The Privatization of Greece. Coming to a country near you!
“What is going on in Athens at the moment is resistance against an invasion; an invasion as brutal as that against Poland in 1939. The invading army wears suits instead of uniforms and holds laptops instead of guns, but make no mistake – the attack on our sovereignty is as violent and thorough. Private wealth interests are dictating policy to a sovereign nation, which is expressly and directly against its national interest. Ignore it at your peril. Say to yourselves, if you wish, that perhaps it will stop there. That perhaps the bailiffs will not go after the Portugal and Ireland next. And then Spain and the UK. But it is already beginning to happen. This is why you cannot afford to ignore these events.” – Sturdy Blog, June 2011, Democracy vs Mythology: The battle in Syntagma Square
The Privatization of a country
The aim must be a perfectly balanced relationship between the public and the private sector in a country in order to protect the autonomy of state and securing of its citizens – who trusted it, leaving the administration of the country to the institution. The sovereignty of a state, usually referred to as full autonomy, may be nullified by adverse developments in its interior, without the need for a military incursion into the territory.
The above text, slightly shaped, comes from a very famous German jurist, who is also a member of the Constitutional Court of the country. The professor says indirectly that Germany is now facing a huge problem, having divest the majority of public property – which is already a fact that the citizens now are paying dearly, through increased taxation, and also the continuous reduction of social welfare combined with the gradual deterioration of services in education, health and elsewhere.
The current trend therefore, the requirement that the privatization of all sectors of the economy of a country, which suggest both the EU and the three main international organizations (IMF, World Bank, World Trade Organization), is completely at odds with the interests of the majority of citizens.
In particular, if the state “retired” from both the property and the management of utilities, they are also losing the ability to exercise policy. That is no longer the democratically elected government which gives directions, forming and developing the society, but individuals – who are essentially running authoritarian measures without being accountable to citizens, solely for profit.
As an indirect result of privatization, the state can no longer impose an equitable redistribution of income and steer the economy because, among other things, it can not place the companies or the demand of employees “in balance” – except that is simultaneously “blackmailed-able” by the Cartel.
For example, the private sector of energy could maintain artificially low supply (as happened in California) in order to raise prices – with devastating results for both the public and for small businesses or households. The same could happen with water supply, the ports, public transport and communications. In this case, it is obviously impossible to speak of “autonomy” of the state – let alone national sovereignty, especially when private entrepreneurs are foreign multinationals.
A second well known example is the U.S. private rating agencies – the mighty three “sisters”. If any state, including the U.S., France and Germany refused to follow their orders, they are confronted with the devaluation of their credit worthiness – which places a billion plus interest on the budget.
So in conclusion, by the side of the current Constitution we should not allow anything to challenge the self-reliance, sovereignty of a state, wherever it comes. Therefore, the privatization of utilities must be constitutionally prohibited, which essentially amounts to handing over the autonomy of the state among individuals – the privatization of power and the overthrow of the Republic.
Despite that, however, results of operations of the British prime minister first led the economy into high growth, the subsequent indebtedness (the total debt of Great Britain today, public and private, exceeds 500% of GDP) has shown that, privatization is not necessarily synonymous with long-term prosperity. The privatization now, in the broadest sense, is devided into sub categories of the following:
(C) Organizing privatization: that’s all those strategies that are adopted to increase productivity and also to reduce the cost of public enterprises – which are run by government, but now with private criteria. This organizational change, which is regarded as the ideal way to “privatization” can be achieved without requiring the rental of networks, their use by individuals or the sale of state enterprises. Here we obviously refer to public property. used by the government itself.
|Deficit / GDP||-10,4%||-12,0%||-13,1%||-13,8%||-14,4%|
|Debt / GDP||160,6%||174,8%||183,6%||191,7%||198,9%|
|Salaries, pensions **||22.018||21,585||21.622||21.673||21.729|
Note: The income to cover all primary spending, those without interest. Therefore both wages and pensions are not paid by the lenders.* 2009 GDP: 235,017 GDP 2010: 230,173** Included in primary expenditure
Source: Medium Term from 10.06.2011
Theoretically speaking, with the property of the State to be estimated about 300-400 billion €, we could cover our debt, worth about 360 billion €, for the most part. Of course the debt of a country can be contrasted with the assets in a government balance sheet, and the value of the assets depend substantially on their performance, the utilization and profitability so to speak (something that has been “neglected” criminally by all our governments to date, leading to impairment of a large part of them).
But when someone is selling assets, he reduces debt, while at the same time reduces revenue in the future – just as with business. For example, if Greece sells the Electricity Utiliti (DEI) will now receive an amount of about 1.2 billion € (public participation at 51.5%), but will lose in dividends an amount of approximately € 260 million annually – and the multinational who would buy the company, would pay less tax on the one hand (by the known method of avoidance), while it will reduce staff, costing the treasury at least 50-100 million € annually (unemployment benefits, etc.).
Therefore, although currently public debt is reduced, the budget is incurred in the near future, with deficits which “flow” back in debt – in the case of DEI at least 400 million annually. From this, it is concluded that any benefits of privatization will be short – and for all Greeks would mean further significant increase in energy prices (to be doubled soon, as in Britain, Germany and elsewhere), while we would see the declining of real incomes.
Meanwhile, citizens would be forced to incur in the future with higher taxes in order to cover late-DEI revenue along with the inability of “national” economic development, because of lack of our own companies (which will undoubtedly worsen the debt-to-GDP).
