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By Shavasb Bohdjalian
The International Monetary Fund, the European Commission and the European Central Bank — known as the troika – are currently in Greece assessing how sustainable the country's debts are with conflicting reports on the one hand suggesting that Greece has not met its targets, hence it cannot qualify for the next tranche of the IMF loan while others insist that the Greek state has assets worth EUR 300 bln that need to be sold to cover its debt.
The IMF has said it cannot release its part of a EUR12 bln aid tranche to Greece if fiscal conditions are not met and the European Commission's top economic official was quoted as saying the EU was setting the same conditions.
At roughly EUR330 bln, or 150 percent of gross domestic product (GDP), Greece's debt is so high that many economists believe the country will inevitably have to restructure eventually.
EU officials have asked Athens to step up privatisations urgently and suggested setting up a trustee institution to help oversee the process, similar to the body that privatised East German companies after the fall of communism. European Central Bank Board member Juergen Stark was quoted as saying Greece had assets worth EUR300 bln, which it could sell off to meet its targets.
Greece currently aims to raise EUR50 bln from privatisations by 2015 to help stave off a fiscal meltdown.
Athens is setting up a sovereign wealth fund to pool real estate assets and state stakes in companies such as telecom company OTE, Post Savings Bank and ports, Reuters reported.
It is very difficult to know what is the real worth of the asserts belonging to the Greek government since there has been no effort in the past to register such assets, let alone place a value on them.
The intense pressure now applied on the Greek government to proceed with selloffs may be another attempt by the troika to seize real assets against future loans, which everybody knows Greece needs to take in order to stay afloat.
A weekend poll in the Greek press found that the majority of the Greek public who are sick and tired of austerity measures support state-owned asset sales. But in the current depressed market conditions, asset sales are not possible, which is why other fellow EU states are suggesting a similar process that Germany adopted when it dumped the assets of the East German state after reunification.
The Greek debacle may also be considered as a stark warning to Cyprus to start putting its act together by proceeding with measures to cut civil servant costs and by starting the selloff of non essential assets such as Cyta, EAC, Water and other semi-government organizations.
The next major calendar event where the Greek fiscal woes and how the country will raise money from its privatization programme will be discussed is the June 24-25 EU Summit which most probably will not find a cure for the problems facing Greece with a good chance that the issue will be postponed till September.
This means the Greek restructuring worries will keep the markets busy over the summer months, probably casting a cloud over the euro, which nevertheless should be supported by weakening US economic data, which should be dollar negative.
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(Shavasb Bohdjalian is an approved Investment Advisor and CEO of Eurivex Ltd., a Cyprus Investment Firm, authorized and regulated by CySEC, license #114/10. The views expressed above are personal and do not bind the company and are subject to change without notice. Investing in markets and trading on leverage is highly risky and it may not be suitable to all investors since it carries a high degree of risk and you can lose more than your initial investment)
