves in publicdiscourse is very revealing. Workers are first grouped in separate,opposing camps (private employees vs. civil servants, employeesvs. the self-employed, pharmacists vs. notaries, etc). This is fol-

lowed by spreading negative stereotypes for each category as awhole. As a result, all taxi drivers are thieves, all doctors are tax-dodgers, all lawyers are privileged, but most importantly, eachgroup separately constitutes an organized guild with powerful in-terests, which led the Greek State to bankruptcy. The dominantguild of workers is civil servants, who according to the dominantnarrative were all recruited as a political favour, are all lazy, allget fat pay checks and in practice, are all useless.

The most powerful propaganda weapon against civil servants andparticularly against employees of public utility companies is theirsalary. More specifically, this is defined as the total staff costs (thecumulative total of net salaries, contributions, special bonuses,overtime, and travel costs where relevant) divided by the numberof employees of each agency. Astronomic figures in the order of€50,000 to €60.000 per annum were thrown around with this cal-culation. A sample of the staff categories of 15 public utility com-

panies puts things in place (Table 2). In the beginning of 2010,before successive pay cuts were enforced under the terms of theMemorandum, the majority of the privileged employees of publicutility companies had an annual gross salary ranging from€20,000 to €40.000. This translates into a monthly gross salaryof €1,400 to €2,850 and a monthly net salary of €900 to €1,900.

Table 1: Public sector workers (2006-2011)

Figure 4: Labours expenditure of the General Govern-ment as part of the total labour (2000-2008)

Even such a wide-ranging definition of staff categories shows thatthe earnings of public utility companies’ staff were anything butexceedingly high. What this table points out however is the widesalary gaps within the public sector, and gives us a clue as to thenumber of staff in actually privileged positions.

Another interesting element about payroll inequalities can befound in the Study of salary development in the public sector con-ducted by the Ministries of Finance and Interior in February 2011.The mean average income of employees showed differences ofup to 50% between various State agencies, which translated intoan average difference in net monthly income of €1,000 to €2,000.

Imagine now, if there are such big inequalities in pay in the publicsector, what will happen to the employees of these companies tothose at least who won’ t get fired after the privatization processis completed; especially now, after the vote of the third Memoran-dum, which stipulates that monthly salaries can be compresseddown to €580, while there is absolutely no provision for the type

of contracts and the salaries of the top executives of the colossalprivate monopolies that will be created.

The truth is that it was the State blackmailing indirectly its employ-ees, not the other way around. In Figure 6, the distribution of paygrades in the public sector (2010 figures) hides a secret, calledthe basic salary. Until recently, it was the only amount about whichcivil servants could feel relatively safe. The choice of successivegovernments to offer various additional bonuses (up to 29% oftotal pay) instead of proper pay rises always gave leeway to theState to cut its costs unilaterally without significant complications,by simply cutting back on the bonuses. This was already done inthe first round of cuts in the public sector.

With regards to the recruitment process for the vast majority ofcivil servants, it was conducted under the Supreme Council forPersonnel Selection (ASEP) for the past fifteen years. This is atruly transparent council (for the vast majority of recruitments)whose authority extends to fixed-term contract employees in thepublic sector. ASEP has supervised the recruitment of approxi-mately 300,000 tenured, regular and seasonal employees in thewider public sector, while also controlling the transition of 75,000employees from fixed-term contracts to open-ended contracts.While we harbour no illusions about the existence of party politicsand the ensuing entanglement of interests which enhances aguild-like mentality among some employees of the public sector,in particular among labour unionists who are at the same timeparty officials, the truth is that the majority of public sector em-ployees were recruited through formal procedures unfathomablein the private sector. Who slipped through the net? As we sawabove, some temporary staff and until recently the stagiaires at€300/month, whom only a vile mind wouldn't describe as near-beggars with lamentably underpaid and insecure jobs.

The only powerful and properly guild-like section of the civil serv-ice consists of those who were placed in senior administrativeposts by successive governments and the personnel of specialagencies which either are very close to political circles (e.g. Par-liament staff), or belong to institutions where there is traditionallyheavy political influence (e.g. university professors). But thesegroups will be affected last by any programme of restructurationand cuts at the public sector. Finally, with regards to the oft-re-peated argument about tenure and job security for civil servants,it applies only to employees of the core public sector, who are nomore than 400,000. However, a formula to fire them if needed hasalready been found: by simply disbanding the agency they belongto.

And all this brings us to the next myth...

Figure 5: Total public sector as part of the total labour (2008)

Table 2: Public companies salaries (2010)

MYTH 4: Market competition is healthy

One of the most common arguments in favour of privatizationshas to do with blind faith in the self-regulation of free marketsthrough competition.

State dominance over the market is disadvantageous for con-sumers, this logic goes; therefore the magic wand of free compe-tition should work in their favour after public enterprises aresurrendered to private investors. Who will ensure that competitionworks? But, the State, of course. The very same State which, aswe saw elsewhere, secures privileged relations to certain privatesuppliers and manufacturers and reins in strategically some of thepublic companies it administers in order to allow for certain privateinterests to grow. Even in areas where the State doesn’t have amonopoly, it refuses to control the market effectively, regardlessof the level of pressure it is submitted to, and always under falsepretences. As a result, instead of State monopolies, whose normalpurpose is to serve society as a whole without discrimination, wewitness the development of private monopolies and oligopolies,whose purpose is, by their very nature, to ensure ever-increasingprofits for private investors. Examples of this are numerous, and,what is more, can be found in strategic sectors of the economy.

Fuel: In theory, competition should work in a beneficial way in thefuel market, due to the existence of numerous distribution com-panies and thousands of privately-owned retail fuel stations. Nev-ertheless, this happens only up to a certain point, and only in bigcities. Prices along the national road network are steadily higherthan in cities, with only minor differences from one fuel station toanother. The situation in the islands is similar, especially duringthe summer. These peculiar cartels have been operating undis-turbed for several years. And this is the tip of the iceberg. The fuelmarket was theoretically deregulated in March 1992 (incidentally,its deregulation was followed by an immediate increase in theprice of fuel, which peaked with the urgent fiscal measures taken

in the summer of the same year.) However, the fuel market is in-fluenced decisively by the de facto private oligopoly of refineries.The two largest refineries in Greece, MOTOR OIL HELLAS-CORINTH REFINERIES and HELLENIC PETROLEUM, areunder the control of Messrs Vardinogiannis and Latsis respec-tively. These two companies represent 100% of the refining ca-pacity in Greece and control 70% of the wholesale market and60% of fuel stations. The public sector participates only in HEL-LENIC PETROLEUM, the larger of these two companies, of whichship owning magnate Spyros Latsis owns 41.9% while the State

owns 35.5%. It is mainly Greek owners of retail fuel stations whodenounce the lack of competition and the fixing of fuel prices atthe level of refineries. However, the IMF itself in a recent report,which was published by the Wall Street Journal, not only high-lights this issue but also names the names of those in charge ofthis private oligopoly.

