sellout

A radical idea to save Greece: Sell off islands like Corfu and Lesbos

February 4, 2013
Obsession
Euro Crunch
February 4, 2013

A headline from today’s New York Times tells us just how bad it’s gotten in Greece: “Oil Tax Forces Greeks to Fight Winter as Ancients Did.” Austerity measures are forcing Greeks to live like their fabled brethren. Whether or not it stays in the euro zone, the country is likely to endure a decade (or decades) of hardships. At this point, Greece’s financial problems are insurmountable, and each solution applies a small Band-Aid to a fatally-wounded patient. Selling assets has proven futile as they would garner just a small fraction of the $400 billion Greece needs.

But there is a radical answer, one with roots as old as the means Greeks are using to cope.

Two years ago, two German members of Parliament proposed selling Greek antiquities or uninhabited islands. Greeks responded by boycotting German goods. Two years later, Greek employment has surpassed 26% and more than one in three youth is jobless. Greece’s situation is now so hopeless that no idea is too radical. In fact, Greece can do even better than the German idea it once scoffed at: Forget a worthless island with no infrastructure. Sell one with real value, like Rhodes or Corfu or Lesbos.

Who’s in the market for a whole island? Enter the Gulf states.

The problem for the Gulf states is that same desert that has proven fertile for oil proves desolate for everything else. Neighbors are trying to outdo each other in the quest to create the Singapore of the Middle East. Qatar, Abu Dhabi, Kuwait City, Bahrain, several cities in Saudi Arabia and the most well known of the lot, Dubai, all have aspired to replicate Singapore’s success. But there is only Singapore for the populations of India, China and Indonesia, nearly three billion people. The Gulf states catchment area, the Middle East, is much smaller and has less than a billion people. Maybe a Dubai survives without the largess of oil, but it’s hard to imagine that six of these cities thrive or survive. Indeed, the Gulf states have experienced a population explosion with oil money and land, desert land, that could truly only sustain a small population, has been stretched to support a much larger population. The economy of these countries is nearly wholly dependent on oil. Without oil, the economies would collapse. This is not a problem today, but given the explosion in growth of shale oil gas in the US, a long-term problem looms. It is the US, not Saudi Arabia or Russia, that will export the most oil by 2014. The warning signs for the prosperity of the Gulf states are blinkering hard and fast.

Selling land between states is an old tradition and not much practiced in the 20th century, but the precedent has been well established for hundreds of years.  The United States doubled in size with the Louisiana Purchase in 1803 and Russia sold Alaska to the US in 1867, partly to escape economic difficulties. Russia’s problems in the 1850s pale in comparison to Greece today.  The value of Rhodes alone could be more than $50 billion dollars (a generous $10 million an acre).  Including compensation to the people living in Rhodes of $200 billion dollars (a generous $2 million a person, plus whatever land/housing they own). Selling just one island could free a generation of Greeks from penury.

The Gulf States are not far from the Greek Islands. The flight from Athens to Rhodes is a shade less than an hour.  A direct flight Rhodes to Qatar might be just over an hour. A ship would take longer, having to round the Persian Gulf and the Gulf of Aden and then part the Red Sea. These logistics matter less today than ever. Somehow, the US is connected to Hawaii, and the British and French to islands thousands of miles away. Given the improvement in connectivity in this century, distance is hardly an obstacle.

The Gulf states have no way of getting around their main problem: the desert is inhospitable. The Gulf states have sovereign wealth funds with billions, trillions of dollars. Instead of building glass skyscrapers in the desert, they would be better served tilling fertile land or fishing in abundant seas. Granted, the Greeks interpret the idea of selling an island, or two or three, as a non-negotiable affront to national sovereignty. But the basic problem for Greece is that they are broke, bankrupt. They have borrowed too much money and cannot pay it back. At least not in this generation.

In short, they have no other choice.

The only way for Greece to escape its debts is to pay its debts. For the Gulf states, there would be no better investment. For Greece, there is no other solution—even if it means the unthinkable, even if it means selling out.

Follow Prashant on Twitter @agrawalprashantWe welcome your comments at ideas@qz.com

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