Loan renegotiation with Greek land as collateral

Beaches, islets, ports and airports are on the list of real estate drawn up by the government. The finance team is discussing the idea of renegotiating the interest rate of the 110bil loan or alternatively, the issuing of new loans by the European Support Fund using part of this real estate as collateral.

According to protothema.gr information, during  the last two weeks when it became obvious that the Troika would press for measures of immediate decrease of state debt (and not just of the deficit) through privatizations and the sale of real estate, the idea to attempt a major decrease of loan costs by using privatizations and real estate as collateral began to gain ground.

This plan foresees a list of real estate and companies to be used as clearance or to cover our lenders, so that either the Troika will agree to decrease our debt rate to 5% or Greece be given new low-rate loans. Such a development, say the initiators of the idea, could sweep the spreads downwards along with it, paving the way for Greece’s return to the markets.

What will be utilized

The disadvantage of this proposal, beyond the political reactions, lies mainly in the burden inherent in public real estate properties, and this assigns the 400bil euro treasure to the realm of myth. However, the best real estate can get good prices even in a crisis period, even as collateral, since they are not intensely affected by the financial cycle and the recession, as are the shares of listed companies for example.

However, the economy team is not entertaining any illusions, like the EC representative Servaas Deroose is, that 5bil will be part of the public funds by 2012 (that’s the total of the Arab investment and not the price of the land purchase) and 10bil more will also have found its way there from state participation in several companies.

Tourist real estate will go under the hammer first. The ETA files contain 360 properties a of 30bil-euro total value, of which they can use a lot less, reducing the estimated amount to 20bil euros.

The property of the state Real Estate Company of the state, which deals with large public land with many unknown owners, is estimated at about 10bil euros. But many parts of this land have been violated by non-authorised properties.  

The 500 islands which, according to IOBE estimates, are offered for tourist and investment interest, might prove to be an ace up the government's sleeve.
 

Bargaining at Ecofin

Today and tomorrow at Eurogroup and Ecofin meetings, Giorgos Papakonstantinou will have critical discussions on the extension and reduction of interest rates for the loan of our country through the European Support Mechanism. In those meetings, the minister of Finance may the partners some idea about the projects for the utilisation of state property.

The Finance ministers are paving the way for the Summits on March 11 and 25, and the markets are eager to “see the smoke” to be convinced about EU decisions, since setbacks and delays have once again resulted in an upward climb of European interest bonds.

Whatever is decided on about the New Support Fund, its capital and responsibilities, it will be directly related to Greece, which wants an extension and a decrease of debt and interest rates.

The European IMF

According to Der Spiegel, the Permanent Support Mechanism (EMS) for countries with problems such as Greece, which will replace the “temporary” Rescue Fund (EFSF), will be a European “IMF”, . It will manage funds of 500bil, IMF type loans, and "will provide mild restructuring processes, with the non-payment of countries’ debts as the ultimate solution".

Merkel’s plan provides for strict supervision of indebted countries and a new Agreement of Competitiveness.

The countries will be audited by means of measuring competitiveness, in which process the prevalent factors will be low wage costs. Financial stability will also be checked.

According to this German model, each country will receive a good grade if:

• it advances to disconnection of salaries from inflation
• connects (see “increases”) pension age limits based on the sustainability of its pension system
• displays a commitment in its constitution for “putting the breaks on debts”.