GREECE | 22.05.2011

Eurogroup chief suggests East German privatization model for Greece

 

With Greece in trouble, the future of the euro is at stake

Eurogroup chief Jean-Claude Juncker has called on Athens to adopt a privatization plan similar to the one implemented by former East Germany. Juncker's suggestion comes amid fears that Greece will restructure its debt.

 

Greece should establish a trust agency tasked with selling off state assets modeled after the organization that privatized former East Germany's public property, according to the Eurogroup President Jean-Claude Juncker.

Juncker says Greek privatization should go deeper

Juncker said the trust agency would be staffed by international experts in order to lend it a degree of independence.

"I would welcome it very much if our Greek friends found a privatization agency independent of the government and modeled after Germany's Treuhandanstalt," Juncker told the German news magazine Der Spiegel, referring to the agency which privatized thousands of state-owned companies after the collapse of communist East Germany and national reunification.

Juncker said Europe would carefully guide Athens as it seeks to generate revenue by selling off assets.

"Henceforth, the European Union will escort Greece's privatization program as if we were conducting it ourselves," he said.

Budgetary pressure

Prime Minister Papandreou says Greece has to show its determination

A year after the European Union and the International Monetary Fund granted Athens a 110-billion euros ($156-billion) bailout, Greece has spiraled into a recession that has reduced public revenue and created major budgetary gaps.

Investors have expressed concern that Greece cannot meet its financial obligations and will have to undergo debt restructuring as a consequence. 

In an attempt to calm market concerns, Athens has sought to speed up a privatization plan worth 50 billion euros. That plan comes in addition to deep cuts in public sector wages and tax hikes.

"Debt restructuring is not under discussion," Greek Prime Minister George Papandreou said. "Greece must convince everyone of its determination."

Debt restructuring

Juncker, however, said the revenue from Greece's privatization plan should exceed the current goal of 50 billion euros.

The Eurogroup chief had previously alluded to the possibility that Athens may require a soft restructuring of its debt.

On Friday, Fitch Ratings slashed Greece's bonds further into junk status and warned that it would regard a debt restructuring as a sovereign default.

Greece originally received its bailout to avoid such an outcome.

Author: Spencer Kimball (Reuters, AFP)
Editor: Toma Tasovac