U.S. Markets open in 8 hrs 41 mins

Greece says to use asset sales for social welfare, not to cut debt

A Greek national flag flutters in front of the parliament building during heavy rainfall in Athens March 13, 2015. REUTERS/Alkis Konstantinidis

ATHENS (Reuters) - Greece will shortly present a law to turn its privatisation agency into a wealth fund that will use proceeds to finance social welfare policies instead of reducing its public debt, the deputy finance minister said.

The move could further strain relations between Prime Minister Alexis Tsipras' new left-wing government and Greece's international creditors, who want Athens to use the revenues to cut its huge debtload.

"There will be a new Sovereign Wealth fund ... and the revenue will be used to fund the government's social policies and to support the social security system," said Deputy Finance Minister Nadia Valavani.

Valavani told a parliamentary committee she would present legislation in the coming weeks to merge the privatisation agency (HRADF) with the country's state property company, ETAD, to set up the new body.

The leftist government is opposed to some key asset sales but has been forced to moderate somewhat its stance as it negotiates with its European partners over a new aid package.

Athens has promised not to cancel completed privatisations and to only review some tenders, under the terms of a four-month extension of its bailout program agreed with its creditors last month.

Greek representatives started talks with the international creditors in Brussels last week in an attempt to agree on a set of reforms and unlock much-needed remaining bailout aid.

Privatisations had been meant to raise billions for Greece's depleted state coffers since 2010 under its 240 billion euro bailout with the European Union and the International Monetary Fund.

However, proceeds have been disappointing since the HDRAF was set up in 2011, amounting to about 3 billion euros, a fraction of an initially targeted 22 billion euros.

The parliamentary committee also approved on Tuesday a new management for the privatisation agency.

Asterios Pitsiorlas, a businessman involved in the tourism sector, will become chairman, while Antonis Leoussis, former chief executive at Alpha Bank's real estate arm, will be chief executive. They replace appointees of the previous conservative government.

(Reporting by Angeliki Koutantou and Costas Pitas; editing by Gareth Jones)