Could Greece's tragedy yet have a happy ending?

Many investors think the country has little chance of avoiding a default at some point. Its slim hopes of avoiding that depend on an ambitious €50 billion ($71 billion) privatization and real-estate development program by 2015, with €12 billion to €17 billion of receipts now promised by 2013. Wednesday's announcement of a raft of advisers for privatizations ranging from gambling companies to motorways suggests it may finally be serious. Still, execution risk remains high.

Greece has no shortage of assets. It has state-owned enterprises alone valued at €44 billion, according to the Organization for Economic Cooperation and Development. These include ports, power, transport, water and gambling companies. In addition, the government owns real estate with an estimated value of €200 billion to €300 billion, including 2004 Olympics facilities, military property and land used for uncontrolled private development.
But despite commitments given to the International Monetary Fund and European Commission, Greece has been dragging its feet, partly for fear of sparking further domestic protests. Unlike the U.K. privatizations in the 1980s, Greece seems likely to have to sell mostly to foreign investors rather than to its own public, heightening the sensitivities. But attitudes are changing: A recent poll showed more than seven out of 10 Greeks support privatization, and the Socialist government can count on support from the right-wing opposition for asset sales.
The challenge now is to find investors willing to put money into Greece. Spain's Gas Natural has indicated it may bid for a stake in gas company DEPA; Athens International Airport also looks set to draw international interest, though the deal's value will depend on the terms of a new concession agreement.
Hurdles remain. Financial buyers may find it difficult to borrow against Greek assets. And on the real-estate side, progress may be slow. Even now, Greece is only just establishing a single land registry; its banks are cataloguing its real-estate assets; and the country is having to develop surface rights and long-term leaseholds. Conditions for developers remain unclear. Yet Greece is relying on real estate to generate €35 billion of the €50 billion target. This is hugely ambitious.
Still, the prize is worth it. If it succeeds in raising the full €50 billion—equivalent to 20% of gross domestic product—Greece's debt-to-GDP would fall to 134% in 2015 from a current forecast of 151%, according to the IMF, and its debt would be on a clear downward trajectory, raising hopes it would be sustainable. That estimate excludes other economic benefits, including increased foreign investment elsewhere in the economy, higher productivity and the opportunity to buy back debt at sky-high yields.
What Greece is confronting is nothing less than a Thatcher-style revolution. But the comparison is a reminder that what is promised is achievable—providing one has a Thatcher.

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