Greek port sale halt may ‘deter investors’

Hasty move could mar economic ties

A halt to the privatization of the biggest port in Greece may further hit investor confidence in the country in the wake of the election of a leftist-led anti-austerity government, analysts said Wednesday.

As Greek Prime Minister Alexis Tsipras named a cabinet of anti-austerity veterans, he also made good on his election pledge to halt the privatizations of the port facilities in Piraeus, Thessaloniki and the Public Power Corporation, a state-owned energy company.

China's Cosco Group, which already has a deal to operate two piers at Piraeus, was shortlisted along with four others in the sale of a 67 percent stake in the port. The privatizations were agreed with the previous conservative-led government as part of its international bailout deal.

"We will not sell a majority stake in Piraeus port," Thodoris Dritsas, the deputy minister in charge of shipping, told Reuters on Tuesday. "The Cosco deal will be reviewed for the benefit of the Greek people."

Zhang Zuqian, an analyst from the Shanghai Institute for European Studies, told the Global Times that the Greek economy could take a hit over the halt to the privatizations.

"The [privatization] freeze will further hurt investors' confidence in the country as it experiences a drastic shift in economic policies. This may bring further economic turmoil," he said.

"Tsipras's primary task is to force Europe to ease tough bailout terms. Everything else revolves around that," said Zhang,

He added that if Tsipra's negotiations prove to be effective, his methods may be followed by other southern European countries where anti-austerity sentiment is on the rise.

The unilateral announcement caught the Chinese government by surprise.

China's foreign ministry spokeswoman Hua Chunying told a media briefing on Wednesday that China is still verifying the relevant information with the Greek government.

"Since the Cosco Group began to manage the two cargo piers of the port in 2008, the Piraeus port project, under efforts from both sides, has become a model of mutual benefits and win-win cooperation between the two countries. China has confidence in the intentions of both governments to continue cooperation in many fields, making more progress to benefit both countries and their people," Hua said.

Cosco acquired the franchise rights to the piers for 35 years in a deal worth 4.3 billion euros ($4.88) in June 2008.

"It may be too early to conclude what factors played a role behind the halt in privatization as much information has not been disclosed and the government was just elected on Sunday. One thing we can be sure of is that the new Greek government is eager to show its people and the world how different it is from the last government and that it is determined to make a change," Ding Chun, director of the Center for European Studies at Fudan University, told the Global Times.

Other analysts described the move as "irrational."

"Projects like this are not between private firms but based on inter-government agreements. A unilateral announcement goes against international practice," Zhang Min, a research fellow at the Institute of European Studies of the Chinese Academy of Social Sciences, told the Global Times.

She noted, however, that the impact of the bold move on the Greek economy will not be immediately obvious.

The loss of the Piraeus port bid could also damage China's "One Belt, One Road" Silk Road initiatives, said analyst, as the Port is a vital piece of the initiative.

In December 2014, Chinese Premier Li Keqiang and his counterparts from Serbia, Hungary and Macedonia reached a consensus to build a land-sea express passage linking the Port of Piraeus and Budapest to speed up transportation between China and Europe.

Just this past Friday, the premier praised the collaboration in the port as a "prime example of the development of China-Greece relations" as he congratulated the expansion of a port container terminal, carried out by China Ocean Shipping Company.

"China needs to carefully tackle the situation. It's possible the new Greek government acted in haste due to a lack of experience and its eagerness to please the Greek people. It may also feel dissatisfied with the terms agreed by the previous government and wants to bargain a little," Zhang Min said.

"However, we cannot fully rule out the possibility that the freeze is careful political positioning to cater to some European politicians' uncomfortable feeling with China's growing investment or simply a new plan to hand the project to an EU member state in order to acquire more leverage in the economic negotiations," Zhang Min noted, adding that the latter case could greatly harm China-Greece relations.

Shares in Piraeus Port Authority fell by over 8 percent on Wednesday after the new government said it would freeze privatization plans.

Cosco Group, a State-owned enterprise and one of the world's top shipping companies, could not be reached for comment by the Global Times as of Wednesday.

On January 16, the new Sri Lanka government also announced it was to review a $1.5 billion port deal with China Communications Construction Co Ltd over security concerns.