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

CATASTROIKA english teaser trailer from ThePressProject on Vimeo.

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.

The economic aspect of privatization
The definition of “privatization” was adopted substantially after the British elections of 1979 and the election of M. Thatcher – which launched a broad program of “sale” of public enterprises in the country, “beating” the labor unions.

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:

(A) Physical privatization: the assignment of state participation in companies, which are essentially public (electricity, water etc.). If the state sold all the shares, ie 100%, then refer to an actual privatization or a privatization in the narrow sense. In this case it is clear that we do not refer to the use of public property, but the realization of it.
(B) Liberalization: meaning “restructuring” and wider changes in the areas of infrastructure. The exclusive use by a government monopoly infrastructure networks (trains, water, telecommunications, electricity), assigned to individuals as well – who compete with services also provided by public services, without such networks being owned by them. This is therefore the use of public property by private individuals, without requiring the divestiture of them.

(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.

Proponents of privatizationContinuing, the “correctness” of the policy of privatization supported by the defenders from their conviction that the share of government must be limited to benefit the private sector because the latter (individuals) are more effective. According to manyof them, privatization can then only be successful when the State sets the rules,oversee the strict implementation and ensure competition.
In this regard, it is rather inconceivable replacement of public monopolies by private monopolies which, inter alia, have the sole purpose of profit. Therefore, the state must take care to maintain a functional competition between firms, which “grants” to individuals.

But if the state privatize enterprises because they have the capacity to manage them properly, then how can we accept that it can control them? On the other hand,especially for large enterprises (electricity, telephone etc.), isn’t it obvious  that they can be bought, because of cost of capital and other needs, only by the oversized multinationals,which usually create oligopolies? This has been shown in Germany, UK, USA… and elsewhere?
Opponents of privatizationOpponents of privatization now (Attac, etc.), have a settled view tha we should not trust the areas of “public care” (Education, Health, Transportation, Ports, Energy and Water) to the private sector, because they serve people, which are contrary to the rules of free market – so it cannot be managed with performance criteria, nor can it be assessed in light of the profit.
For example, if the injurious transport in Greece was sold to individuals, the first act of the new owners would be; increase the tickets, ignore the “social costs” in order to ensure their profitability – and they might also require the State to fund them (so they would continue to burden the budget, but with a different way, not perceived by the citizens).
The experiences of privatization
Further, the experience so far from the privatization of utilities, have demonstrated that, first, the government continues to be overcharged by debt (USA, UK, Germany etc.), while services from individuals are much more expensive while the welfare state is getting gradually catalyzed – to the point of completing the privatization of power by multinational corporations and international usurers.
Besides in Germany (which no longer seeks bounce-back electricity companies), as in Austria or Great Britain, which privatized everything, the experience they gained  is not the best (in the heavily indebted Japan also, especially after the destruction of Fukushima , which caused the private company Tepco).
In particular, the privatization of British Rail on the one hand led the British taxpayer to pay much more, while on the other led to serious accidents and derailments of train, because the actions of maintaining the network were incomplete, for reasons of cost and performance (the same actually happened in Japan). So, the UK was forced to buy back the network from individuals – which ultimately cost the government a budget several times over.
In conclusion, the direct democracy of Switzerland has avoided these pitfalls altogether, because on the one hand it does not privatize any public company, on the other it has chosen to reorganize their private economic criteria (“organizational privatization”) -reliant management and ownership in the cantons and communities, its citizens.
This substantiates that the state is not “axiomatic” incompetent, meaning, the state is not by design insufficient. Powerless and poor may be some governments that are staffed by corrupt politicians – who do not have the required skills, in no case, therefore the policy in general, which is the only protection against economic power. Finally, based in Switzerland concluded that direct democracy does not fit with the privatization, which essentially prevent the prevalence of it.
The medium term CRIME
Our elected government (essentially non misunderstandood because they do want to help but may not be able to, because they ought to show faithful obedience to the commands of the EU) under the trying of intimidation of the Greeks, has released a five-year budget, which was “baptized” in the marketing -standards of the U.S., a “medium-term plan.”
This budget has for the first time on a global scale, three different ‘versions’: (a) without interventions, (b) with interventions, (c) with interventions and privatization (where the special word “intervention” implied the new tax collection and other measures)
Without being bogged down in details, since the budget is evidently an “intimidating way” for the selling off of public assets at ridiculously low prices, as well as the looting of private property of the Greeks, we shall refer to the sizes of the “non intervention” – the “baseline scenario”, gracefully defined by the advocates (Table I).
TABLE I: Key figures of the budget, without interference, in billion €
sizes 2011 2012 2013 2014 2015
Revenue 55.501 54.591 54.814 54.397 54.859
Primary expenditure 53.468 52.375 53.493 52.660 53.053
Interest 16.002 16.900 20.500 24.400 28.000
Total expenditure 81.389 81.277 86.483 88.423 92.956
Deficit GK -23.552 -27.499 -30.909 -33.595 -36.183
Deficit / GDP -10,4% -12,0% -13,1% -13,8% -14,4%
GDP* 225.400 228.400 235.500 242.900 251.900
debt GK 364.105 399.253 432.378 465.614 501.078
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

As we conclude from Table I, the revenue will decline slightly compared with 2011,despite GDP growth (!) – For reasons that is it hard not to be considered as “goebbelsian”. But if in 225 billion € GDP income is 55.5 billion €, ie 24.66%, then one wonders why in 2015 they will be reduced to 21.8%; If they just remain unaltered percentage (no new recessionary measures, etc.) , will it not amount to 62 billion €, instead of 54.8 billion reported by the budget? Wont this automatically reduce both deficits and debt?
Further, if no new measures are taken and no sell out of profitable public enterprises, wont GDP growth and income will be greater (dividends, etc.)? Why the GDP in the ‘medium term’ with or without “interference” remains at the same level? Isn’t simply a disgrace that the invaders underestimate our intelligence to such an extent? Finally, is it ever possible for a country to survive by paying 50% of the revenue for interest in the loan sharks who do not want to limit their profits (interest rates), but prefer to plunder it?
The Privatization in GreeceRegardless now of these “aberrations” of the budget which is more than annoying, regarding their basic “capture”, we ought to analyze economically, if indeed Greece is obliged to sell off public enterprises to cover debts – if this would be largely beneficial, although it was quite bad for our national sovereignty, for the Republic, and also for the welfare state.
First we are given that Greece is trapped in a deep recession – firstly because of poor governance of the debt crisis of the previous governments secondly due to the catastrophic challenge-management crisis lending by the present. The drastic austerity measures (cost reductions and salary), as well as excessive tax increases, further limit our GDP – which makes further efforts to reduce budget deficits and the effective consolidation of our economy rather useless.
In this context the ‘troika’, the Western powers per se, the usurers and the IMF, they want to compel us to dispose public property; dictating to our government a vast privatization program, which includes all profitable, charitable and non-business as well as vast areas of land, licenses of profitable services, the rights to the subsoil and more – a literally terrifying “selling under the table”, which accompanies the “medium term of subjugation and occupation” tabled by the government. At the same time, they wish to formally settle in our country, just as happened in Turkey (1875-1927, 2001 onwards) in order to receive revenue from taxes, development and privatization.

 

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.

Epilogue

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 inevitablethe “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

 

Source:  Sofokleous10

Translation from Greek to English: apollo

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