Known by its Greek acronym ODDY, the Organisation for Public Property Management ran warehouses nationwide that auctioned off anything from old sofas discarded from city hall waiting rooms to luxury cars confiscated from drug dealers.

Now, efforts to consign ODDY itself to the scrapheap, along with its loss-making payroll costs, show just how hard it is for the Greek government to satisfy foreign creditors' demands that it shut down dozens of state agencies to save money; it may say it is waging war on red tape, but the red tape may be winning.

Set up to offload army surplus after World War Two, ODDY began showing losses a decade ago, squeezed by competition while maintaining dozens of employees on staff. So when some 50 state entities were slated for closure in 2011, ODDY was on the list.

More than a year later, it has indeed been wound up. A ministerial decree in November announced ODDY no longer existed, and the European Union and International Monetary Fund, which are keeping Greece afloat on condition it slashes costs, duly noted in March that the required cuts had been legislated for.

But that is all on paper. Employees and government officials who spoke to Reuters have revealed that ODDY still exists in all but name, for as DDDY - no longer an Organisation, but now a Directorate - it has simply become an office of the Greek Finance Ministry. And while staffing has been cut, many costs have simply transferred from wages to pensions, and the shake-up has all but paralyzed its ability to run auctions to make money.

The workforce has been halved since the debt crisis erupted in 2009 and the wages of those remaining have been cut. But as many who left simply retired and took a pension, the state may have saved little overall; meanwhile revenues, disrupted by a shunt into legal limbo, have tumbled, and assets, like that yellow roadster, gather dust in silent yards across Greece.

"I feel disappointed. This is not what we dreamed of," said George Chronopoulos, who retired last month aged 61 after 37 years working for ODDY as a valuer, mainly for cars, at the agency's Athens warehouse, one of its four main sites.

"I used to love my job," said Chronopoulos, who was also a trade union organizer and served for a time on the agency's management board. "But now I cannot find a reason to stay."

In Athens, the unit has held just one car auction this year, compared with one a month in better times. Even more bizarrely, the change of name and status led to its Internet access being cut off since March, hindering it even further in making sales.

In the chaos of dramatic staff cuts, a shortage of security guards to fend off thieves tempted by its stores of valuable goods has meant some of the agency's clerks have been drafted in as watchmen, employees said. And at the Athens yard, where rows of confiscated motorcycles and piles of slot machines sit unsold, one worker pointed to dogs, kept in cages but barking loudly, as another interim solution for discouraging robberies.

LONGER-TERM GOALS

Details from the story of ODDY, pieced together from current and former employees and official records, illustrate some of the hurdles Prime Minister Antonis Samaras faces to his goal of saving up to 2 billion euros by 2015 through scrapping some of the thousand or so similar agencies in the hope of persuading international lenders he can steer the budget towards balance.

Auditors from the EU, IMF and European Central Bank, known as the troika, are in Athens this week going through Samaras's strategy and reviewing Greece's performance to date; any signs that savings are not going to plan may trouble them.

The Finance Ministry and the Ministry for Administrative Reform declined comment for this article.

But Dimitris Kouvaris, who has run the DDDY operation since March, defended his agency's efforts to reform itself, acknowledging struggles with technical problems but insisting that it was too early to pass judgment on a long-term overhaul which he said would save the state money eventually.

"Our aim is to reduce spending, achieve better control of expenses and upgrade services," he said.

"Of course, we have technical and operational problems which we are trying to overcome, and also labor-related issues, since the workforce has been significantly reduced."

Founded as ODISY in 1946 to manage leftover wartime equipment, ODDY became widely known in the 1980s and 90s for auctioning off cars confiscated from criminals. Employees say politicians and civil servants were particularly frequent visitors to its warehouses, picking up bargains. As late as November last year, the agency handed over free to the army five vehicles including an Audi sedan, a government document shows.

By the turn of the century, however, the agency had gone into decline, suffering from competition from private firms bidding to recycle materials, former valuer Chronopoulos said. For 2009, published results show ODDY had accumulated losses of 17 million euros and had a net loss that year of 2.4 million.

Soon it was on the government's shutdown list.

REARGUARD RESISTANCE

Reaction among the 120 or so staff was swift. With cuts in wages and pension rights looming, many took the chance to retire early on the basis of existing, more generous, terms.

As Chronopoulos, the former union leader noted, when faced with a monthly salary being cut to, say, 1,300 euros from 2,000, many found they were better off locking in a state pension - a move that left the overall state budget little better off.

Other employees at ODDY decided to fight the cuts.

With colleagues at other threatened outfits, they launched strikes and protests that union officials say deflected the blow, aided by support from political leaders who backed action against public sector layoffs that reached a peak a year ago.

"ODDY is an inextricable part of the state," Fotis Kouvelis, leader of the Democratic Left party, said at the time, in 2011. The party is now in Samaras's broad coalition government.

In November last year, ministers appeared to sidestep on the promised closure of ODDY, issuing a decree transferring its functions to a department of the finance ministry.

Chronopoulos and another long-time ODDY employee said only seven staff from ODDY were ultimately put into a scheme to dismiss public workers. Manager Kouvaris said six workers had been put on the dismissal track since he took over in March.

Yet alongside the shrinking workforce, employees complain of propagating red tape, suggesting that arcane approval procedures have held up payment for renewing the office's Internet service.

"There is no room for initiatives now to improve things," said Chronopoulos, who now plans to return to cultivate his pomegranate trees in the southern village where he has a home.

"You would need a hundred signatures."

Three employees normally engaged in clerical work said they had been asked to guard warehouses to make up for gaps left in the security teams by early retirements.

Kouvaris, the DDDY manager, declined to comment on the specific complaints but insisted restructuring was on track.

Pointing to an auction held last month as a success, he said online sales could restart this month and he was hoping for monthly revenues of up to 1 million euros. Prime assets included a luxury yacht and cargo vessels still on the agency's books.

For those who understood the Greek government's plan to be to shut down ODDY, such hopes of resurrection from the scrapyard of state entities may seem at odds with the strategy.

But as Athens University management professor Antonis Makrydimitris argues, it is a mark of the resilience of a complex network of public bodies built up by politicians who saw them as vehicles for distributing favor and patronage:

Describing the task of reform as urgent and "titanic", Makrydimitris said: "If you ask workers or managers in these entities if someone else could do their job, not only they would say 'no' but they would say they need more people ... The problem is that none of these organizations want to die."

(Additional reporting by Lefteris Papadimas; Writing by Deepa Babington; Editing by Alastair Macdonald)

• A Permanent Economic Emergency