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Greece just shut down its state broadcaster in an attempt to balance the books

June 11, 2013
Obsession
Euro Crunch
June 11, 2013

In under 24 hours, the Greek government has twice made headlines… about privatization. First, it failed to sell DEPA, the state-owned gas monopoly, in a deal fraught with intrigue. Second, it announced the sudden closure of state broadcaster ERT starting at midnight local time tonight, so that it could fire as many as 2,600 people.

Both developments may be consequence of continuing pressure from the “troika” responsible for Greece’s bailout package—the European Commission, the European Central Bank and the IMF—to drastically reduce the size of Greece’s government and spending. Greece is behind on meeting promises to dismiss public-sector workers; it still needs to fire 2,000 more this year and 15,000 in 2014. Moreover, reports the Financial Times, it will now have to fill an €800 million hole (paywall) from failing to sell DEPA.

Although it denies involvement in the proceedings, the Commission may be to blame for blocking the sale of the gas provider to the Russian energy giant Gazprom. A source cited by the Financial Times said that two European organizations had made clear that they didn’t want the sale to happen. European competition authorities had the power to veto the deal. The Greek government didn’t receive any other bids for the company.

But closing down the state broadcaster? Evidently not so offensive. In fact, broad layoffs at ERT seem like a decent way to get back in the troika’s good graces while Greece asks for leniency on privatization targets, suggest an editor at Greek paper Kathimerini and an interest-rate strategist for Credit Suisse in London:

The truth of the matter is that—despite a couple months of less-bad-than-usual economic data—the Greek economy is still in dire straits. Indeed, the last few months may have been “just another political illusion,” writes Lombard Street Research’s Kasia Zatorska:

Reduced labour costs have not yet encouraged greater exports or attracted vast amounts of investment. The fall in the trade deficit has so far been driven mainly by depressed imports… rather than structural rebalancing. Bleak perspectives for employment could easily trigger another set of unrest, while record-high long-term unemployment (17% of total labour force) will have profound implications for the labour market recovery in years to come. There are also many deep-seated social issues to overcome. Tax evasion continues to be wide-spread, public administration remains large and inefficient while any gains in the unit labour costs so far have been achieved mainly through wage cuts rather than productivity-enhancing reforms.

It’s hardly likely that the troika will leave Greece hanging at this point, but the country still faces years of economic struggle, which could renew political unrest at any time. In its report on the Greek bailout published last week, the IMF seemed to realize that. Exotix senior economist Gabriel Sterne writes in an editorial today:

An implication of the shift in [the IMF's] rationale is that Greece was given a programme that was destined not to work, but was necessary for the good of the euro. Surely then, Greece deserves a more generous treatment by both the IMF and the eurozone.

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