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Greek Rail System’S Debt Adds To Economic Woes

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http://www.nytimes.com/2010/07/21/business/global/21rail.html?_r=1&ref=business

ATHENS — In 2009, bankers for Goldman Sachs and Morgan Stanley pitched the Greek government on a plan to overhaul its money-losing railway system. Among the ideas was to lay off half of the system’s 7,000 workers and have the government take on roughly half of the company’s 8 billion euros in debt.

The suggestion did not fly. It was an election year in Greece, after all, and the country was already struggling to keep up the payments on its debt, which is higher in proportion to economic output than in any other nation in the European Union. The plan was shelved, soon to be overshadowed by the country’s close brush with bankruptcy.

Losses at Hellenic Railways, however, continue to mount — at the rate of 3 million euros, or about $3.8 million, a day. Its total debt has increased to $13 billion, or about 5 percent of Greece’s gross domestic product.

Now, as a condition of Greece’s financial rescue, the International Monetary Fund is demanding that a solution be found. The fund and the European Union, which also chipped in to provide the bailout, are requiring that the debt of Hellenic Railways, as well as the off-balance-sheet obligations of other state-owned enterprises, be counted toward Greece’s official debt — which Greece has agreed to do.

Analysts estimate the total to be around $33.6 billion, a sum that would add another 11 percentage points to Greece’s current debt level of about 120 percent of gross domestic product. It would also surely raise further questions in the minds of many investors about the government’s ability to repay ever-increasing amounts as the overall economy contracts.

Some have argued that Hellenic Railways should shut down the majority of its routes, especially in the mountainous Peloponnese region where trains manned by drivers being paid as much as $130,000 a year frequently run empty.

The government, perhaps optimistically, is advocating the sale of a 49 percent stake to the French, who said this year that they would take a look. But it remains unclear how the French rail network, already burdened with its own high levels of debt, would be able to assume Hellenic’s liabilities and losses.

The debate, a longstanding one in Greece, has taken on new urgency of late. For the better part of a decade, Greece has provided sovereign backing to Hellenic Railways, thus allowing it to borrow billions from accommodating foreigners even though the company’s finances are so skewed that it pays three times as much on interest expenses than it collects in revenue.

The precarious nature of euro zone finances has made it increasingly difficult for state rail companies to raise capital throughout Europe. Standard & Poor’s recently downgraded the debt of the French and Portuguese national rail operators, and earlier this month Moody’s placed the Spanish train operator on review for a possible downgrade.

Until now, Greece has been able to use its rail system as a means to support employment while not adding to its official debt number.

“This was an accounting trick, another good way for the government to hide its debt,” said John C. Mourmouris, a former chief executive of the railway who is now an economics professor here. “But a company with 100 million euros in revenue can no longer borrow 1 billion euros a year.”

In the latest annual figures available, Hellenic Railways reported a loss of more than $1 billion in 2008, on sales of about $253 million. Of course, shaky finances are not uncommon among rail operators in Europe. Many are poor cash generators. Their prices are kept low as a matter of social policy, forcing the companies to become heavy state-backed borrowers to finance upkeep and expansion.

Even so, the Greek railway is in a category by itself. According to an analysis by Mr. Mourmouris, for Hellenic Railways to just break even, it would need to increase passenger traffic by a factor of 10, an outcome that seems unlikely. Greece has a well-developed road network, a relatively short distance separates its main cities and the railway’s shabby reputation makes it an unpopular travel option for most Greeks.

Jesus that's one hell of a dole payment $130k a year to drive an empty train. If they want to pay people to do that then fine but for christ sake they could employ 4 or 5 people for that amount at least try to keep employment down.

What sort of train are they driving for that sort of money, is there danger money involved?

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'In 2009, bankers for Goldman Sachs and Morgan Stanley pitched the Greek government on a plan to overhaul its money-losing railway system.'

this was the first flaw in the Greeks plan.

big massive flaw & the end of their economy

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Some have argued that Hellenic Railways should shut down the majority of its routes, especially in the mountainous Peloponnese region where trains manned by drivers being paid as much as $130,000 a year frequently run empty.

Wow.. heck forget about the drivers pay, the cost of running a whole train empty!

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'In 2009, bankers for Goldman Sachs and Morgan Stanley pitched the Greek government on a plan to overhaul its money-losing railway system.'

this was the first flaw in the Greeks plan.

Beware of bankers bearing gifts....

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http://www.nytimes.com/2010/07/21/business/global/21rail.html?_r=1&ref=business

Jesus that's one hell of a dole payment $130k a year to drive an empty train. If they want to pay people to do that then fine but for christ sake they could employ 4 or 5 people for that amount at least try to keep employment down.

What sort of train are they driving for that sort of money, is there danger money involved?

This is old news. Privatisation of this rail network has been talked about for some time. Don't be surprised is this is one more business that goes to the Chinese.

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  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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