Country once described by its PM as a sinking ship now turns to selling off the family silver, angering unions

A year ago George Papandreou, the Greek prime minister, standing on the pretty island of Kastellorizo, compared his country to a sinking ship. Racked by huge public debt and a runaway deficit, pounded by the markets and merciless bond vigilantes, Athens, he announced, had no option left.

It would have to do what no other eurozone capital had done to date: accept a rescue from the EU and IMF involving €110bn (£97bn) in financial aid, the biggest bailout in western history.

"I have asked our partners to contribute decisively in order to give Greece a safe harbour," he said. "At the same time, we are sending a strong message to the markets that the EU is serious about protecting its common interests and common currency."

The rescue, which saw the bloc tearing up its own rules, was the single biggest humiliation for Greece since the return of democracy in 1974. But as speculation on the inevitability of a sovereign default in Athens mounts and Europe's debt crisis goes from bad to worse, it seems other indignities are in store: for the first time since its foundation as a modern state, Greece will soon be forced to sell off prized national assets, including the lease of prime real estate and sun-soaked islands, in what is poised to become one of the most ambitious privatisation programmes ever.

Under the plan, announced last week, Athens aims to raise €50bn, a sum big enough, it is hoped, to dent a debt that at €340bn and climbing is projected to hit 160% of GDP next year.

Outraged Greeks snarl that the sale will be the equivalent of auctioning the family silver. In places like Corfu, long described as the jewel of the Ionian sea, the anger among proud locals is almost palpable – even if purported sales of beaches, marinas and casinos have not been confirmed.

"They say Vidos, off our coast, and the palace of Mon Repos [where the Duke of Edinburgh was born] are going to be privatised," said Spyros Apergis, a driver with a tiling company on the island. "Our country is clearly bankrupt even if politicians don't openly admit it. But it is totally wrong that such wealth should be sold. These are our riches. A lot of people were killed in wars so we could have them. I'm totally against this plan."

The burly Corfiot is not alone. With the ruling socialists pledging to start the drive with the sale of stakes in ailing public enterprises, the backlash has been swift and sharp.

Powerful unions backed by militants who have successfully disrupted past privatisation plans have vowed to step up opposition. Alexis Tsipras, the leader of Syriza, a leftist alliance, and a vocal opponent, has already warned of the need for a referendum. "What government has the right to give away our land?" he railed in parliament recently. "What government has the right to deny our children and the next generation our country's wealth?"

This week, the 24,000-strong power workers' union weighed in, threatening to blanket Greece in darkness with "rolling 48-hour strikes ... to make the government change its wrong decision".

"Selling public property at provocatively low prices to satisfy our creditors is not going to help our country extricate itself from economic crisis," said Ilias Iliopoulos, general secretary of Adedy, the civil servants' union which represents half a million workers.

"After all the austerity measures that have brought ordinary Greeks to the brink of penury, privatisations will be the tipping point. In the current climate we all know the prices won't reflect their real value. The IMF, the EU, the banks and other profiteers who have loaned us money will be getting them for nothing."

Although the privatisations have also ignited in-fighting among the ruling socialists – many of whom are opposed to the plan – officials say sell-offs are the only way of digging Greece out of its debt spiral. Dominique Strauss-Kahn, the managing director of the International Monetary Fund, and mandarins in Brussels insist the programme amounts to Athens' best chance of boosting investor credibility and avoiding a debt restructuring.

"Greeks have always had a parasitic relationship with the state. Unlike in other European countries they have always depended on it and shown little confidence in the private sector," said Spyros Vougias, the deputy transport minister.

"Psychologically, this has made them phobic about privatisations. But, at this juncture, it makes sense to denationalise loss-making public utilities such as OSE [the state-owned railway network which loses €1bn every year] to lower the debt and pay less interest. Whatever the political cost, Papandreou is determined to do these reforms."

A team of international advisers is expected to be appointed by the government in the coming months to oversee the programme.

But financial experts say the drive is also overly ambitious, reflecting an economy in freefall at a time when its international rescue package appears, increasingly, to have failed.

Prior to the announcement of the €50bn plan, the IMF had urged Athens to make privatisations amounting to 0.8% of GDP, or €2bn, over a three-year period to 2015. More worryingly in a country that still lacks a full official land registry, it remains unclear what, exactly, the state owns. Chaos is such that officials are unsure which ministries own facilities built for the 2004 Olympics.

"Suddenly, we are told privatisations will amount to €50bn, which goes against all the forecasts and literally will mean raising a staggering €15bn every year," said Theodore Pelagidis, an economics professor in Athens.

Greece, he added, was still a sinking ship. "Even if the programme brings in €20bn-€30bn, which in my view is optimistic, it won't change the fact that, sooner or later, a debt restructuring will be imposed if Greece is to avoid becoming the Lehman Brothers of Europe."

What Greece plans to sell



• Stakes in railways, water utilities, electricity and natural gas companies

• Public holdings in banks, including 34% of Hellenic Postbank, in which the state has a 34% stake

• Athens' former international airport, Hellenikon, as well as hundreds of ports and regional airports

• Loss-making defence companies such as Hellenic Defence Systems and the Hellenic Vehicle Industry

• Government-owned buildings, land plots, hotels, beaches, thermal baths, marinas and casinos

• Billions of euros' worth of venues built for the 2004 Athens Olympic Games (right, Greek actor Maria Nafpliotou takes part in the ceremony to pass the flame to China in 2008)