This is known to investors (markets), which certainly take it seriously – assessing worse the creditworthiness of that country which disposes public companies (let alone in times of recession and depreciation of the stock market).
The markets would trust us and lend us if we would continue to have assets – provided of course that we would manage them properly and profitably in order to increase the “stock” value. Instead, if we finally dispose public property, especially in today’s ridiculously low prices (30% of Telephone utility OTE sold about 4 billion € a few years ago, while 10% is only € 400 million today), we will hardly borrow from markets – staying for a long time in the ‘serum of IMF. “
In conclusion, although undoubtedly the privatization of public enterprises reduce political corruption and clientelistic state, the negative impact on the economy (long term) is enormous. It is about indirect taxes, which cause the devaluation of the ratings of countries, even more severe recession, as well as the absolute impoverishment of the greater portion of workers.
Greece, The Markets & The ECB
So when the medium-term budget tabled by the government is doomed to failure, privatization will be negative in the future (although the next three years will be difficult to surpass revenues of 10 billion € – essentially just a half of the interest), while the markets know this exactly, so they are not going to be fooled by medium term fireworks from Greece, then why does the Troika insist, despite the dangerous reactions of Citizens?
Is it because the Greek “insurance megaton bomb” in the foundations of the Eurozone has not yet been neutralized after a while, or because the ECB has been exposed widely in Greek bonds, after the continuous lending of our banks?Wishing to avoid those cases, which usually lead to erroneous conclusions, we first point out that it is no longer guaranteed a further loan of Greece – especially if they pass the criminal medium imposed by the shadow government.
In our view, the markets will not appreciate this positively, as they will find that something else is behind their “trick to mislead”. Moreover, the continued sale of Greek government bonds by both the German and French banks, can not mean that they believe in the future lending of Greece.
Continuing, not to mention the enormous problems of the Fed, the Bank of England (BoE) and the Japanese central bank (BoJ), which we analyze in the past, we restrict ourselves to the ECB.
So, according to Spiegel, the list of securities of the ECB’s loans, one finds a Portuguese counterpart from 1943, which must be paid to 31.12.9999 – in other words in 8,000 years (!). However, the bond is valuable for the central bank of Portugal, after serving as collateral at the ECB, under which now receives cash in Euros – let alone global markets providing loans to banks in Portugal, Ireland, Greece , Belgium, etc. are almost closed, for these countries.
Much of the securities held by the ECB, are of “questionable value” – as essentially the “bad bank” of the European monetary system, collected toxic debt “worth” of several billion. The same applies to other central banks of member countries of the Eurozone, as well as in trade – a problem of incalculable proportions for the financial system.
In particular, the ECB has accepted as collateral for providing money to European banks, structured bonds (ABS, Asset-Backed Securities), total “value” of 480 billion € – while owning in its books even 360 billion € more, which has recorded as “unusable financial instruments.” In addition to those, they hold treasury bonds in their pockets, from Portugal, Spain, Greece, Ireland, Italy, etc., of “questionable value” – although it does provide banks liquidity lower than their nominal value. Also, it owes to the central banks of surplus countries (mainly the Bundesbank) huge amounts, which should not owe in the first place.
Finally, in the “books” of the ECB, in its assets, even “promissory debt” is recorded which are essentially “unload” by European banks, while not traded on the open market. This is loan securitisations, whereby, for example, if a German company producing tools go bankrupt, the ECB should require the repayment of loans – as the ECB has supported the German bank, the lender, through its central bank, taking the requirements of the German bank as security (!).
This is therefore an enormous “credit pyramid”, of a magnitude of at least 1.5 trillion €(same are the Fed, the BoE, the BoJ, etc.) which, if collapsed, will wrap around the planet in flames. Just realize that the ECB’s capital soon rose to 10 billion €, with funds provided to the size mentioned (more than 1 trillion €), to understand the magnitude of the problem.In this context it is evident that the Greek bomb is now the smallest problem of all. Instead, it is very likely that the bankrupcy of Greece will “launch” methodically, if they decide to use our country as a sacrifice for reassurance, for the better well being of the markets – because only then the other countries, also USA, will be forced to the acceptance of austerity measures (if not the privatization of power), which now require greedy, dictatorial markets.
In our subjective opinion, Greece has absolutely no reason today to privatize public property – neither national nor economic nor strategic, nor simply “scarcity-wise”. One possible divestiture, according to the “medium-term plan” filed, on the one handnot only it would not serve our country, on the other it would cause exactly the opposite – a controlled bankruptcy, as well as the “enslaving” of a looted and most impoverished country, which will be offered as a sacrifice to the “Kings” of markets.
Without of course being absolute,without sending away our invaders, despite the huge problems we would face then (the default, coupled with the isolation, an extremely painful experience), we will not avoid the inevitable – the “logic” of a “juiced lemon cup.”On the contrary, if we take the risk all together, staying of course in the Euro zone, but without abandoning the future of rich, multi-gifted country in the hands of a government that rather “wants but can not“, we have some faint hope of survival while being free – albeit with a lower standard of living for some years.
Moreover, “we must never let an anomaly to be continued to avoid war, because they do not avoid it eventually, but only the conditions change for the benefit of their opponents” (N. Machiavelli).
Viliardos Vasilis (copyright)
Athens, 12. June 2011
Translation from Greek to English: apollo