14 Airports in Greece to Be Privatized in $1.3 Billion Deal

By NIKI KITSANTONIS

DEC. 14, 2015

The New York Times

ATHENS — Greece’s leftist-led government on Monday signed its first major privatization deal, granting a German company the right to lease and manage more than a dozen regional airports.

The contract, worth 1.2 billion euros, or $1.3 billion, is part of an effort to privatize state assets and adopt economic changes demanded by international creditors under Greece’s €86 billion bailout program. Some other measures are under debate in the Greek Parliament and are scheduled for a vote Tuesday night.

The airport management contract had been under negotiation with the German company, Fraport, when Prime Minister Alexis Tsipras and his leftist Syriza party stormed to power in January. The party pledged to end years of austerity and foreign oversight by the country’s creditors: the other nations that use the euro, the European Central Bank and the International Monetary Fund.

The airport contract talks were revived only after Mr. Tsipras capitulated to creditors during the summer as Greece teetered on the brink of bankruptcy, accepting the country’s third bailout since 2010.

The government’s debt problems have for years deprived many Greek airports of sufficient money for maintenance and modernization. One exception is the Athens airport, which has already been partly privatized and generally lives up to its role as a modern international hub.

Under the accord, Fraport and its Greek partner, the energy firm Copelouzos, have secured a 40-year lease on 14 provincial airports, including those on the popular tourist islands of Corfu, Mykonos, Rhodes and Santorini.

The consortium, which is to assume management of the airports in the fall of 2016, has agreed to pay annual rental fees of €23 million and to spend €330 million over the next four years to revamp the facilities, which in many cases are dilapidated and substandard. The consortium said it planned to invest €1.4 billion over the life of the lease.

Commenting after the signing, Stergios Pitsiorlas, the head of Greece’s privatization agency, described the deal as “a very significant development and a strong message, in all directions, that the Greek economy is winning the trust of markets and entering the road toward growth.”

Since 2010, when Greece signed its first international bailout, its creditors have pushed it to privatize state assets as a way of raising much-needed revenue and spurring growth. However, several governments displayed little appetite for selling assets, and only around €3 billion in revenue has been raised so far through privatizations.

The current bailout program calls for the government to raise an additional €6.2 billion from selling or awarding management contracts for state-owned assets over the next three years, money that is to go toward reducing national debt and increasing sorely needed investment.

The latest package of economic measures now under debate by Parliament includes the creation of a new privatization fund that would be jointly supervised by Greek and foreign officials. Other actions on the list include overhauling the Greek energy sector and allowing the sale of delinquent loans held by Greek banks to so-called distressed debt funds. (Greece’s creditors are particularly concerned about an estimated €107 billion of nonperforming loans that are sapping the country’s banks.)

The new measures are widely expected to pass in Tuesday night’s vote because the government’s Syriza-led coalition has a majority, albeit by three seats, in the 300-member Parliament. The package must be approved if Greece is to receive its next allotment of €1 billion in bailout money.

A series of austerity measures and economic overhauls adopted over the last two months has fueled public anger and prompted two general strikes. Mr. Tsipras, who once railed against austerity, has insisted that Syriza has not forgotten its pledges to restore social justice.

The government will face a much tougher test next month when it tries to overhaul Greece’s costly and dysfunctional pension system. Greek officials are resisting calls for more cuts to pensions, noting that payments have been cut more than 10 times in the last six years. They are seeking other ways of bolstering the system, notably by imposing higher social security contributions for employers and workers.

The idea is said to have been greeted with skepticism by creditors, though, as unemployment remains high and thousands of businesses are struggling to remain afloat.

Securing support for an overhaul of the pension system is likely to be the biggest challenge yet for Mr. Tsipras.