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Euro zone, IMF to press Greece for foreign agency to sell assets

People walk past closed shops at an arcade in central Athens June 6, 2013. REUTERS/Yorgos Karahalis
People walk past closed shops at an arcade in central Athens June 6, 2013. REUTERS/Yorgos Karahalis

By Robin Emmott

BRUSSELS (Reuters) - Greece's international lenders will press Athens next month to transfer state-owned real estate to a holding company managed by the euro zone to spur flagging privatization efforts, officials said on Thursday.

The plan, to be put to the Greek government by the troika of lenders - the IMF, the European Central Bank and the European Commission - in September, will propose creating a Greek-owned holding company outside Greece and run by foreign experts.

The plan, first suggested two years ago, reflects growing frustration with Greece, which will probably need further aid and has made scant progress in reforming its public sector and selling assets.

Acting as a warehouse for property, it would seek to overcome Greek bureaucracy that has undermined the privatization program, agreed as part of a 240-billion-euro ($320-billion) rescue. It will also ensure that the money raised will help pay off Greece's debt.

"The main point is to maximize the value of state-owned real estate assets in Greece by making them more attractive for investors," said a spokesman for the European Stability Mechanism (ESM), stressing that the plan had not yet been discussed by euro zone finance ministers.

"The benefit of privatization is to generate resources for Greece to help overall development and pay back its own debt faster," said the spokesman for the euro zone's bailout fund.

The idea of transferring assets to a Luxembourg-based holding company was reported by Reuters in 2011, when Finland supported it. Luxembourg attracts multi-nationals seeking lower corporation tax and is home to other special purpose vehicles

A Greek finance ministry official said the holding company would issue asset-backed bonds to pay down Greek debt.

"It is under discussion to base the holding company in Luxembourg because it would be easier to run it from there. It would be fully controlled by the Greek government," the official said on condition of anonymity.

Under Greece's bailout agreement, the ESM was supposed to draw up a report on how to raise money from real estate assets currently not included Greece's privatization plan.

Athens has screened for possible sale 81,000 real estate properties with an estimated value of up to 28 billion euros. Athens will propose by the end of this year a plan to prepare those properties for securitization or direct privatization.

But Greek officials have rejected moving control of its state property abroad, saying it would not solve the problems.

This time, Greece's international creditors are eager to try to convince the centre-right government of Prime Minister Antonis Samaras as the country's privatizations struggles.

Athens' original plan to raise 50 billion euros by 2016 was scaled back to 15 billion euros. Only 5 billion euros have been raised so far and the flagship sale of the country's gas utility flopped this year when the only bidder pulled out.

The credibility of its privatization agency was eroded in August when the government dismissed its chairman for using the private plane of a businessman who had bought a state company. ($1 = 0.7496 euros)

(Additional reporting by Harry Papachristou and Lefteris Papadimas in Athens, editing by Elizabeth Piper)

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