Much of Greece’s industry and commerce, including much of the tourist industry, is owned by the state. It should be sold with the proceeds used to reduce public debt. That would make the remainder of the debt more sustainable and transfer workers to the private sector where competitive pressures for lower wages and increased productivity would more closely align employment costs and reality. If the socialist government returned more of the economy to the private sector, Greece would have a better chance of economic recovery.I'm not so sure about this. While there is no doubt privatisation would help the Greek economy, doing privatisation properly takes time and Greece needs money now. A rush for revenue could result in a privatisation programme that does more harm than good. As I have noted before, just trying to maximise revenue from privatisation programmes isn't always a good idea, you should maximise revenue subject other constants such as getting the market structure right, increasing competition, putting good regulation in place etc. Theses thing will help the economy but also lower the price an SOE can be sold for. The most obvious example of this is that monpolies sell for more than competitive firms but competitive markets are better than monopoly markets.
Friday, 4 June 2010
Privatisation and Greek debt problems
Economist Alan Meltzer puts privatisation forwrd as a partial solution to Greek debt problems: He writes