20 September 2011

Greece: this is THE week

As reporter by Bloomberg: “European Union and International Monetary Fund inspectors hold a teleconference call today with Finance Minister Evangelos Venizelos, to judge whether the government is eligible for its next aid payment due next month and on track for a second rescue package approved by EU leaders July 21.”
So, here we are, finally, decision have to be taken after months of wrangling, (badly) communicating and ignoring reality.
To raise EUR 78 billion in 5 years, Greece is to bring additional taxes, including a property levy for EUR 2 billion: I am wondering how the Government intends to implement the measure since the new land registry is not yet finalized and how will they be able to privatize without a certainty regarding title of assets (real estate is part of the EUR 50 billion privatization program); the initial deadline was November 21 and December 30 2008 depending whether your are Greek resident or non-resident, then postponed to H1 2010, and now October 31, 2011. The fun is that Greece first launched a project to record the use and ownership of land in 1995, with EU subsidies, but it ran into repeated delays and nobody at EU did react… When the blind leads the blinds…
As reported by the English speaking Greek newspaper
Ekathimerini: Greece hopes to complete the registration of all its land by 2020. So far, 13.8 million titles have been recorded on the cadastre.” 2020!
Ekathimerini is an endless source of information on Greece dysfunctions: “The Citizens’ Protection Ministry Tuesday rebuffed a report in the Financial Times indicating that Greece may be temporarily ejected from the passport-free Schengen travel area for its failure to keep undocumented immigrants out of the bloc […] It added [the Greek Citizens’ Protection Ministry report] that the Commission should support member states “managing the massive burden” of guarding the bloc’s external borders from illegal immigration.” Oh, yes, give me more money!
Do you want more? Yes? Let’s carry on:
“Whereas more than 1,000 Greeks were losing their jobs in the private sector every day in August, the government was assuring civil servants with lifetime tenure that their job privileges were not in danger and the so-called reserve pool was not intended for them but only for employees in the greater public sector. […] In the meantime, many Greeks were surprised to hear the government had hired between 15,000 and 20,000 people in the public sector in various forms since the start of 2010.”
About the need to reduce expenditures: “…closing down one or two money-losing state entities, such as the the Hellenic Railways Organization (OSE)…”
This is a topical and typical subject: the Hellenic Railways. A few numbers tell you all; for 2009 consolidated accounts:
Turnover - EUR 174 million
Operating loss - EUR 359 million
Total loss – EUR 937 million
Accumulated losses – EUR 2.5 billion
LT debt EUR - 7.8 billion
Interest paid - EUR 388 million (2x the turnover!)
Employees’ compensation - EUR 291 million (more than the turnover)
The auditors commented that they could not conduct a tangible asset and inventories impairment test as well as updating the fair value of investment real estate assets.
I could not find the same information for 2010. According to data released by the Ministry of Finance, on a non-consolidated basis, for the 5 months to May 2011, the situation has improved but remained catastrophic, the turnover is 3x less than personnel expenses (EUR 40,000 / employee / year as an average i.e. 4x the minimum wage, quite nice, and excluding various benefits – EUR 48,000 in 2010), the net loss amounting to EUR 164 million.
As a whole, during the same period, public entities had revenues of EUR 512 million personal costs of EUR 399 million and losses of EUR 534 millions (more than revenues). This tells you all, and the situation is “better” than in 2010…
Greece’s officials are willing to raise taxes and cash via privatizations; good luck! For example privatizations raised EUR 400 millions whilst EUR 5 billion was planned for 2011 – 3 months left…
However, I have no doubt that Greece will get its EUR 8 billion early next month.

Ekathimerini: Investors sought for land registry
Ekathimerini: Land register invites private bids
Ekathimerini: Ministry rebuffs Schengen report
Ekathimerini: Civil servants in the firing line
Ministry of Finance:
Hellenic Railways Organization: Annual financial statements for 2009