Greece Announces Restructuring of Railways

Transport Minister Costis Hadzidakis Tuesday revealed a plan to restructure Greece's debt-ridden national railroad company OSE, the latest effort by the government to clean up loss-making public enterprises. Under the plan, the government aims to narrow losses at OSE from EUR455 million in 2007 to just EUR80 million by the end of 2010.

The plan relies on several measures, including a voluntary retirement scheme to eliminate 2,000-3,000 workers - roughly half of OSE's workforce; better exploitation of the company's property holdings; the cutting of loss-making routes; and higher fares, while also increasing passenger and freight traffic. Since being elected in 2004, the center-right New Democracy government has made fiscal consolidation the cornerstone of its economic policy.

It won kudos from both the European Commission and international ratings agencies for cutting the deficit to below 3.0% of gross domestic product last year from 7.4% in 2004, and is aiming for a balanced budget by 2010.

But OSE is an impediment to that goal. As of 2007, the company had an operating loss of EUR455 million and accumulated debts of EUR7.04 billion, making it one of the biggest burdens on state finances along with troubled flag- carrier Olympic Airlines.

"OSE, along with Olympic, are our most basic priorities," said Hadzidakis. "I want to be clear, the state of the Greek railroad is extremely poor."

Hadzidakis has previously pledged to restructure loss-making Olympic Airlines by year end. While the current OSE restructuring plan follows a parliamentary vote in late July amending labor rules at loss-making state-owned companies.

That legislation, which was narrowly approved in parliament, gives the government greater say in restraining salaries at those companies, such as OSE where last year's wage bill totaled EUR400 million - three times its operating income.

In the last week of August, the government is also expected to introduce legislation that would tighten spending and budget procedures at public-sector bodies such as local governments and hospitals.

Ministry Web site: www.yme.gov

-By Alkman Granitsas, Dow Jones Newswires; +30 210 331 2881; alkman.granitsas@ dowjones.com

13.08.2008