Greek plans to sell state assets as part of a 78 billion-euro ($111 billion) budget retrenchment are "not a fire sale," the official in charge said.
"It's a professionally run privatization plan and we go through professional procedures of sale through tender processes," George Christodoulakis, the government's special secretary for restructuring and privatizations, said in a question-and-answer session at a conference in London today. "One can say: Is this the best time to sell assets? But this is devoted exclusively to the buyback of debt."
Greek lawmakers vote tomorrow on Prime Minister George Papandreou's five-year plan for budget cuts and asset sales, which is needed before the cash-strapped nation can tap a fifth loan payment from last year's 110 billion-euro rescue by the European Union and the International Monetary Fund. Failure to pass the proposal may lead to the euro area's first sovereign default.
Greek unions shut down government services, halted public transport and disrupted flights at the start of a 48-hour strike today in protest at the plans, which include the sale of stakes in Public Power Corp. SA, the former electricity monopoly, Hellenic Telecommunications Organization SA and Opap SA, Europe's biggest publicly traded gambling company.
Finance Minister Evangelos Venizelos told lawmakers today the asset sales comprised the "first pillar" in any new financing package for Greece. The privatizations will begin in the next couple of months once the agency responsible for them has been set up, government spokesman Elias Mossialos said in Athens.
A day after passing highly unpopular new measures to cut spending, hike taxes and privatize state assets, the Greek Parliament Thursday approved the legislation required to implement the new austerity package.
The vote, 155 to 136, capped a tumultuous few days in Athens that ended with a significant political victory for the ruling Socialist Party of George Papandreou. However, the voting both Wednesday and Thursday took place against a backdrop of escalating social tension, violent clashes between protesters and police, and the destruction of two Socialist Party offices on the island of Crete.
Given the widespread opposition to the measures, it seems likely that Papandreou will face fierce social resistance as he attempts to enforce the measures in the months to come.
The spending and tax measures, which are in addition to Greece's already established austerity plan, are meant to cut the deficit by an additional E28 billion over the next three years. The privatization plan, which is to be run by an independent agency, has a target of E50 billion in asset sales through 2015.
The vote was almost straight along party lines: the Socialists, with a majority of 154 seats in the parliament, got one opposition vote, and the rest of the opposing parties voted against the legislation.
However, in addition to the straight roll call vote on implementation, Greek MPs were also being allowed to weigh in on specific articles in the overall legislation, going on the record as favoring some and opposing others.
That will provide a more nuanced picture. For example, the main conservative opposition party, New Democracy, favors the spending cuts and privatization provisions even though it rejected the package as a whole - primarily for domestic political reasons. It firmly opposes the tax hikes.
Passage of the measures was a condition of additional aid for Greece, which would likely default on debt repayments by this summer without a E12 billion loan tranche from its Eurozone partners and the International Monetary Fund, a part of the E110 billion bailout package established in May 2010.
With approval of the package, it is almost certain now that the Eurozone finance ministers, due to meet in Brussels on Sunday, will approve payment of their E8.7 billion share of the E12 billion tranche. The IMF will almost certainly follow suit, releasing its E3.3 billion share.
The money will keep Greece afloat financially until September, when another EMU-IMF tranche is due, amounting to E8 billion. At that point, the drama could begin anew, with the IMF and European officials scouring Greece's books to see if Athens is hitting its fiscal targets -- and likely demanding even more measures if it is not.
In the meantime, Eurozone officials and the IMF will be negotiating with Greece the details of a second bailout plan, estimated between E100 billion and E120 billion. That plan is expected to have a contribution from private creditors, including banks and insurance companies, who hold billions of euros in Greek debt.
The United Nations Office of the High Commissioner for Human Rights (OHCHR) on Thursday warned that the Greek austerity measures and structural reforms may result in violations of basic human rights.
According to Cephas Lumina, UN expert on foreign debt and human rights, the implementation of a second package of austerity measures which includes a wholesale privatization of state-owned enterprises and assets is likely to have a serious impact on the Greek population's basic rights.
The UN independent expert, who reports to the UN Human Rights Council, urged Greece to find the balance between austerity and the realization of human rights, particularly in the most vulnerable sectors of the population such as the poor, elderly, unemployed and persons with disabilities.
"The rights to food, water, adequate housing and work under fair and equitable conditions should not be compromised by the implementation of austerity measures," added Lumina.
The warning came as the Greek Parliament passed a series of reforms to facilitate the implementation of the new series of austerity measures, aimed at securing a second loan from the European Union.
"Debts can only be paid out of income. A shrinking economy cannot generate any revenue and contributes to a reduced capacity to repay the debt. More time should have been allowed for the restructuring measures already in place to work," Lumina said.
However, the Greek government is determined to secure a new 12 billion Euro ($17 billion) bailout from the EU and the International Monetary Fund (IMF) to consolidate its troubled finances and avoid bankruptcy as the first one failed to stabilize its financial system.
This week, the Parliament voted to approve the Medium-Term Fiscal Strategic Program and the necessary reforms despite the opposition from citizens who have staged a series of protests in the capital Athens and in other parts of the Mediterranean country.
The new set of austerity measures approved by the Parliament included tax hikes, wide-ranging reforms and accelerated privatizations. The approval of program was fundamental for securing a new EU bailout agreement.
"Tax rises, public expenditure cuts and privatization measures have to be implemented in such a way that they do not result in unbearable suffering of the people," remarked the UN independent expert.
Lumina also called on the IMF, the EU and the European Central Bank (ECB) to remain aware of the human rights impact of the policies they design in attempting to resolve the financial crisis in Greece.
"There will be no lasting solution to the sovereign debt problem if the human rights of the people are not taken into account," Lumina concluded.
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