The great Greek fire sale of assets

Posted on April 22, 2013 by Madsen Pirie

Harriet Alexander tells us in the Telegraph about plans by the Greek government to sell off assets in a bid to raise funds to plug holes in its finances. It is among the conditions that the Greek government agreed to meet in return for the bailout from the EU, the IMF and the European Central Bank. The Greek economy has been in recession for the past six years, unemployment is 27 per cent, and the deficit is forecast to grow to 189pc of GDP this year. Clearly they have to do something.

The sale of the coast at Afandou is part of the Greek government’s desperate attempts to raise money by privatizing its vast portfolio of state-owned assets – the largest fire sale in history. Some 70,000 lots are for sale, ranging from pristine stretches of coast through to royal palaces, marinas, thermal baths, ski resorts and entire islands. Only last Wednesday, bidding closed for a stake in the state gambling company.

The move has attracted criticism by some who call for these assets to be kept under public ownership. I disagree. I did not like the Greek bailout, preferring default, exit from the euro and devaluation as the way they could have enjoyed a speedy recovery instead of years of penury. But I do think that privatization is the way to go. ‘Public ownership’ is largely mythical because although their name might be on the dotted line, the public does not exercise the rights of ownership. It is bureaucrats and politicians who decide how and by whom it is used. Private owners tend to look after it better because it becomes a valuable asset worth protecting. The revenue brought in by a sale does not have to be raised by taxation or by inflation, and has no harmful effect on the economy. Indeed, it is more likely to foster development and economic growth as people seek to exploit their new assets. State-owned assets tend to be under-used and allowed to deteriorate because the state is always short of money to maintain them. Privatization will be good for those assets and good for Greece and the Greek people. I only wish I were rich enough to buy a small island for myself…