The dairy industry: While this is a sector of intense competition,with a plethora of companies, in 2006 the General Directorate ofthe Competitiveness Commission accused 17 enterprises of car-tel practices. In one of the few sectors where Greece is successfulat exporting goods, a sector where numerous private companiesare active, not one, not two, but seventeen companies had man-aged to come to an agreement and manipulate prices. It is alsoknown that the very same products of some of these companiescan be found in German supermarkets for a price up to 30%cheaper than in Greece. This case can be interpreted in two ways.On the one hand, it reveals that a plethora of private companieswith similar products does not guarantee competitiveness or ben-efits for consumers. On the other hand, the State, in this case,was able to detect and control these cartel practices; therefore, itcan in its capacity as a control mechanism force competition towork for the common good. This second interpretation would bevalid if the State had managed to crack down on tens of otherwell-known cartels, or at least to collect the fines it imposed onthe dairy companies. However, we know from experience that thesame State we deem failed as an administrator of public enter-prises was never successful at controlling private companies.

Air transport: In early November 2012, the largest air carrier inGreece, Aegean Airlines, launched its third attempt for dominationof air transport by reviving its proposal to purchase Olympic Air,this time through a stock market buyout. Previous attempts haddrawn the attention of the European Committee for CompetitionMonitoring, which had rejected the merger proposal and opted forpreserving two schemes, with Olympic Air remaining a subsidiaryof Aegean Airlines. Olympic Air, the formerly dominant but heavilyindebted (for many reasons which we cannot explain here) aircarrier underwent several attempts at consolidation whichfavoured only some private managers who were involved in theconsolidation plans, and ended up in 2009 on the portfolio of theMarfin Investment Group, owned by Mr. Vgenopoulos. What withthe protracted crisis of air transport, what with the recession inGreece and internationally, Olympic Air became a shadow of itsformer self, but, most importantly, both Olympic Air and AegeanAirline found themselves making losses. The repeated attemptsof Aegean Airlines to acquire Olympic Air were presented as cru-cial for the survival of Greek air transport in an international envi-ronment where competition is intense. What was not emphasizedhowever is the fact that they operate together 89% of domesticroutes. Thus, if the new merger proposal manages to overcomeEuropean objections, it will result in a private monopoly that willdominate the domestic flight market, which is subsidized by noneother than the State.

Telecommunications: Here we will see a different type of privatemonopoly. There is usually a private monopoly lurking behindeach State monopoly, a monopoly in the form of the public sec-tor's main supplier or contractor. In a country where corporationssuch as Siemens, Intracom and AKTOR thrive, there is no needto look far to draw this conclusion. The Hellenic Telecommunica-tions Organization (OTE), which was fully dependent on the in-terests of businessman Kokkalis up to the early 2000s, shapedthe landscape of telecommunications on the basis of Intracomproducts. While the rest of the world was adopting broadbandconnections (ADSL), OTE insisted on using the outdated technol-ogy of dial-up, ISDN. The author of these words had to endure inthe year 2002 a sermon from the OTE general manager on thefailure (!) of ADSL. As it turned out ex post facto, OTE wouldn'tdiscover ADSL until all the Intracom ISDN modems had been pro-moted in the market.

Figure 6: Salary distribution in public sector

Another very serious parameter altering competition is the matterof national networks and infrastructure. What will happen whenthe State surrenders them to a handful of private investors is ob-vious due to the dominance their new owners will have acquiredon the market. However, even when a public agency owns basicinfrastructure and private businesses are simultaneously activeand making use of it, the key priority is not to expand services andcompress their cost for the benefit of society, but to secure profits(or competitive conditions, as some like to call it) for private busi-nesses. A recent example is the hefty fine imposed by the HellenicTelecommunications and Posts Commission (€100,000/day) onOTE after a complaint filed by private companies Forthnet, HOLand Wind, because some of the cheap packages offered by OTEannihilated the profit margins of private investors who were mak-ing use of existing infrastructure for a wholesale price.

Although it is obvious that the above-mentioned example can beinterpreted the other way around, meaning that a public companymanages its infrastructure as a monopoly and determines the costof its services at will, the core issue is that a fundamental servicesuch as telecommunications is subjected first and foremost to nar-row economic and technical rules of profit instead of prioritizingservices to society as a whole. This specific case actually revealsthe risks of market manipulation through private acquisition ofbasic national infrastructure, as OTE was already a mixed com-pany at the time of these events (Deutsche Telekom had alreadyacquired its management).

Let’s be realistic. Even if the very same State that is consistentlyconsidered incapable of achieving anything was suddenly able tocontrol the market effectively and crush cartels from the cradle,the economy of Greece is too small for any form of private com-petition to function in the field of basic infrastructure. In the best-case scenario, the public sector will shoulder the cost ofinfrastructure and networks and lease them for a derisory sum tofive or six private companies, for which it will secure profits inevery possible way. In the worst-case scenario, infrastructure andnetworks will be turned over directly to a handful of private in-vestors and State monopolies will become overnight private ones.The minimal benefits that public utility companies managed toprovide to society so far will be replaced by guarantees of prof-itability, and, what is more, with a guaranteed customer base, es-pecially in critical supplies and services such as energy,telecommunications and water.

Myth 5: The public sector stands to gain fromprivatizations

At this point, the fabrication that the public sector stands to gainfrom privatizations and more generally from limiting its role as anentrepreneur is refuted both by the overall economic situation andby individual cases of flotation and denationalization. It is howeverworth mentioning succinctly a few of them.

To start with the big picture, as stated above, Greece engaged inselling public companies’ shares, transferring their managementto private businesses and fully privatizing them since the early1990s. In principle, this should mean that State revenues in-creased while deficits fell and that the external debt was cut down.However, the debt almost never stopped increasing during thetwenty years where the Greek economy was modernizing into aliberal economy, especially during the Karamanlis governmentwhen a significant number of privatizations was completed (eachone of them with a distinct flavour of scandal). This is, of course,a simplistic approach, but one that could, in and of itself, decon-struct the equally simplistic opinion that the debt will shrink if weprivatize public companies. We must take note however here ofone of the key reasons which led to a rise of the external debt,namely a surge in the trade imbalance, meaning the differencebetween imports and exports (Figure 7). This rise mirrors progres-

sive changes in private companies, their productivity and theircompetitiveness, as well as the deindustrialization of the countryand its simultaneous transition to an exclusively retail-based pri-vate economic model. In short, factories were replaced with shopsand importers.

