Greece today began a massive asset sale to reduce its rampant debt, with the government calling Germany's Deutsche Telekom to talks over the state's remaining stake in Balkans telecom giant OTE.
Finance Minister George Papaconstantinou sent a letter to the board of Deutsche Telekom to 'begin the procedure' after the cabinet approved on Monday the further privatisation of OTE, the minister's office said.
The move comes with other European states breathing down Greece's neck to speed up privatisation and reforms after Athens secured an unprecedented bailout loan from the EU, the IMF and the European Central Bank last year.
The cash-strapped Greek government this week said it will reduce its 16% stake in OTE by next month, amid plans to raise €50 billion from state asset sales to reduce the country's mountain of debt.
The semi-state Athens News Agency said today that tenders on a host of other state properties for full or partial sale - including the ports of Piraeus and Thessaloniki and Hellenic Postbank, one of the country's best-capitalised lenders - would be launched in coming months.
Germany's Deutsche Telekom currently controls 30% of OTE, the largest telecom operator in the Balkans that employs some 30,000 people in Albania, Bulgaria, Romania and Serbia.
The government is holding crunch talks with the EU, the International Monetary Fund and the European Central Bank on the privatisation programme and economic reforms whose outcome will determine Greece's continued solvency.
Greece's euro zone peers have made the privatisation programme a condition of more assistance down the line. 'Greece has to take new commitments.
Greece has to enlarge the ambition of its privatisation programme,' leading euro zone policy-maker and Luxembourg Prime Minister Jean-Claude Juncker said earlier this week.
Athens was last year granted a €110 billion loan from the three organisations and has warned it will go bankrupt without a €12 billion instalment due this month.
But the IMF has made it clear that it will not release new funds for Greece without a comprehensive European support package to cover future years, the Greek finance minister said this week.
The privatisation drive has sparked social tension in Greece with unions gearing up for a general strike, the third this year against austerity.
New thinking needed on Greece - Germany
Europe has not exhausted ways of helping Greece but any restructuring its debt would pose serious risks, German Finance Minister Wolfgang Schaeuble said today.
'It is true that in the European Union (EU) we have not yet explored all the scenarios to help Greece,' Schaeuble told the German business daily Handelsblatt. He acknowledged that 'budget discipline measures by themselves can not resolve the problems' faced by Athens as it struggles with about €340 billion in debt.
An aid programme worth €110 billion set up by the EU, the International Monetary Fund and the European Central Bank has forced Greece to adopt austerity measures that economists say will curb short-term economic growth.
'There must be medium and long-term growth prospects,' the German finance minister said, including investments in solar energy and electric power networks.
But Schaeuble warned that changing the terms of Greek debt repayments, a scenario being considered by many EU leaders, could cause financial turmoil in Greece and elsewhere.
'A restructuring scenario would contain serious risks,' and undermine confidence in public finances in the euro zone, he said. Investors might rush to get funds out of Greece and push the banking sector and government towards collapse, generating a ripple affect that could reach other euro zone members.
A Greek bankruptcy could have 'more dramatic consequences than the collapse of Lehman Brothers,' Schaeuble said. The US investment bank went under in September 2008, sparking a new phase in the global economic crisis.
'There exists no precedent of a country that was forced to default on its payments within a monetary union,' the German minister added.
He has recently suggested that Greece's debt could be subjected to a so-called 'soft' restructuring, a notion that might involve an extension of the reimbursement period or a lowering of interest rates applied to it.
Financial markets expect a 'hard' restructuring at some point under which some of the money Greece has borrowed would not be paid back. Even the former option would require the consent of the ECB however, because it currently owns some €45 billion in Greek debt and has lent money to Greek banks against much more in Greek-based collateral.
The ECB is steadfastly opposed to any restructuring of Greece's debt.
