Universities face huge losses to reserves after bond ‘haircut’

Universities and technological institutions in Greece face a huge reduction in their reserves despite the 53.4% write-down in the value of government bonds that reduces the country’s debt by €100 billion (US$133 billion).

Rectors and presidents are discussing legal action against the Bank of Greece, where they are required to keep their reserves, for unilaterally placing their funds in government bonds without consulting them.

They have also called on the government to replace their funds. Otherwise, they claim they would have no choice but to close down their institutions.

As a warning, several institutions closed down for two days at the end of March, though without suspending their educational programmes – an indication that they are prepared to escalate action in future if their demands are not met.

When the bonds were devalued many institutions lost their entire funds while others found that they had a great deal less than they originally thought.

An estimated €150 million was lost in the recent ‘haircut’, with the National Technical University of Athens losing €31million, Athens University €13 million and Aristotle University of Thessaloniki €8 million. The remaining universities and technological institutions also suffered losses.

Education Minister George Babiniotis (pictured) announced that funding would no longer depend on whether institutions have carried out elections for new management councils – a measure imposed by his predecessor, Anna Diamantopoulou, to force institutions to comply with the requirements of the Law on Universities enacted in August 2011.

The majority of rectors and presidents welcomed the initiative as a step towards normalising relations between the ministry and institutions, which have been strained to breaking point.

Professor Yiannis Mylopoulos, rector of Aristotle University of Thessaloniki, said that “at a time of severe economic crisis, when the funding of the universities has been reduced by more than half, and at the time when huge sums of institutions’ reserves have been sacrificed at the altar of private sector involvement [‘haircut’], the threat to the funding of institutions would not be the best possible development”.

Babiniotis and Under-secretary of Education Kostas Arvanitopoulos insisted that the disengagement of funding from the requirements of the law was calculated to ease the financial problems experienced by institutions as a result of cuts in their budgets and the reduction of their reserves.

They also insisted that the new arrangement was only a temporary measure.

Babiniotis said: “We looked at the institutions’ request with sympathy as a result of the economic situation and the new conditions which arose from the reduction of their reserves.”

He also announced that a committee of experts composed of rectors and education ministry officials would be formed to examine the legislation thoroughly and report by 15 May on ways and means for the law to be improved.

Institutions that have already complied with the requirements of the new law complained that the education ministry appeared to be rewarding those institutions that initially declared their opposition to the legislation and that they would not implement it.

Representatives of the institutions insisted that this was the first step towards circumvention of the law, adding that five of the seven members of the committee were rectors who had opposed the law.

Arvanitopoulos said that the committee was formed to examine thoroughly any problem areas and to bring in realistic proposals for its full implementation, not its suspension.