Financial Times news article—
â€œReal estate development could become a catalyst for emerging from the crisis,â€ said Yiannis Stournaras, director of IOBE, an Athens think-tank.
That’s the Greek crisis that we’re talking about.Â And although suggesting real estate as a path out of crisis sounds like a hair of the dog cure, since real estate didn’t have much to do with Greece getting into crisis, the point has validity.Â
The tricky part though is that the scope for real estate development is linked to privatization — historically a touchy word in IMF lending programs and a word that showed its lightning rod capacity over the weekend.Â Â Â Consider the full paragraph from the troika (IMF/ECB/EU) statement that touched off the row —
Concerning financing, the government continues to work toward securing a gradual return to bond markets at affordable interest rates. Strong program implementation, with financial support from the international community, remains key to achieving this. It is equally important that the government notably scales up its privatization program, and more generally realizes better returns from its extensive portfolio of assets. Work is proceeding to establish a comprehensive inventory of the governmentâ€™s real estate assets, and to define a phased action plan.
Leave aside the question of how the Greek government found itself reacting to a sentence that itÂ must haveÂ known was goingÂ to be in the troika statement before it was issued.Â Â It’s worth noting that the discussion of privatization appeared not in its customary place as a structural reform, but as part of the government’s financing.Â In other words, it was being pitched first and foremost as a fundraising measure, and not for its efficiency potential (although no doubt the troika would see that as an advantage).Â
The subtext here of course is a key problem with the Greece and Ireland programs — given the governments’ debt loads and financing needs, the programs aren’t big enough.Â Â There is also a review of state assets with privatization potential in Ireland.Â But whereas privatization proved to be the political sore spot for Greece, it’s the status of unsecured bonds in Irish banks that is resulting in the first serious friction between Ireland and its official lenders.Â
Unfortunately, Ireland can’t claim that the prospects for real estate development could help generate cash for the government.Â What it can do is provide many cautionary tales on what happens when private developers are let loose on government property.Â We’ll assign the Dublin Docklands Development Authority as the case study.