{"id":61527,"date":"2015-07-27T12:00:23","date_gmt":"2015-07-27T11:00:23","guid":{"rendered":"https:\/\/www.transcend.org\/tms\/?p=61527"},"modified":"2015-07-27T09:20:21","modified_gmt":"2015-07-27T08:20:21","slug":"europes-vindictive-privatization-plan-for-greece","status":"publish","type":"post","link":"https:\/\/www.transcend.org\/tms\/2015\/07\/europes-vindictive-privatization-plan-for-greece\/","title":{"rendered":"Europe\u2019s Vindictive Privatization Plan for Greece"},"content":{"rendered":"

\"Yanis<\/a>20 Jul 2015 – <\/em>On July 12, the summit of eurozone leaders dictated its terms of surrender<\/a> to Greek Prime Minister Alexis Tsipras, who, terrified by the alternatives, accepted all of them. One of those terms concerned the disposition of Greece\u2019s remaining public assets.<\/p>\n

Eurozone leaders demanded that Greek public assets be transferred to a Treuhand<\/em>-like fund \u2013 a fire-sale vehicle similar to the one used after the fall of the Berlin Wall to privatize quickly, at great financial loss, and with devastating effects on employment all of the vanishing East German state\u2019s public property.<\/p>\n

This Greek Treuhand would be based in \u2013 wait for it \u2013 Luxembourg, and would be run by an outfit overseen by Germany\u2019s finance minister, Wolfgang Sch\u00e4uble<\/a>, the author of the scheme. It would complete the fire sales within three years. But, whereas the work of the original Treuhand was accompanied by massive West German investment in infrastructure and large-scale social transfers to the East German population, the people of Greece would receive no corresponding benefit of any sort.<\/p>\n

Euclid Tsakalotos, who succeeded me as Greece\u2019s finance minister two weeks ago, did his best to ameliorate the worst aspects of the Greek Treuhand plan. He managed to have the fund domiciled in Athens, and he extracted from Greece\u2019s creditors (the so-called troika of the European Commission, the European Central Bank, and the International Monetary Fund) the important concession that the sales could extend to 30 years, rather than a mere three. This was crucial, for it will permit the Greek state to hold undervalued assets until their price recovers from the current recession-induced lows.<\/p>\n

Alas, the Greek Treuhand remains an abomination, and it should be a stigma on Europe\u2019s conscience. Worse, it is a wasted opportunity.<\/p>\n

The plan is politically toxic, because the fund, though domiciled in Greece, will effectively be managed by the troika. It is also financially noxious, because the proceeds will go toward servicing what even the IMF now admits<\/a> is an unpayable debt. And it fails economically, because it wastes a wonderful opportunity to create homegrown investments to help counter the recessionary impact of the punitive fiscal consolidation that is also part of the July 12 summit\u2019s \u201cterms.\u201d<\/p>\n

It did not have to be this way. On June 19, I communicated to the German government and to the troika an alternative proposal, as part of a document entitled \u201cEnding the Greek Crisis\u201d:<\/p>\n

\u201cThe Greek government proposes to bundle public assets (excluding those pertinent to the country\u2019s security, public amenities, and cultural heritage) into a central holding company to be separated from the government administration and to be managed as a private entity, under the aegis of the Greek Parliament, with the goal of maximizing the value of its underlying assets and creating a homegrown investment stream. The Greek state will be the sole shareholder, but will not guarantee its liabilities or debt.\u201d<\/p>\n

The holding company would play an active role readying the assets for sale. It would \u201cissue a fully collateralized bond on the international capital markets\u201d to raise \u20ac30-40 billion ($32-43 billion), which, \u201ctaking into account the present value of assets,\u201d would \u201cbe invested in modernizing and restructuring the assets under its management.\u201d<\/p>\n

The plan envisaged an investment program of 3-4 years, resulting in \u201cadditional spending of 5% of GDP per annum,\u201d with current macroeconomic conditions implying \u201ca positive growth multiplier above 1.5,\u201d which \u201cshould boost nominal GDP growth to a level above 5% for several years.\u201d This, in turn, would induce \u201cproportional increases in tax revenues,\u201d thereby \u201ccontributing to fiscal sustainability, while enabling the Greek government to exercise spending discipline without further shrinking the social economy.\u201d<\/p>\n

In this scenario, the primary surplus (which excludes interest payments) would \u201cachieve \u2018escape velocity\u2019 magnitudes in absolute as well as percentage terms over time.\u201d As a result, the holding company would \u201cbe granted a banking license\u201d within a year or two, \u201cthus turning itself into a full-fledged Development Bank capable of crowding in private investment to Greece and of entering into collaborative projects with the European Investment Bank.\u201d<\/p>\n

The Development Bank that we proposed would \u201callow the government to choose which assets are to be privatized and which not, while guaranteeing a greater impact on debt reduction from the selected privatizations.\u201d After all, \u201casset values should increase by more than the actual amount spent on modernization and restructuring, aided by a program of public-private partnerships whose value is boosted according to the probability of future privatization.\u201d<\/p>\n

Our proposal was greeted with deafening silence. More precisely, the Eurogroup of eurozone finance ministers and the troika continued to leak to the global media that the Greek authorities had no credible, innovative proposals on offer \u2013 their standard refrain. A few days later, once the powers-that-be realized that the Greek government was about to capitulate fully to the troika\u2019s demands, they saw fit to impose upon Greece their demeaning, unimaginative, and pernicious Treuhand model.<\/p>\n

At a turning point in European history, our innovative alternative was thrown into the dustbin. It remains there for others to retrieve.<\/p>\n

_______________________________<\/p>\n

Yanis Varoufakis, a former finance minister of Greece, is Professor of Economics at the University of Athens.
\n<\/em><\/p>\n

Go to Original \u2013 project-syndicate.org<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

20 Jul 2015 – On July 12, the summit of eurozone leaders dictated its terms of surrender to Greek Prime Minister Alexis Tsipras, who, terrified by the alternatives, accepted all of them. One of those terms concerned the disposition of Greece\u2019s remaining public assets.<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[51],"tags":[],"class_list":["post-61527","post","type-post","status-publish","format-standard","hentry","category-europe"],"_links":{"self":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/61527","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/comments?post=61527"}],"version-history":[{"count":0,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/61527\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/media?parent=61527"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/categories?post=61527"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/tags?post=61527"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}