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“Where Greece Begins” and the euro ends?

Debates surrounding a possible Grexit have been raging for months, but in the eyes of some whether or not Greece can salvage its euro status could come down to an $800 million power plant in the mountainous north of the country.

Near Florina (the town dubbed ‘Where Greece Begins’) the Melitis facility is the most recently built production unit owned by state-controlled Public Power Corporation SA (PPC). In order to meet longstanding demands from the European Union regarding Greece deregulating its energy market the PPC is scheduled to sell the power plant to competitors.

The PPC was founded in 1950 with the aim of supplying Greek citizens with domestically generated electricity. Reliant on foreign financing and shrouded with vested interests and political protection, the PPC is viewed by some as encapsulating the nation’s economic approach.

The eight plants owned by the PPC are responsible for distributing half of Greece’s power, and are fired by a specific type of coal called lignite. PPC is so determined to retain its monopoly on this fuel that it’s willing to relocate a whole village to gain access to more of it.

Although PPC now employs over 20,000 compared with roughly 38,000 in the mid 1990’s, and has been limited to one new employee for every ten old, the company remains Greece’s largest employer. The plan to sell the Florina plant hasn’t gone down overly well with the country’s most powerful union.  GENOP, which boasts 18,000 members, has threatened to blight the summer tourist season with nationwide blackouts to prevent the sale.

Last month the head of GENOP, Nikos Fotopoulos, made the union’s feelings on the project clear. He declared: ‘We will make saving PPC a cause for all Greeks. We fight our battles with faith and passion, and we fight them hard. A serious state must control businesses of strategic importance […] We don’t consider giving existing lignite units to private groups an investment in, and contribution to, the country’

In order to meet the 11.5 billion euro’s of budget cuts Prime Minister Antonis Samaras has sworn to prioritise the sale of state-owned assets. With 3.5 billion – 4 billion euro’s of the target still to find, last month Samaras appointed former PPC Chief Executive Officer Takis Athanasopoulos as chairman of the organization overseeing the privatization program.

Since his appointment Athanasopoulos has come to blows over PPC with GENOP head Fotopoulos over job cuts and proposals to partner the company with Germany’s RWE AG.

Whilst Samaras asserted towards the end of July that; ‘We are determined, as a government of three parties, to press on with structural changes, with state-asset sales.’

Despite this, former New Democracy Industry Minister Stefanos Manos was quoted as saying: ‘PPC has a very strong union that so far has hindered changes. The government needs a clear strategy of what it wants to achieve in the energy sector in general and with the company in particular. I have yet to see evidence of that.’

The sale of the PPC plant will be a test for Samaras, providing the International Monetary Fund and the rest of the euro-zone with the evidence they need to prove that Greece is adhering to demands regarding scaling back the state, cutting red tape and opening markets up to competition.

Over the last year PPC shares have crumbled by 61 per cent and the company had a first quarter net debt of 4.85 billion euro’s. Consequently the asset-sale program could also come to include lowering the state’s current majority holding of 51 per cent to a minority.

In accordance with European law, before the onset of the debt crisis, EU regulators ordered Greece to reduce PPC’s control of lignite and to make market barriers fairer for competitors.

The EU’s 2008 deregulation order was to be met by the previous New Democracy government with a plan focused on the expansion of mining capacity and bestowing competitors with access to 40 per cent of exploitable Greek lignite reserves.

After coming to power in late 2009 the Pasok government abandoned that plan and, after vowing to promote cleaner energy, eventually became prepared to sell four existing power units belonging to PPC.  With the Samaras led coalition now in power the Pasok plan remains up for consideration.

At the beginning of this month Greece’s deputy Energy Minister, although declining to provide specifics, asserted that: ‘The government is committed to proceeding with the privatization of PPC in an organised fashion.’

But with the August 20th deadline set by the European Central Bank for the repayment of 3.1 billion euro’s of debt fast approaching, time for governmental decision making is almost up.

Whether or not GENOP will follow through on their threat to plunge the country into a darkness to rival their economic black hole remains to be seen.