Nov 6 2017

The Political Economy of Privatisation in Greece after the Economic Crisis

By Özgün Sarımehmet Duman

The recent economic crisis has been a very solid testimony to the interconnectedness of world markets that the US-originated crisis has had an endemic and epidemic reflection throughout the world, the Eurozone having prime eminence due to its own monetary and single market based specificities. Among other peripheral economies of the Eurozone, the emergence of the economic crisis in Greece has disclosed its structural specificities that the long been delayed reforms for improving not only the functioning of the real economy and the financial market but also their integration with the capitalist world have been put at the top of the agenda[1]. Accordingly, the introduction of non-structural and structural measures dominated the economic recovery process of the post-crisis Greece, despite some discrepancies in implementation. These measures mainly targeted to improve the functioning of the real economy in terms of increasing competitiveness and to enhance the openness of the financial market to the international market.

Among structural policies and labour market reforms, privatisation policies and legal-institutional regulations have been carried to the top of the agenda during the economic crisis. These policies have had two main motivations: explicit motivations of collecting revenues for debt repayment and increasing competitiveness; and implicit motivation of achieving further liberalisation of the economy. An analysis of Hellenic Stability and Growth Programmes, Economic Adjustment Programmes and Memoranda of Understanding (MoU), the Medium Term Fiscal Strategy, adoption of the Law 3986/2011 on privatisation and establishment of the Hellenic Republic Asset Development Fund (HRADF) provides an insight into the commitment of Greece to an efficient privatisation policy for economic restructuring.

The Hellenic Stability and Growth Programmes preceding the economic crisis made a very weak emphasis to privatisation policies and limited it to the implementation of public private partnerships. However, with the emergence of the economic crisis, the importance given to privatisation as a crucial policy instrument in economic restructuring has increased.

An inquiry into all three of the Economic Adjustment Programmes, Memoranda of Understanding and Specific Economic Policy Conditionality Reports also indicate that there has been an increasing prominence given to privatisation policy in economic recovery in Greece in the aftermath of the economic crisis. Whereas privatisation was only mentioned under the subheading of managing and divesting state enterprises in the first MoU (2010a), it was later allocated an exclusive space as a separate subheading and pronounced out loud in the update of the first MoU (2010b), second MoU (2012) and the third MoU (2015).

The Medium Term Fiscal Strategy provided the most solid plan prepared and published on the prominence of privatisation policies in economic recovery. It affirmed the significance of privatisation policies for economic restructuring in relation with revenue collection and increasing competitiveness. The focus on further liberalisation of the economy was also intrinsic to the document that it elaborated on the assessment of all public utilities in many sectors and provided a very detailed plan. The Medium Term Fiscal Strategy deliberately engaged different concepts to promote the very same phenomenon, that is, privatisation. All these relatively technical terms – liberalisation, utilisation, divesture and exploitation, were used interchangeably with the highly political and manipulative term of privatisation. The main aim was to depoliticise the privatisation process, and to downgrade this radical change in the economic structure and the labour market to a rather technical issue.

Both the adoption of Law 3986/2011 on privatisation and the establishment of the HRADF evidenced the intention of depoliticisation of privatisation in Greece, taking aside the hot debates among political figures on the process especially during the rule of the current SYRIZA government. Establishment of the Fund not as a public entity but as a public limited company governed by private law, and its operation outside the state apparatus as an autonomous body indicates that the Greek authorities intended to transform the privatisation process into a non-political and rather technical phenomenon. These two legal-institutional regulations aimed to convert the highly political nature of privatisation that had caused various governments to postpone or limit the implementation of privatisation policies throughout the 1990s and the first decade of the 2000s under Law 2000/1991 and Law 3049/2002 into a technical issue to be deliberated with professionals and experts. Privatisation, however, is still very political.

Dr Özgün Sarımehmet Duman is a Visiting Fellow at Hellenic Observatory, London School of Economics and Political Science.

[1] For a comparative analysis of core and peripheral economies of the Eurozone, please see the recently published article on Competitiveness and Financialization in PIIGS.

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