In special cases however, it is enough to refer to a sample of thedozens of cases of transfer of companies, infrastructure and min-eral resources from the Stateís ownership to private hands, withcontracts that were always biased in favour of private businesses

Olympic Air was handed over to the Marfin Investment Group in2009, for the derisory sum of €174 million, while the public sectorshouldered burdensome obligations, paying no less than €1.3 bil-lion in compensation, bonuses, social security and pension con-tributions, etc. to 5,500 workers. The State decided that Greeksliving in Greece as well as those living abroad didn’t need a na-tional air carrier. After going private, Olympic Air first stopped op-erating most international routes, then got rid of some exceedinglyexpensive planes for one-sixth of their estimated value, limitingitself to the role of a domestic air carrier, and is finally on its wayto be acquired by the other owner of a peculiar air transport oli-gopoly. The former State monopoly shrank and, it seems, will beconcentrated again in the hands of a single company, Aegean,but this time, it will be privately owned.

Here is what the Economist had to say about the sale of OlympicAirís Airbus planes:

A sale of surplus state assets that might have strengthenedGreece's coffers by $180m in 2009 ends up raising just $40m,three years and two international bail-outs later. In part the mostrecent slump in value is because the buyer will have to spend upto $20m on repairs to make the planes fit enough to be ferriedacross the Atlantic with no passengers (which is cheaper than fullrestoration). At these prices it might have even been better tobreak them up for scrap in Athens: at least that would have pro-vided a bit of work for jobless Greeks.

In Chalkidiki, ore mines with identified gold resources worth up to€20 billion were sold for €11 million. The AKTOR group, whichwas the intermediate owner of the mines before 95% was takenover by European Goldfields and later Eldorado Gold, earned€174 million in this transfer, by creating a company with an initialcapital of €60,000 (Source: Hellenic Mining Watch).

In October 2012, the Agricultural Bank of Greece, which holdsmortgages for millions of acres of agricultural land, was split intwo. The State took over the loss-making component of bad loans,while the Piraeus Bank purchased the healthy part of the bank for€95 million. The privatization of the sound Hellenic Post Bank isplanned along similar lines. This was preceded by the haircut ofGreek government bonds, under the terms of which these twopublic banks are not eligible for recapitalization, as opposed totheir private competitors, many of which have turned into zombiebanks. The buyout was presented by the Greek government asvital for the banking system and the Greek economy, as well as acrucial step to secure workers’ jobs. The simple truth however is,as reported by To Vima newspaper on 15/7/2012, that the priva-tization of the Agricultural Bank is on the list of prior actionsagreed with the troika for continued funding of the country.

The recent vote by parliament of a law allowing full disengage-ment of the public sector from public utility companies, togetherwith the vertiginous list of planned privatizations through the Hel-lenic Republic Asset Development Fund, makes future privatiza-tion scenarios even worse as far as losses are concerned, lossesfor the State, the public sector and society as a whole.

This was already highlighted by Ethnos newspaper in January2012:

One of the companies included in this year’s privatization pro-gramme is the Athens Water Supply and Sewerage Company(EYDAP). The plan is to sell 27.3% of its shares and to transferits management to a strategic investor.

If we take into consideration EYDAP’s current capital (approx.€337 million), while its real value, based on the valuation of itsassets, is estimated at €1.5-€2 billion, we can easily conceivewhat will happen if shares are transferred through the AthensStock Exchange, even if interested investors are granted a highpremium.

But what will happen if the private owner of a public utility com-pany finds out that his investment isn’t worthwhile? If, despiteprice hikes, profits are derisory? If the investor goes bankrupt?International and domestic experience proves that the State willhave to shoulder the cost immediately. When confronted with thepossibility that large segments of the population might find them-selves without access to electricity or water, the State will haveno choice but to burden itself again with the company, its debtsand its problems.

Twenty Years of Privatizations

Greece had been constantly denationalizing private companiesthrough flotation, long-term concessions and sales to private com-panies since 1991 until 2010, when it came under supervision bythe IMF, EU and ECB. Here is a list of the family jewels thatpassed, one way or another, into private hands in the past twentyyears:

DENATIONALIZATIONS 1991-2010 *

1991Sale of the Piraeus Bank to a group of investors led by professorand banker Michalis Sallas Privatization of urban public transportation with the establishmentof Transport Companies

1993Flotation and listing of the Greek Sugar Industry in the Stock Ex-changeSale of the Athens Bank to Hanwha First Investment

1996 First flotation of the Hellenic Telecommunications Company (OTE)

1997 Announcement of the flotation of the National Petroleum Com-pany Group (DEP)

1998First and second flotation of the Hellenic Duty Free Shops (rev-enue thus generated was 20 billion and 80 billion Greek drachmas(GRD) respectively)

First and second flotation of the Athens Stock Exchange (revenue:GRD22 billion and GRD10 billion respectively)

Second and third flotation of the Hellenic TelecommunicationsCompany (revenue: GRD126 billion and GRD302 billion respec-tively)

Sale of shares of the National Bank of Greece (revenue GRD63billion)Sale of the Bank of Crete to Eurobank (revenue from down pay-ment: GRD22 billion)

Flotation of the National Petroleum Company Group (revenue:GRD35 billion)

Partial purchase of the Bank of Macedonia-Thrace by PiraeusBank (revenue GRD 27.3 billion)

Sale of the Bank of Central Greece to Egnatia Bank (revenue:GRD17.3 billion)

Flotation of Olympic Catering (revenue: GRD2.5 billion)

Flotation of General Bank (revenue: GRD14 billion)

Announcement of the listing in the stock market of the followingprofit-generating public companies by 2010: Corinth Canal, Thes-saloniki International Fair (DETH), Hellenic Public Real EstateCompany (KED), Athens Water Supply and Sewerage Company(EYDAP), Thessaloniki Water Supply and Sewerage Company(EYATH), Hellenic Horseracing Betting Company (ODIE), PiraeusPort Authority (OLP), Thessaloniki Port Authority (OLTH), OlympicCatering, Olympic Tourism, Hellenic Football Prognostics Organ-isation (OPAP)

1999Flotation of the National Bank of Greece (revenue: GRD281 bil-lion)

3rd flotation of the Hellenic Duty Free Shops (revenue: GRD127billion)

4th flotation of the Hellenic Telecommunications Company (rev-enue: GRD341 billion)

Flotation of the National Petroleum Company (revenue: GRD50billion)

