The news in Greece has been dominated this past week by the Attiko Metro strike, which lasted for 8 days. Attiko Metro runs the Athens Metro: disruption caused to millions of commuters during the five working days of the strike’s duration cannot be underestimated.
The main reason for the strike is the Greek government’s decision to implement a single wage policy for all Greek public sector workers, including those of state-owned companies (DEKO). The government claims that this will have the effect of reducing wages by 20% on average.
One of the inexplicable issues here is the lack of basic economic reporting available to the public. A review of the Attiko Metro’s website (http://www.ametro.gr/) or that of the operating company Stasy (http://www.stasy.gr/) shows a total lack of financial data.
The Attiko Metro site does not have a single section on financial reporting, although it has extensive reporting on its history, technical issues, “the Metro and Culture” and other worthy issues. The Stasy site has a single reference to financial information: the 2011 financial summary, as published in press according to law, without any kind of detailed financial report.
Compare this to Transport for London, which has already published its 2012 Financial Report as well as its 10 Year Business Plan as well as a detailed review of all Commercial Contracts and expenditure.
Compare this to RATP, which runs the French public transport system, and provides detailed operational and financial information and the complete 2011 annual report (the RATP financial year ends on December 31st; Transport for London’s financial year ends 31 March)
Compare this to the Washington Metro, which publishes its detailed Financial Statements, including contract, its Strategic Plan, its Operating Scorecard, and even the meeting agenda its Board of Directors.
One has to wonder why, in 2013, a company of this size does not make detailed financial or operational reporting available to the public. The Athens Metro is a Greek development project which was financed by EUR 1.2 billion of European taxpayer money via the EU Structural Funds. The Metro’s current operations are financed by passenger tariffs, while its deficit is financed by the Greek taxpayer, via Greek government subsidies. The Metro is a public sector monopoly. Why should its reporting requirements be held to a lower standard than any other public company’s?
The answer, of course, is precisely because it is a public sector monopoly. The standard of Greek public sector management in financial and strategic matters has been disastrous. The necessary skills, competencies and procedures are simply not in place, and are possibly not even accepted as being a necessary aspect of management.
There is also no doubt that for years, the Athens Metro has been used as a source of political patronage. As Nikos Malkoutzis writes in the Kathimerini article An Underground Resistance in Athens (ekathimerini.com, Thursday Jan 24, 2013):
Decision makers are also paying the price for treating the civil service as a private club to which they could bring new members whenever they wanted. It has been well documented that the metro experienced a surge in its employee numbers, often in nontransparent circumstances, under the 2004-09 New Democracy government. The current administration is now trying to slash costs that were in some cases unnecessarily created by its predecessors.
Malkoutzis’ article is also worth looking at for the basic financial and operating information it contains about the Athens Metro:
· Used by about 650,000 passengers a day; more than 400 million rides a year
· Approximately 15% of all users do not pay fares, translating an estimated EUR 30 million in lost revenue per year
Let’s do a very quick calculation on fare losses using this data. If we assume an average ticket price of 0.85 cents (taking into account reduced fares and common fares), and a total of 400 million rides per year (and assuming 1 ride = 1 ticket), then the total turnover should be at least EUR 340 million. If we assume this figure is 25% off, then the turnover should be EUR 255 million.
Stasy, which consolidates the financial operations of the Attiko Metro, the Tram, and the Athens-Piraeus Railway, reports total income of EUR 126.911.848, and a net loss (after tax) of EUR 123,172,584. Comparing this to the theoretical sales of the Athens Metro alone indicates the magnitude of financial mismanagement in the Greek public transport system.
If we assume 15% of all passengers are fare dodgers, then the lost income amounts to EUR 51 million, not the EUR 30 million quoted in the article.
Rides / Year
Average Fare (cents)
Share of Fare Dodgers
Lost Income (EUR)
In all the times I have ridden the Athens Metro, I have never seen a ticket inspector at work. Access to the platforms is free entry: there are no turnstiles or gates anywhere.
It should therefore come as no surprise that the Metro is losing money:
· The Metro is a public sector monopoly. There are no competing metros, surface tram lines or surface bus lines: the only competitors are private taxis. Nearly all staff are public servants employed under what amounts to permanent employment contracts and in practise cannot be fired except for criminal behaviour.
· The Metro is regulated solely by the Greek government without any other form of oversight by other stakeholders. The Greek government provides 100% of the funding to cover the Metro’s losses. No steps are taken to replace non-performing management or staff: the only management replacements occur when a new government makes political appointments.
· There is no financial transparency over basic operations. Basic information such as staff count, wages, income, expenditure, procurement and strategic planning is unavailable to public scrutiny.
· There is no attempt to control fare-dodging. There are no ticket inspectors; access to the platforms is free, without barriers.
· There is no attempt to generate additional revenue using the platforms and stations for additional services, such as catering, parking, or advertising.
· There is a high investment programme for line maintenance and expansion, which brings with it the risk of corruption via bribes on over-priced procurement contracts.
None of these issues are being addressed in an effective and satisfactory manner. There has been no attribution of responsibility or accountability at any level of the system, whether in the Greek Parliament, at the Ministries of Transport or Finance, or in the Attiko Metro company itself.
Rather than solving the systemic issues, the government (and the Troika) are tinkering with the symptoms--a theoretically high wage cost—in an immediate attempt to reduce costs.
Yet we live in a European Union of 2013, with legal regulations on financial reporting, and numerous examples of best practise (and common sense) available.
The failure to act on this is yet another testament to the sheer incompetence and duplicity of the public sector in Greece, led by the political parties and the patronage system that control it. The only surprise, perhaps, is the willingness of Greek and European taxpayers (and the IMF) to pay for it.
Given this record, the privatisation of the Athens Metro appears to be a valid solution. The Greek state should focus on regulation of issues such as customer satisfaction, fares and timelines, cleanliness and safety and track expansion agreements. A private operator should take over operations within a clearly-defined operating framework.
This privatisation would best be structured as an operating lease and revenue-sharing agreement, based on specific review dates and performance indicators. The operator would pay a mandatory annual fee to the Greek State, with additional revenue share based on performance.
Any privatisation should include the clause that the operator has successful experience in managing a mass transit system in a comparable capital city.
The main risks to such an arrangement would most likely be the future political risk of a Greek government intent on changing the terms of the agreement, or a Greek political party seeking political gains by exploiting the unionised workforce. Yet as the example of Athens International Airport shows, it is possible to combine excellent service under a private operator, despite the operating risks in the political environment.
The Attiko Metro is not on the list of Greek privatisations published by the Hellenic Republic Asset Development Fund. The events of these past two weeks may convince decision-makers that it should be.
(c) Philip Ammerman, 2013
27 January 2013
Philip Ammerman is Managing Partner of Navigator Consulting Group and European Consulting Network.
I really do hope that this can already convince them. It has been a long struggle to let this people see what we see. It'll definitely start the year right too.ReplyDelete