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Greece Puts on the Red Light, Sells its Assets to the Night

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GREECE IS THE WORD
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There's a fire sale going on in Greece right now, as the cash-strapped government desperately tries to raise €50 billion by 2015.

The Wall Street Journal's Charles Forelle reports that items up for sale include: "Four wide-body Airbus jets, a state lottery, a state horse-racing concession and sports book, stakes in a casino, several ports, a national post office, two water companies, a nickel miner and smelter, a munitions maker, electricity and gas monopolies, a telecommunications operator, shares in a half dozen banks, hundreds of miles of roads, a defunct airport, old Olympic venues and thousands of acres of land, including magnificent stretches of Greece's famed coast."

Though Greece has already received €110 billion worth of bailout money, it is not nearly enough. Forelle points out that "the European Union and the IMF have made both privatization and budget cuts a condition for new aid," though both seem to be presenting quite the challenge so far.

The public has subtly hinted around their feelings regarding the proposed austerity measures:



Leaving the sale of state assets to carry the bulk of the load -- but the clearance sale doesn't look to be a walk in the park, either.

Forelle explains that "many of the available properties have already been offered for years, with no takers."

"Since 2000, Greece has netted some €10 billion from privatization. Now it must do five times that much in less than half the time," he writes.

And former finance minister Yannos Papantoniou says, "The markets in Greece now, as a result of the economic and financial situation, are not good for proceeding to sales," or, more accurately, long-term leases, which is the plan as it currently stands.

"Prices are low," he warns, and finding buyers, much less getting fair prices, will be "a difficult thing to achieve."

Leonard Gilroy, Director of Government Reform at the Reason Foundation and a leader of Louisiana Governor Bobby Jindal's privatization initiative, says it didn't have to be this way.

He laid out his take on the situation for us via email, earlier today:

1) It's unfortunate that governments like Greece and California tend to ignore their bloated enterprises and asset portfolios in good times -- essentially operating on auto-pilot -- only to scramble when conditions deteriorate. Privatization can and should be part of government's de-leveraging toolkits for sure, but a more structured and long-term approach is always preferable to the reactive, crisis-driven approach we're seeing today in Greece.

2) It's a good thing that Greek policymakers aren't managing our personal 401(k)s, because smart asset managers sell high and buy low. They divest themselves of assets and realign their portfolios as a regular, ongoing process in order to capture the maximum upside while hedging risk, as opposed to perpetually accumulating and hoarding their assets until market and fiscal conditions get so bad that there's no other choice but to sell in a down market.

3) Another advantage of an ongoing, institutionalized de-leveraging approach is that it would afford policymakers time to do privatization right and ripen the assets before going to market. For example, no rational buyer would pay more for state-owned land encumbered by onerous regulations and policy restrictions than that same asset without such baggage. The more options for the new owner, the higher they'll value the asset. Hence, it's important to take the time to address those policy impediments to maximize the value of the assets, but it appears that Greek policymakers will not have the time or resources to be so forward-thinking. By trying to avoid the pain of streamlining government and offending public sector unions and big government apologists in the past when things were less dire, Greek policymakers have ensured that solutions will be even more painful now that the real bills have come due.

Of course, if you're the market for an abandoned airport on the outskirts of Athens...



...things have never looked better.
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