Flotation of the National Gas Company (revenue: GRD35 billion)

Flotation of the Athens Water Supply and Sewerage Company(revenue: GRD60 billion)

Sale of the Ionian Bank to Alpha Bank (revenue: GRD272 billion)

New flotation of Olympic Catering (revenue: GRD3 billion)

Flotation of the Hellenic Bank for Industrial Development (rev-enue: GRD75 billion)

2001Flotation of the Thessaloniki Water Supply and Sewerage (rev-enue: €10 million)

Flotation of the Thessaloniki Port Authority (revenue: €20 million)

Flotation of the Hellenic Football Prognostics Organization (rev-enue: €90 million)

2002Sale of the Hellenic Bank for Industrial Development to PiraeusBank. (revenue: €511)

Flotation of the Hellenic Telecommunications Company (revenue:€652 million)

Flotation of the Hellenic Football Prognostics Organization (rev-enue: €508 million)

First and second flotation of the Public Power Corporation (rev-enue: €814 million)

Sale of a bundle of 2.3% of the Deposits and Loans Fund sharesheld by the Commercial Bank to Credit Agricole-CA (revenue: €56million)

Sale of 58% of Olympic Catering to Everest (revenue: €18 mil-lion)

Sale of 49% of the Mont Parnes Casino to the Hyatt-ET consor-tium, plus various investments (revenue: €170 million)

Long-term leasing of the Attica coastline, plus various investments(revenue: €32 million)

Sale of the Hellenic Shipyards in Skaramangas to HDW.

20033rd flotation of the Public Power Corporation (revenue: €636 mil-lion)

Bundle sale of 11% of the National Bank of Greece (revenue:€490 million)

Initial public offering of the Piraeus Port Authority (revenue: €55million)

Bundle sale of 33.4% of the Hellenic Stock Exchange (revenue:€89 million)

3rd flotation (24.61%) of the Hellenic Football Prognostics Organ-ization (revenue: €736 million)

Bundle sale (16.65%) of Hellenic Petroleum (revenue: €326 mil-lion)

Bundle sale (40%) of the Hellenic Duty Free Shops (revenue:€174 million)

2004Bundle sale (8.21%) of Hellenic Petroleum (revenue: €192 mil-lion)

Bundle sale (7.46%) of the National Bank of Greece (revenue:€562 million)

2005Allotment of 16.44% of the shares of the Hellenic Football Prog-nostics Organization (revenue: €1.266 million)

Allotment of 10% of the shares of the Hellenic Telecommunica-tions Company (revenue: €835 million)

2006Allotment of 7,18% of the shares of the Agricultural Bank ofGreece (revenue: €328 million)

Capital restructuring of the Hellenic Post Bank and equity coop-eration with Hellenic Post (revenue: €436 million)

Listing of the Hellenic Post Bank in the Athens Stock Exchangetogether with the allotment of 34.84% of its shares (revenue:€612 million)

Allotment of 11.01% of the shares of the Commercial Bank (rev-enue: €364 million)

2007Offer of 10.7% of the shares of the Hellenic TelecommunicationsCompany to Deutsche Telekom (revenue: €1,123 million)

Allotment of 20% of the shares of the Hellenic Post Bank (rev-enue: €510 million)

2008 Allotment of 3% of the shares of the Hellenic TelecommunicationsCompany (revenue: €431 million)

Concession of the Piraeus Port Authority Container Terminal toCOSCO (revenue: €50 million)

Concession of the SEF marina (revenue: €40 million)

2009Allotment of 5% of the shares of the Hellenic TelecommunicationsCompany (revenue: €674 million)

Sale of Olympic Airways to the Marfin Investment Group (revenue:€177 million)

Sale of the infrastructure of the Athens Airport (revenue: €9 mil-lion)

* The above list does not include projects implemented throughpublic-private partnerships.

We can find a very interesting detail on the personal website ofthe Karamanlis government Minister of Finance, Giorgos Alogosk-oufis, with regards to the achievements of the privatizations pro-gramme during the period when New Democracy was ingovernment:

“The last and most successful denationalizations took place be-tween 2004 and 2009. [...] The denationalizations that took placebetween 2004 and 2008 were strategic in nature, as opposed tothose conducted in the past. We put emphasis on the full dena-tionalization of the banking system (except the Agricultural Bank)and of telecommunications [...] The total revenue generated bythe Denationalizations Programme (2004-2009) reached €7.63billion”.

To these € 7.63 billion generated through denationalizations dur-ing 2004-2009, we must add €15.4 billion for 1998-2003, and afurther US$3.16 billion for 1991-1997. Put simply, over a periodof 11 years (1998-2009), denationalizations were in excess of €23billion!

Figure 7: Trade balance 1990-2010

REVENUE FROM DENATIONALISATIONS 1991-2009

1991-1993: US$1,380 billion1994-1997: US$1,780 billion1998: €2,104 billion1999: €3,971 billion2000: €1,830 billion2001: €1,651 billion2002: €2,697 billion2003: €3,148 billion2004: €0,754 billion2005: €2,101 billion2006: €1,740 billion2007: €1,719 billion2008: €0,545 billion2009 (1st semester): €0,868 billion

With regards to the spike of denationalizations conducted inGreece, in particular during the 10 years which preceded the eco-nomic crisis a crisis which is due, according to proponents of pri-vatizations, to the Soviet model of the State entrepreneur thefollowing graph is eloquent enough:

Sources : Ministry of Finance (denationalizations 2004-2009), Pri-vatization Barometer, C. Melas (Professor of Economics, Pan-teion University, G. Alogoskoufis (former minister of finance).

Denationalisations 1991-2011

Public-private partnerships: Milking the Stateand the People.

They were initiated during the 1990s in order to promote the so-called large-scale projects such as the Attiki Odos Motorway, theEleftherios Venizelos airport, the Rio-Antirrio bridge and more.The law which established them and has since expanded theirscope of operation to infrastructure and national networks wasvoted in 2005 under the New Democracy government. We are re-ferring here to Public-Private Partnerships (PPPs), a theoreticallyeffective process to deliver public works and/or public services,especially at local level, which has become common practice inWestern countries. Specifically, the Ministry of Finance offers thefollowing outline:

“Public-private partnerships (PPPs) are contracts, usually long-term contracts, which are agreed between a public sector bodyand a private carrier, aiming at delivering public works or services.Under a PPP, the private carrier takes responsibility for part or allof the implementation costs of the project and for a significant partof the risks involved in its construction and operation. The publicsector focuses on defining the design and the technical and op-erational requirements of the project and repays the private party,either in installments coming from the public sector depending onthe project’s advancement and its compliance with operational re-quirements, either through direct payment from the final users ofthe project”.

