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A crowded road to market

The pressures of qualifying for Emu are forcing governments to privatize faster than they might otherwise think prudent. There's a convergence of issues as well as a convergence of currencies. Is it all more than the market can bear? Catherine Garner reports.

Governments are under pressure to speed up privatization. In western Europe the need to reduce public debt to levels that will qualify countries to join the EU's single currency has brought a new urgency to stalled programmes. In emerging economies the IMF is pressing governments to rid themselves of state dinosaurs. Market prospects are not propitious, adding to the urgency - governments are aware that the bull run in equities may be drawing to a close. There are also signs that strong investment inflows from the US are drying up, with reports that US investors are redeeming holdings in mutual funds.

Under these circumstances governments must get assets to market soon or find they have to sell them off more cheaply than expected. In western Europe (including Turkey) this means, according to a recent report by JP Morgan, that governments are expected to set a privatization record this year, raising an estimated $53 billion and thus dominating global privatization programmes. The privatization goals have been set at a time when there is little room for mistakes. At worst there may be delays and even a secondary market crash, but the show must go on. "Privatizations must take place, and unfortunately it's now or never even if the conditions are not ideal," says one equity analyst.

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