Roland Berger Strategy Consultants presents recovery plan for the Greek economy
Munich, September 26, 2011
Against the backdrop of the current debate on the Euro and Greece's financial future, Roland Berger Strategy Consultants presents a recovery plan for the Greek economy. The aim is to protect the country from bankruptcy and, in particular, from being excluded from the Eurozone. The goal is also to massively cut Greek government debt without forcing a haircut on the country's creditors and to stimulate the economy and thus ensure the stability of the Euro.
"Our recovery plan pursues a clear objective: to help financially ailing Greece restructure its balance sheet and sustainably stimulate its economy," says Dr. Martin C. Wittig, CEO of Roland Berger Strategy Consultants. "If Europe manages to help Greece reduce its public debt, this will do more than considerably improve the country's economy: Greece's rating would also improve, and the country's interest burden would be reduced, opening the door for an influx of fresh investment capital."
The most important component of the recovery proposal is the creation of a central holding company to take over Greek state assets, such as ports, airports, highways and real estate, worth a total of about 125 billion Euros. This holding would subsequently be sold to a European institution. Greece could then use the proceeds to repay its liabilities to the countries of the eurozone. Furthermore, the country could remove further bonds from the market by means of an EFSF program. The transaction is structured in such a way that a Greek default is ruled out. The plan would almost halve Greece's government debt in a short time from currently 145% to 88% of the gross domestic product (GDP) – without having to reschedule the country's debts.
To maximize the value of the privatized Greek state assets, the European fiduciary institution should invest an additional approx. 20 billion Euros to restructure the acquired state assets. In addition, it could avail itself of EU infrastructure funds for Greece amounting to 15 billion Euros. This would boost the prices that could be achieved when the individual assets are subsequently sold. "We anticipate a rapid surge in growth in the Greek economy as a side benefit of this program: instead of shrinking by 5% per annum as at present, Greece's GDP would grow by up to 5% a year," explains Markus Krall, Senior Partner at Roland Berger. "And this would in turn make sure that the state receives higher tax revenues." As a result, Greece's debt could be cut to the EU limit of 60% of GDP by 2025.
"Altogether," says Krall, "in one fell swoop, the country would escape from the debt trap, and a stimulus package would boost growth, create new jobs, and break the vicious circle of saving and shrinking. At the same time, this would also greatly reduce the costs – and the default risk – for the European partner countries. Simultaneously, it would make the European Central Bank's monetary policy more credible."
Martin Wittig underlines: "Our aim with our concept is to help Greece to get back on its own feet – with a future-oriented and sustainable restructuring program. It is food for thought that the Greek government could turn into its own program."