The three main advantages of PPPs, as defined by the Ministryof Finance, are:The ability to finance additional projectsThe transfer of risks to private parties (reduction of constructioncost overruns)An improvement of the investment climate

In reality however, the Greek experience related to the implemen-tation of PPPs is very different, especially when it comes to large-scale public works projects, which, in practice, evolved intoprivate, long-term monopolies. These monopolies are extremelylucrative for those making profits and extremely burdensome forthe citizens who have to use them.

In 2010, a working group from the Central Macedonia Departmentof the Technical Chamber of Greece (TEE) completed a studywhich exposed the drawbacks of PPPs for the Public InvestmentProgram and the economy as a whole. This was shortly beforeGreece engaged in the Memorandum, at a time when the expan-sion of PPPs to new projects as well as existing infrastructure wasput forward by the government as a growth measure to counterthe economic crisis. The TEE’s study, however, suggests that theState is paying three times over the cost of some projects imple-mented under a PPP scheme, favouring big construction groups.(Newspaper Macedonia, 21/2/2010)

According to the conclusions of the study:

The borrowing costs of the private party undertaking the projectare clearly much higher than the borrowing costs the Public Sec-tor would incur for the same project.

Banks financing such projects require that private parties take outinsurance against any likely or unlikely risk, not only during theproject implementation phase but for the entire duration of thecontract.

The State hires financial, technical and legal advisors who are re-sponsible for preparing the highly complex, both legally and eco-nomically, tender process as well as supporting the Public Sectorduring the project.

On the other hand, the banks financing the project and the insur-ance companies insuring it hire financial, technical and legal ad-visors who are called upon to examine every aspect of theparameters and potential risks involved in the project and to ad-vise their employers.

An independent engineer undertakes to monitor and controlpreparatory studies, to supervise construction and secure overallproper implementation of the contract.

There is also an expected overpricing on services undertaken bythe contractor for a very long time (20-30 years), such as mainte-nance, cleaning, security; the contractor should take into accountunforeseeable future situations.

The contractor will seek to make a profit, certainly not only throughthe construction itself but through the total cost which includes allof the above.

Banks (and insurers) specializing in this type of financing are fewand therefore can impose their terms and conditions.

There are numerous PPPs on offer but those able to bid in ten-ders at least on the Greek side are extremely few, which makescompetitive bidding substandard and even nonexistent. Thingsget even worse because of the unacceptable bonus system pre-scribed in tendering rules, which favours those who have alreadyundertaken a PPP project or a concession project. Thus, the mar-ket of PPP projects is shaped into an oligopoly with all the conse-quences this may imply.

The example of the Attiki Odos Motorway

It is clear that the conclusions listed above can be confirmed, oneway or another, through an analysis of the largest (and most ex-pensive) public works projects that were completed in the pastyears through PPPs, first and foremost the Attiki Odos Motorway,the agreement for which was ratified in 1996, thus making it a pre-cursor for all projects to follow on the national road network.

As early as 2003, the Centre of Planning and Economic Research(KEPE) was labelling the operation of the Attiki Odos Motorwayby the consortium as extortionate for citizens, because no publictransport network was developed, forcing citizens to pay high tollfees even for short distances. KEPE also speaks of “bulking upí”the collateral works that were assigned to the contractor besidesthe main road. It also notes that the PPP agreement ensures thegroup’s revenues. The private party can determine the toll fees atwill (within the price range specified in the agreement), while theagreement provides for the payment of compensation by the pub-lic sector in case the suburban railway contributes to the reductionof traffic on the motorway. (Eleftherotypia, 5/2/2011)

Two years later, the public prosecutor’s office tasked with inves-tigating overpricing cases that saw the light of publicity may haveshelved the case, with the rationale that the construction wasrightly executed from a legal point of view; but the findings of theDistrict Attorney, Ms. Eleni Touloupaki, describe the agreementas inequitable. She also stresses that the control mechanisms ofthe public sector must monitor when the constructors’ investmentis paid back, so that toll fees are either reduced or partly returnedto the State (Kathimerini).

Let us have look in more detail at how the financing pie was splitfor the construction of the Attiki Odos Motorway:

The concession contract, which was signed in 1996 and ratifiedthrough law 2445/1996, forecasts that its operation from the con-cession holder could last for up to 23 years. The motorway will bedelivered, provided that equity (the funds invested by the conces-sion holder in the project) is paid back with a minimum return of11.6% annually, irrespective of the maximum duration of the con-cession contract.

The Attiki Odos Motorway cost €1.3 billion. Of those:

32% (€420 million) was paid by the State with EU co-financing,meaning: the Greek people paid for it.

An estimated €675 million were loans taken out by the consor-tium, guaranteed by the Greek State. This means that if the jobgoes awry, the bank will take its money from the State. If it doesn’t,it will take the money from the tolls, meaning once again, from thecitizens.

The share of the consortium, which constructed and is operatingthe motorway, was approx. €175 million. In order for the consor-tium to abandon the operation it would have to receive a return ofthe same funds with an average yield of 11.6% for every year untilrepayment.

To date (i.e. 2011), the total revenue generated the Attiki OdosMotorway during its 8 years of operation is in excess of €1.7 bil-lion, which means that it exceeded not only the sum of equity andthe agreed annual revenue and loans but even the total cost ofthe project. (EMDYDAS)

In reality, the participation of the consortium was even smaller.The total cost of the motorway together with collateral works, ex-propriations, etc., is in excess of €3 billion. When Kostas Hatzi-dakis, who was then a European MP for New Democracy, putthrough a parliamentary question on the matter, the relevant EUCommissioner Michel Barnier replied that the final cost of the proj-ect amounts to roughly €3.2 billion. Since the additional expendi-ture did not burden the consortium’s share, its real participationis limited to a meagre 5.5%. [1]

Despite this, the company continues to operate the motorway andto collect tolls, on the basis of a loophole in the 1996 concessioncontract. As opposed to the other five national motorways underconstruction, the concession contract that was signed stipulates

that the timeline for return of the regional highway to the State isbased on the profit made by the contractor (Attiki Odos S.A.) andnot on revenues. This is something that causes understandablereaction and it is characteristic that the State has not engaged inanother such concession contract. In other words, the 2011 Re-port of the Bank of Greece concludes that, in spite of constantlyincreasing revenues from 2004 onwards, Attiki Odos should nothave been passed on to the owner of the works, that is, the State.Instead, Attiki Odos S.A. achieved extensions of the concessioncontract, taking on the relevant new expansions of a Pharaonicproject, which to date, remains fundamentally incomplete; incom-plete in precisely those critical points through which it can black-mail citizens, as the Ministry of Development concluded as earlyas 2003.

