A German Solution to a Greek Problem?

 By Terence Roth
Could Germany’s old Treuhand become a blueprint for Greece’s privatization push?
Jean-Claude Junker, Luxembourg’s Prime Minister and President of the Euro Group, says the agency created in 1990 to sell off the state-owned assets of the defunct East German state might be just that.
Thousands of East German companies were auctioned off in a privatization bonanza that was designed to correct four decades of uncompetitive Communist management.
That task towers over the comparatively modest Greek project—with three dozen companies, state projects and other properties potentially up for grabs.
Greece today also has a much narrower productivity gap with the rest of Europe than East Germany did 20 years ago. The effect on Greek jobs will never be as brutal as the East German fire sale. But some of Treuhand’s pitfalls are worth raising.
We dipped into this newspaper’s archives for some snapshots.
1991—Job Killer: In the first year alone, 840,000 jobs were cut from eastern European payrolls as
companies were slimmed down to become more competitive and attractive to investors. By early 1991, nearly 2.7 million—almost a third of the region’s nine million workers—were out of a job or working on part-time shifts.
1994—Bureaucracy:  From The Wall Street Journal. “For the Treuhand, the bureaucratic tangles have brought the agency increasingly under fire for not fully meeting the— perhaps unrealistic—expectations of a quick and flourishing privatization process.”
1994—Graft: Through to the end of 1993, the Treuhand estimated that 300 million marks worth of damages were incurred as a result of criminal actions in connection with Treuhand deals, requiring further contract renegotiations; some companies were purchased only to be looted. Allegations of kickbacks abounded.
1994—Money Loser: From The Wall Street Journal. “According to the German government, the Treuhand’s activities will leave behind about 275 billion marks ($164 billion) in bills—as a result of assuming old debts from eastern German companies, cleaning up environmental damage, restructuring otherwise unviable companies and paying for social plans and layoff packages.”
Still today, united Germany’s eastern region bears the scars of rushed sell-offs: a jobless rate that is double that of Western Europe, lower household incomes and more polarized politics. This is despite more than $1.5 trillion in transfers since 1990 from the former West Germany to help cover social and economic wounds.
Though a much smaller affair, Greece’s sell-off doesn’t have a “West Greece” to help bankroll social acceptance.

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