Greece May Finally Sell Its Most Beautiful Islands

The Greek government is between Scylla and Charybdis. It can restructure its debt, which would ruin its ability to raise funds in the capital markets and a cause a collapse of its already unstable economy,  or it can take more aid from its neighbors, many of which now insist that it sell off valuable assets to help pay down its debt.

“Greece also has a huge privatization potential and the Greeks should help themselves before calling for more money,” Austrian Finance Minister Maria Fekter said before a key meeting of EU members who gathered to settle Greece’s financial fate according to Bloomberg. Germany, often called the EU’s bank because of the size of its economy and rock solid financial position, has many voters who are tired of aiding Greece, a nation which they feel has spent its way into current trouble. Greece can default, many of them reason, and Germany can return to its own currency. It does not need the EU to keep up its growth. Whether that is true can be left to economists to debate. What is critical is that many people German voters believe it deeply.

Greece may be allowed to extend the period over which it needs to pay back its debt obligations, which some argue is not the same as a default. It is a change in the terms of the loans, and one in which some of the holders of Greek debt will have no say. Is that a default? It depends on your point of view.

Greece will probably not have to sell its prized islands for now, but it will almost certainly be forced to privatize its large utility and national telephone companies. It is too early to say how those transactions will be structured or when they make occur. It is also too early to tell the value of those assets. The figures may be too small to help Greece’s financial problems much. They are also one-time events which cannot be repeated next year. Greece may find itself in another economic bind in 2012 or 2013, having entirely tapped what it can sell to bring in capital.

At some point, Greece’s trouble may be bad enough that it may be forced to part with some of its islands after all.

Douglas A. McIntyre