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Greek Mishandling Of Key Industries Puts Bailout Agreement At Risk – Analysis

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Greek politicians are no more strangers to the concept of ‘sleight of hand’ than are those of any other nation, and the emergence of the Syrian refugee crisis earlier this year provided a macabre respite from the world’s unwelcome gaze earlier. Prior to this point, the headlines were brimming with the plummeting fortunes of the Greek economy – a dramatic development that had brought the country and the common currency to the verge of collapse. You would expect Athens to have taken advantage of this lull to get its house in order, start implementing the kind of liberal mechanisms that would pull the Greek economy out of the mire and point it firmly skywards again. However, much like an unruly teen whose parents are out of the house for the night, Athens has done little but rest on its laurels, with the consequence that the agreement sealed with creditors is potentially under threat.

In the latest bailout deal offered by international creditors, Greece has agreed to a 50 billion euro privatization program. The complacency of recent months has not gone unnoticed though, and Athens has been tied to a set of specific objectives that leave it little room for maneuver. Widely acknowledged as the only way Greece will ever be able to pay back its debt, the current agreement blocks the short-term or otherwise populist reflexes the Syriza government had shown in the past that had throttled the privatization process. So far, there have been some encouraging signs that these demands are finally being taken seriously. The energy industry is already heading for a major shake up, and the sale of a number of regional airports is due to go ahead in 2016. But such signs, while encouraging, are small change in the grand scheme of Greece’s economic future compared, for instance, to the bloated sink-hole that is the national pension debt and, even more significantly, its mishandling of the shipping industry.

Greece’s shipping industry is the largest on the planet, bringing in $106 billion annually and worth more than its counterparts in the US, the UK and Germany combined. However, despite continued investment in the merchant shipping fleet, there are growing suspicions that the Greek government is far less willing to hand over the reins of its second most important source of income to private investors, than it appears to be. Take the port of Piraeus, for example, Greece’s largest and one which has been scheduled for a 51% share sale. All well and good were it not for the fact that the sale has been postponed three times already. The deadline for binding offers is now on the 21st December, but observers are fully expecting to see further postponements, or even cancellations, as that date draws closer. Greece’s reluctance to commit, though, could prove its undoing, with the main bidders unlikely to be impressed by any further filibustering – especially the main contender, the Chinese shipping giant, Cosco Pacific.

Cosco Pacific, is largely responsible for Piraeus’ transformation into the undisputed king of Mediterranean waters, and is still currently considered the most likely to walk away from the bidding with the prize. However, this hasn’t stopped the Chinese giant from sending a warning shot across the Greek bow, with the recent announcement that it plans to stake a claim in Turkey’s rival Kumport Terminal. The importance of seeking to heal such wounds of investor confidence as swiftly as possible is obvious, yet, despite some serious local concerns, Athens seems entirely willing to continue its game of cat and mouse, confident that the Greek port’s superiority to Kumport will win out. Piraeus has three times the capacity of Kumport, and far greater scope for growth. However, Piraeus itself benefitted greatly from Cosco Pacific’s investments, a feat that can no doubt be replicated to equal effect in the more readily conducive surroundings of Kumport. Kumport Terminal has, for instance, far better rail links to Eastern Europe than Piraeus, a much stronger domestic market, and isn’t hindered by a generally slothful and negative commercial market. Additionally, the Turkish terminal falls into line with China’s plans to extend the Asia Highway network all the way to Europe’s borders, and lies within a stone’s throw of the proposed AH1 route.

A severe lack of imagination has been a problem throughout Greece’s mishandling of its economy in general over the last few years. An inability to react to the threat that Kumport presents, not only to the port of Piraeus but to the Greek economy as a whole, is entirely indicative of the woefully regular lack of foresight that Athens has hitherto displayed. Indeed, its answer to this very obvious and salient threat, is to agree – rather too readily some have argued – to increase taxes on homegrown shipping firms, and risk their exodus to more favorable economic climes. Moreover, the government is planning to bring all shipyards under one public body in what is nothing less than a nationalization of an industry buoyed almost solely by foreign investors. Rather than half spectral pledges to potential investors and fiscal punishments for those already invested in Greece’s future, Athens seems to be desperately in need of a serious long-term strategy to maintain its shipping’s competitive edge.

The bailout package extended to Greece has been subject to controversy since day one, but, regardless of opinion, Europe’s most venerable nation is at a point where there can be no going back. Failure this time to implement the framework set by creditors is likely to undermine their trust that Greece will hit a brick wall from which there is no further option to move anywhere but in sudden and irreversible decline. And yet, with next to no effort to protect one of its most valuable industries, a source of income that has all the potential in the world to ameliorate the nation’s woes, and noises already being made by senior political figures that it will miss its privatization target, Greece’s future is already beginning to look a rather lonely one.

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Theodoros Papadopoulos

Theodoros Papadopoulos is a consultant and researcher based out of London, specialized in the institutional evolutions of Eastern Europe and Africa.

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