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Troika Wants Bankruptcy For Defense Firms

news-troika-elliniki-oikonomiaGreece’s hopes to overhaul its notoriously inept and inefficient defense firms, as well as a mining company, were shot down by its international lenders who say the companies are so bad off they should just be shut down, although there were some hopes to sell them off.
The government led by Prime Minister Antonis Samaras was hoping to save Hellenic Defense Systems (EAS), mining company Larco and the Hellenic Vehicle Industry (ELVO)  and sent a revised proposal to the envoys of the European Union-International Monetary Fund-European Central Bank Troika who said they want the enterprises liquidated.
An e-mail sent to the Finance Ministry by European Commission representative Matthias Mors, and leaked to the Greek media, said the Troika has no confidence in the changed plan which asked to allow the agencies to be overhauled and keep them in operation.
“The proposed restructuring plans are in our view not viable or realistic,” the e-mail said. “In our view, the option of closure/liquidation must be considered for all three companies,” it added, saying that Larco should be split in two before being sold.
In the case of Larco, the chief concern highlighted was that the company’s smelter and mines are “not fully independent from each other,” which would mean potential investors would be saddled with the responsibility of returning illegal state subsidies. The Troika also wants to see a reduction in the number of staff at the firm, which employs about 1,000 people.
The government’s original proposal for EAS would cost 144 million euros “additional to the already inherited liabilities from the past,” the e-mail said. “The proposal is basically calling for a rather generous early retirement and exit scheme which would have implications in terms of fiscal space and the program,” it said.
If Athens argues that the company cannot be liquidated due to national defense concerns, “this has to involve a substantially downsized/restructured company.” The troika also wants to see the EAS work force scaled down to 350 from 850.
As regards ELVO, the Troika appeared more categorical, deeming that the government’s proposed liquidation plan would be more costly than bankruptcy. “We consider that an outright bankruptcy of the company is the most desirable and realistic solution,” the e-mail said. The Troika wants fired workers to receive no severance pay or benefits, which would violate Greek laws.
Finance Minister Yannis Stournaras said the liquidation of the companies over a period of five years would “be more valuable to the state” than bankruptcy. He said the government would try to avert a scenario involving staff being laid off without compensation, claiming that “at least certain parts of the businesses are valuable.” The Troika didn’t buy it.

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