On the basis of this loophole, the technical companies of the con-sortium are receiving fat dividends without counting them towardsthe final bill. As described eloquently by Kathimerini (11/6/2006):The concession contract stipulates that the operation of the routeby the consortium can be terminated if the average yield of theequity capital of Attiki Odos S.A. rises to levels higher than 11.6%.Profits however (in the form of dividends) from the other compa-nies are not taken in consideration. Thus, technical companies al-ready reap profits, which are not counted into the bill, on the basisof which they would be called on to hand over the motorway ear-lier to the State.

Beyond the fact that the 1996 concession contract was biased infavour of the private party, its conditions were not even fulfilled,while the State did not seem to be particularly bothered. To beprecise, because of the fact that collateral routes, which the Statewas obligated to complete, would have dropped the revenues ofAttiki Odos, the collateral network remained incomplete under var-ious pretences. As vehicles have to enter the motorway in orderto move for a few kilometres, the consortium is guaranteed withthe help of the State a steady clientele. The fact that, from earlyon, the actual user caseload for Attiki Odos was 30-40% largerthan originally planned is highly revealing.

Vasso Papandreou, the competent minister at the time, had noteven secured a charge per kilometre for users of the motorway.Steady tolls upon entry and exit of this closed motorway continueto force drivers, to this day, to pay a steady fee even if they onlyuse a fraction of the total route. Presumably, this choice was madein order to discourage occasional users of the motorway andmaintain vehicles' high speeds on average. As mentioned abovehowever, the opposite is happening. The commercial develop-ment of the Attiki Odos route, especially in the areas of Metamor-phosis and Koropi, forces commuters to use this private road ona daily basis, in the absence of completed or reliable alternatives.In spite of Mrs. Papandreouís own admission that the original de-cision was a mistake, as well as the fact that her successorspromised to change the calculation of tolls, nothing of the sort hasmaterialized.

We chose to develop the example of Attiki Odos purposefully asit became the yardstick for all the large network projects that fol-lowed across the country. It may very well be that more recentconcession contracts are more mature and have less flaws, butthey remain one-sided in favour of the private carriers that under-take the works.

Since bank vaults started shutting down in 2008, the true natureof PPPs began to reveal itself: they burden the State with all therisk and the citizens/users of these monopoly infrastructure proj-ects with all the cost. The successive toll increases in the nationalnetwork, which reach up to 50%, happened solely in order forworks which had been halted to resume, along with the liquidityof the banks. In order to deter the “I won’t pay” movement, theState on the one hand took over the task of guarding collectionpoints, thus criminalizing the act of challenging a private transac-

tion (between a user and a company.) On the other hand, it en-sured that it would cover the resulting gaps in financing to securethe continuation of works that remain incomplete and dangerous,even though they are being paid for by the citizenry.

A simple example of this reality is the non-operation of the toll sta-tion in Aiginio, which is located a mere 8 kilometres from the Mal-garon tolls, something that would greatly burden residents of thesurrounding areas. Keeping to its contractual obligations, theState proceeded to return €7.5 million to Aegean Motorway S.A.,a sum which represents foregone revenue by the company fromthe non-operation of the station. The halting of their operation hadbeen decided by Deputy Minister of Infrastructure Giannis Magri-otis, in order to offer financial assistance to those who use thispart of the National Network daily [...] In fact, in order to counterlosses from the non-operation of the Aiginio station, the fee at theMalgaron tolls was raised for about one year from €2 to €2.80,while today the fee is €2.40.

All this was stipulated in the concession contracts signed by theNew Democracy Minister of Infrastructure, Giorgos Souflias. Inother words, the three basic advantages mentioned by the Min-istry of Finance in relation to PPPs are being destroyed all at oncein the case of the National Road Network. We should note thatthe few companies sharing these projects are already reaping thebenefits of their parallel operation.

We can therefore see that, even in cases where we donít have aformal privatization of public wealth and infrastructure, the State(which has otherwise been labelled Soviet-like) finds a way toconcede monopoly markets to private carriers and in fact, to pro-tect them from risk. In addition, without benefitting financially, itchannels further burdens to its citizens, who have no choice butbecome users of these monopolies.

Similarly meagre is the participation of private carriers in all othermajor projects that were constructed through PPPs. A typical ex-ample is the Eleftherios Venizelos airport with total financing costsof 659 billion drachmas, of which only 53 billion (7.8%) came fromthe consortium. This project was followed by a large number offavourable provisions for the German consortium, among which,the exemption of the equity capital from taxation during the first15 years of operation, as well as the exemption from VAT pay-ments for procurements.

The Greek Treuhand

We deliberately avoided focusing on the financial crisis in our pre-vious article, because the protection of public property and infra-structure of public interest is not a circumstantial matter. However,under the specific circumstances of an acute financial crisis, andin particular in a context of high unemployment and social inse-curity, privatizations take the form of plundering. And Greece isno exception.

While the political leadership and the media incessantly repeatthe mantra that privatizations happen for the benefit of the publicsector, the truth is quite the opposite. The only thing one needs inorder to determine this is to become acquainted with the methodthrough which they happen, as well as the rather unsavoury tasteof its (German) source of inspiration.

The Hellenic Republic Asset Development Fund (HRADF) wasfounded with law 3986/2011 (Medium-term plan) under the guiseof a need for speedy and efficient privatization and utilization ofpublic assets. The HRADF is a kind of public asset supermarket,which can be accessed by investors who want to do their shop-ping.

The Fund concentrates all the public assets that are meant for uti-lization and manages the process of divestiture in a unified way.

Theoretically, and from a technocratic perspective, one mightclaim that this indeed constitutes a logical choice for efficiency,transparency and speed of privatizations. One look at law 3986is however enough for even someone observing these develop-ments in good faith to decipher the true nature of the HRADF andthe rationale behind its establishment.

We are confronted with the ideological assertion that privatiza-tions benefit the public sector and consequently society. Nothingcould be further from the truth and we will see why.

Starting with procedural matters, one can read in Article 2 of law3986:

(paragraph 4) transferred and placed under the Fund without atrade-off (paragraph 5) the above assets are placed under the Fund, withfull ownership, legal and possessive, and the Public sector relin-quishes all rights over them.(paragraph 7) The object or right that has been transferred orplaced under the Fund, according to paragraph 5 of the presentarticle, may not be transferred back to its previous owner or ben-eficiary, under any circumstances.

