The annual presentation of the state budget reminds us of the old saying about second marriages being the triumph of hope over experience. In life, a second chance might be all one needs to get it right, but in drawing up budgets, our governments have managed to get things wrong time after time. They have never managed to meet their own forecasts. (Which raises the question of why they bother – is it the triumph of ritual over substance, perhaps?)

The state budget, then, used to be something of a game for those with any interest in following its application through the year, providing a measure against which to appraise the incompetence of the government of the day. Today, unfortunately, this is no longer the case: Greece is now in a very different international environment, one in which every single country is struggling to find ways to make it through the international storm. This state budget reveals how the government intends to deal with the crisis and what radical new thoughts it intends to introduce in an effort to revive the economy, raise productivity and competitiveness and guard against the importation of the troubles wracking trading partners and neighbors. Measured against this, it is clear that Greece’s budget proposal for 2009 is – simply – dangerous.

First, it is stuck in the patterns of the past, expressing optimism that would be out of synch even in the best of times. Apart from an expected growth rate of 2.7 percent (above the European Commission forecast of 2.5 percent and the Organization for Economic Cooperation and Development’s 1.9 percent), it expects a 7-billion-euro increase in tax revenues at a time of crisis, when the tax base will shrink and people and companies will do their best to shirk paying them. The government’s costs will rise as it tries to cope with the crisis by pushing cash into the market and trying to ease the pain of lower-income groups (which will expand along with the rise in unemployment).

Second, sticking to the old type of budget, with its emphasis both on increasing tax revenues while also cutting state expenditures – including public investment funding – will suffocate the economy. If government, business and consumers are all spending less, if incomes from tourism and shipping continue to fall, where is growth to come from?

The global crisis – coupled with the systemic problems of the Greek economy – requires inspired proposals to stimulate growth (and thereby ensure more jobs and state revenues) and to cut down on waste in the state sector. Instead, the government is trying to create the impression that all that matters is keeping the budget deficit under the EU-mandated 3 percent of GDP by overestimating revenues and cuts in spending. It is creating an illusion that fools no one and, in the end, will have no meaning in the real world as events unfold over 2009.

To be fair, the government has very little room to maneuver, given that 40 percent of budget revenues go to wages and pensions, 22 percent to social security and 20 percent toward financing the public debt. That leaves a paltry 18 percent for public investments, state and ministry operational costs and emergency spending. This is where decades of taking the easy route, of not reforming the unproductive economy has lead – to suffocation.

But the 2009 state budget proposal does not simply highlight the economy’s great problems – it reveals that the government does not have a clue as to how to deal with the coming storm. It is a grim forecast for a dangerous time.

13-06-2008	20-06-2008	27-06-2008

04-07-2008	11-07-2008	18-07-2008

25-07-2008	01-08-2008	08-08-2008

15-08-2008	22-08-2008	29-08-2008

05-09-2008	12-09-2008	19-09-2008

26-09-2008	03-10-2008	10-10-2008

17-10-2008	24-10-2008	31-10-2008

07-11-2008	14-11-2008	21-11-2008