Debt crisis: Greece prepares to lease 40 uninhabited islands to cut debt

Bloomberg 3:36PM BST 12 Sep 2012

Greece has identified 40 uninhabited islands and that could be leased for as long as 50 years to reduce debt as pressure grows on the country to revive an asset-sales plan key to receiving international aid.

The shortlist includes islands ranging in size from 500,000 square meters (5.4 million square feet) to 3 million square meters, and which can be developed into high-end integrated tourist resorts under leases lasting 30 years to 50 years.

“We identified locations that have good terrain, are close to the mainland and have a well-developed infrastructure and, at the same time, pose no threat to national security,” Andreas Taprantzis,executive director for housing at the Hellenic Republic Asset Development Fund, said in an interview in Athens.

“Current legislation doesn’t allow us to sell them outright and we don’t want to.”

The fund is charged with raising €50bn from state assets by 2020 to meet conditions tied to pledges of €240bn in foreign aid.

As international inspectors in Athens scrutinise the country’s fitness to receive the latest aid payment, Prime Minister Antonis Samaras has said commercial exploitation of some islands could generate the revenue lenders need to see to continue funding the country.

The shortlist includes islands ranging in size from 500,000 square meters (5.4 million square feet) to 3 million square meters, and which can be developed into high-end integrated tourist resorts under leases lasting 30 years to 50 years, Mr Taprantzis said.

The fund announced an action plan to speed up the country’s privatisation program yesterday. In its statement, the fund named the companies it’s chosen to proceed to the next phase of tenders in three housing projects.

The fund reviewed 562 of the estimated 6,000 islands and islets under Greek sovereignty. While some are already privately owned, such as Skorpios by the Onassis shipping heiress Athina Onassis, the state owns islands such as Fleves, which is near the coastal resort area of Vouliagmeni, and a cluster of three islands near Corfu. Mr Taprantzis declined to identify any of the islands.

Legislation needs to be passed to allow development of public property by third parties and reduce the number of building, environmental and zoning permits needed before the plan can proceed, Taprantzis said.

Outright sales have been ruled out because the returns for the Greek state wouldn’t be higher than a leasehold arrangement, he said. Greece will attract more investment if an island is turned into a resort, he said.

Selling public land outright is a politically sensitive issue in Greece. In 1996, Greece and Turkey almost went to war over who owned the uninhabited Aegean islet of Imia, known as Kardak in Turkey. A proposal by Greece’s lenders last year to increase revenue from asset sales including property drew opposition from then-premier George Papandreou, who said he’d legislate to prohibit such sales.

The country has only raised about 1.8 billion euros from its asset sales program, sparking criticism among European officials that the government isn’t moving quickly enough to reduce debt. Months of negotiations over the country’s debt restructuring earlier this year, the largest ever, and two general elections that threatened Greece’s membership of the euro area also held back progress on sales.

Debt crisis: Greece prepares to lease 40 uninhabited islands to cut debt - Telegraph