In other words, on the one hand, the Public sector will not receiveanything in return for any asset that passes the doorstep ofHRADF. On the other hand, it stands to lose ownership of theseassets once and for all. As a matter of fact, paragraph 7 clarifiesthat under no circumstances can assets be returned to their pre-vious owner. It becomes then immediately clear that the proce-dure that was chosen bears no relation to gains for the publicsector.

The logical question that arises from here is: where will the saleor utilization money go? Further down in the same article it isstated that:

(paragraph 14) The amount collected by the Fund from the uti-lization of its assets is transferred within a maximum of ten (10)days from its collection, by credit to a special account named Hel-lenic Public Sector Income Account Denationalizations, after at-tributable operating expenses and administrative costs of theFund have been deducted for the utilization of the asset.

It is therefore a fact that the public sector does not receive a singleeuro for the property it thus lost and that the revenue generatedby the sale or utilization of assets is entirely transferred to a spe-cial account. At this point, let us point out a detail: The HRADF’soperating expenses (among which, the salaries of its officials) arepaid from a sale of public assets for which the public sector re-ceives no trade-off.

If indeed the aforementioned individual observing these develop-ments in good faith claimed that the special account was createdin order to receive money that will in turn be later passed on tothe public sector, the segment from Article 2 that follows wouldblithely contradict such a claim:

(paragraph 18) The revenues of the Fund are allocated to:The repayment of public debtThe repayment of possible debts incurred by the Fund,The coverage of administrative costsThe payment of all sorts of expenditure necessary for the fulfil-ment of this purpose.

Therefore, the entire value of the assets put up for sale by thepublic sector will go directly to the lenders and, of course, toHRADF officials. Nothing is stipulated for indemnification of theprevious owner, either by way of liquidity, or in the form of trade-offs, services or infrastructure. The common property of the citi-zenry of the country is liquidated in order to pay back the debt.

At this point, the defender of privatizations will counter the seem-ingly logical argument that the reduction of the debt will benefitthe national economy and that the benefit to the citizenry from theprocess of divestment through the HRADF lies therein. To put itotherwise, the public sector wins because it’s paying its debts.

Let us then accept, in good faith, that the repayment of debt in-deed constitutes an indirect benefit for the Public sector. However,simple mathematics proves that the chosen method is the worstpossible method and that the argument regarding a possible ben-efit for the public sector is flimsy at best. Either way, the obviousimpression given by HRADF is that of a bankrupt person that hastaken his or her household belongings out in the street to sellthem off at any price.

The Hellenic Gas Transmission System Operator, HGTS: TheFundís estimate for the sale of the HGTS is €300-500 million.Without taking in consideration the value of assets owned by theHGTS, the profits of the company in a single year (2011) were€125 million. Therefore, if the company remained in the hands ofthe State, it could cover this sum within 3 to 4 years, since all prof-its would go to the public sector. With its sale however, after fouryears, the State will face a loss of earnings of more than €100million annually, since it will be earning back only a fraction of theoriginal revenue in the form of taxation. As for the new owners,they will redeem their investment in 3 to 4 years and will own allof the companyís assets (which we did not take in considerationin the calculation above.) It is worth mentioning that the invest-ment plan of the HGTS for 2013-2022 is in the order of €400 mil-lion (upgrade of the Revithoussa LNG terminal, the stations inMegalopoli and Aliveri as well as the compressor station in NeaMesimvria).

The Greek Organisation of Football Prognostics (OPAP): Amuch more succinct example is that of OPAP. Last September,the government decided to sell the 33% of shares it still owns, in-stead of the planned 29%, thus exiting entirely from the company.The stock value of the package is approx. €500 million, while es-timates of the final price of its sale do not exceed €800 million. Inthe first half of 2012 alone, the Greek State generated €258 eurofrom OPAP!

The vertiginous list of public assets scheduled for privatizationthat have been placed under the HRADF includes, mainly, prof-itable public companies such as OPAP, the Public Gas Corpora-tion DEPA, HGTS, the Public Power Corporation DEH, HellenicPetroleum, and more. All of these cases are similar. The State willthrow out of the window hundreds of millions in profits which godirectly to the public sector, swapping them for a small fraction ofthe real value of its assets to cover an equally small percentageof the public debt. Coincidentally, with the kind of policies whichhave led Greece to a deep recession, the public debt accordingto the 2013 National Budget is expected to rise to €346 billionfrom today’s €340 billion. Taking under consideration the officialrecession projection of 4.5% for 2013, the debt-to-GDP ratio willspike at 189% only two years after the PSI haircut. At the sametime, according to the 2013 budget, revenues from the above de-nationalizations will amount to €2.6 billion. Therefore, one won-ders, how valid is the claim that the HRADF benefits the Publicsector?

The setting for this generalized divestment through the HRADFdoes not end with public utility companies but extends to almostall public infrastructure (e.g. ports, airports etc.) including evensome islands. More specifically, according to Kathimerini: “TheHRADF is examining the possibility of leasing forty uninhabitedislets. Up until now, the Fund has examined 562 islands with theprospect of utilizing them. In 40 of those islands, the Fund seespotential for the development of leisure resorts of high standards.The utilization, as mentioned by an HRADF official, will materializethrough a transfer for 30 to 50 years”.

In practice, this means that the HRADF has seized even properpublic property (and not only the private property of the State),since land, coasts, rivers, forests etc. are included in the definitionof public ownership (common property). In order to avoid the pit-falls of privatizing common property, the Medium-Term Plan rein-troduced the notion of surface, notwithstanding the Civil Code,which requires that no distinction is made between a superstruc-ture and land or water. More specifically, Article 18 states:

(paragraph 1): Surface is the right in rem of a physical or legalperson to construct a building on public land, which he/she/it doesnot own, and to exercise in this building the authority provided bythe right of ownership.

And Article 19 determines the right of surface which is given tothe tenant of public land:

Establishment of the right of surface

By way of derogation from articles 953 and 954 of the Civil Code,it is permitted to establish the right of surface over public land.The right of surface is included in real estate according to article949 of the Civil Code.

[...] the duration of the right cannot exceed fifty (50) years, unlessit was established for a shorter period, which however cannot beless than five (5) years.

Consequently, not only is all public infrastructure, such as airports,ports, highways, bridges, tunnels, railways and more, placedunder the HRADF but also, land itself. The 40 islets mentioned inKathimerini’s report will be given to private parties for up to fiftyyears, during which they will be able, under the rights granted tothem as surface, to utilize public land. It is critical at this point tomention that all revenue generated from leasing islets, which un-doubtedly raises the very sensitive issue of sovereignty, will go toa closed account from which not a single euro will be allocated toinfrastructure or public interest services, but instead, will go ex-clusively to banks.

Do it like the Treuhand

Since however, even after all of the above, it is possible that thereare still a few people observing these developments in good faith,and who think that the HRADF is a necessary institution whichcan help out to pull the country out of its present predicament, thisaccount from recent history will dissolve their last illusions.

The HRADF is not a Greek invention. Well before the Mid-Termplan was voted in 2011, a model of mass privatizations had al-ready been developed in Germany between 1990 and 1994, dur-ing the reunification of the East and West Germany after the fallof the Berlin Wall. This was a disastrous plan which practically an-nihilated the huge infrastructure of East Germany, leaving morethan 2.5 million workers without jobs. This period saw the creationof a public asset management company in the former East Ger-many, under the name Treuhand (meaning trusted hand), whichthe HRADF faithfully replicates.

About the Treuhand, which undertook the largest privatizationpackage of public property in the history of Europe (factories, in-frastructure, land, even retail shops), managed within four yearsto destroy a country, to fire millions of workers and to leavetremendous debts which burdened the German federal govern-ment:

“The truth is however, that in 1994 it was dissolved amidst indus-trial action against huge number of ‘unnecessary’ lay-offs(2,500,000 workers, most of whom never worked again), com-plaints that profitable companies were closing in favour of WestGerman competitors and all sorts of other scandals: 500 cases

related to fast-track sales, from bribery to abuse of funds to fraud,were under investigation by the judiciary during the period of itsdissolution. And apparently not without reason: with an initial val-uation of the assets for sale at 600 billion West German DeutscheMarks (€300 billion), it sold 85% of East Germany’s public prop-erty for DM44 billion (among them, some of the most popular en-terprises were sold at auctions with a single bidder for DM1). Afinal review of the transfer of public wealth to the private sec-toríshows US$170 billion of damages (!) thanks to the activitiesof its 3,000 young employees who were seconded by the largestWest German business groups for ‘specific purposes’”.

Nadia Valavani (Avgi, 15/7/2012)

The Treuhand became a synonym of corruption and patronage insupposedly-exemplary Germany and, as described in Imerisianewspaper:

“It became for years the most loathed organization in Germany,with accusations and hatred taking murderous dimensions, whenits chairman died under the bullets of terrorists. The organizationconcluded its mission in four years, with the final net cost esti-mated at US$175 billion”.

And yet, it is this sweeping model for the divestment of publicproperty, which at one point sold 20 companies daily (!), that wasproposed in May by Swedish Finance Minister Anders Borg andwas adopted by Eurogroup President Jean-Claude Juncker. Aspointed out by To Vima: The role of the Treuhand is controversial,since the question often arises whether the company held a firesale of public property and whether there were any alternativesto fast-track privatizations. However, leading European politiciansleave this discussion aside and propose the Treuhand model forGreece. And so it was. A few months later, the HRADF was bornthrough the 2011 Medium-Term Plan.

Do it worse than the Treuhand

Advocates of privatization recognize the flaws of the Treuhandmodel, but proceed to reassure us that the two cases have fewthings in common. They claim that Greece is already a unifiedeconomy instead of two separate ones, as was the German case.Also, in Greece’s case, there will be no attempt by a more devel-oped part of the productive infrastructure to absorb a less devel-oped part, as was the case in 1990 between the two parts ofGermany, but only a change in ownership and the utilization oflarge, undeveloped sections of land and infrastructure. In addition,the private interests of West Germany desired the dissolution ofhundreds of companies in East Germany which could be domes-tic competitors. This is not the case in Greece, they say. Indeed,a comparison with Germany is likely to lead to false conclusions.What is more likely is that the Greek case will prove even worse.

First of all, it may be that West Germany acted as a suzerain toEast Germany, but that doesnít stop the Treuhand’s work frombeing domestic. Secondly, both the revenues - if there were anyat all - and the restructuring of production would be channelledinto the economy of a reunited Germany. Thirdly, the purpose wasthe reconstruction of former East Germany, with the aim of rein-stituting an internal balance in the German economy and society.Finally, the initial plan provided for compensation of the people ofEast Germany, since it was their property that fell into privatehands.

In Greece, the primary goal is to divest and draw liquidity from thesale or leasing of public property, the value of which will go to es-crow accounts and in turn directly to banks and the country’slenders. In Greece we are not talking of sales, or even liquidationsof problematic companies owned by the State, but of profitablecompanies and prime real estate, which are to be auctioned offin many cases at prices several times below their real, stock value

and always under the unbearable pressure of time (the latter wasof course the case in the Treuhand operation). In most companiesthat will pass into private hands, the part that presents a liabilitywill remain the property of the public sector, burdening the Greekpeople exclusively. Moreover, the process is not domestic but isnot even controlled by the Greek Parliament. It has been imposedby foreign parties and is supervised to a large extent by them,outside of institutional authority. The pressure for complete isola-tion of the parliamentary process in control of mass privatizationsculminated in the voting of the new Medium-Term Plan (or Mem-orandum 3) in early November 2012.

In addition to Greece’s recent experience with collusion of privateinterests, the case of the Slovakian HRADF expert, who was im-plicated in a corruption case last August, is indicative of theHRADF character. Anna Bubenikova was recommended by theEuropean Commission for this HRADF role but is accused ofbeing an invisible middlewoman in the service of private interestsin her home country’s privatization process in 2005-2006.

It must be noted here that the salaries of HRADF consultants arenot affected by the pay ceiling of public sector officials. In the eightmonths between July 2011 and March 2012 alone, their salariesand expenses rose to €6.9 million. Some individuals earn in ex-cess of €20,000 monthly.

In relation to the intentions of HRADF officials, but also to specificindividuals, it would be better to not harbour any illusions either.HRADF’s new chairman is Takis Athanasopoulos, a former deputyCEO of Toyota Motor Europe and former head of the Public PowerCorporation (he was appointed by the New Democracy govern-ment in 2007). Its Chief Executive Officer Yiannis Emiris was upuntil recently the head of the Investment Banking and Project Fi-nance division of Alpha Bank. After taking over his HRADF duties,Mr. Athanasopoulos compared Greece to the legendary Eldorado:“If we could win the game of perceptions, Greece could becomean Eldorado for investors. Our advantage is that the country is notsaturated in any sector, especially not in tourism”.

In any case, the common denominator which no one can ignoreis the element of corruption and lack of transparency. If in Ger-many, the process was compared to the activities of the mafia,what will happen in Greece? As German ZDF journalist UlrichStoll wondered when he heard that the Treuhand model had beenapproved for Greece in a documentary by Kostas Argyros: Do youtrust in the services in Greece to make it?

Indeed, do we?