Friday October 31, 2014 Search
Weather | Athens
18o C
13o C
News
Business
Comment
Life
Sports
Community
Survival Guide
Greek Edition
Greece and Canada: Two tales of fiscal consolidation

By Nikos Konstandaras

Greece and Canada, one of the most creditworthy countries, are worlds apart. What they do have in common is that both are applying fiscal consolidation programs: Canada has been doing so willingly since 2011, with the aim of wiping out a deficit of 4.9 percent of GDP by 2017; Greece, with its back to the wall, has been in its program since 2010. We are living with the consequences daily. It is worth looking at how Canada is doing things.

Aside from its natural wealth, the size of its economy and the fact that it faces no trouble on its borders, Canada has the added benefit of having experienced fiscal consolidation before. After decades of ballooning debt, in 1994 the federal and provincial governments adopted a program which by 1997 had wiped out a deficit of 8.3 percent of GDP. The federal government cut many of its operations, reduced defense and foreign aid spending, as well as business subsidies, while also cutting social program transfers to its provinces. It adopted reforms aimed at spurring growth, including free trade, tax reform and reforms to employment, insurance and public pension plans. Taxes were cut, debt was reduced and, with greater credibility, the economy began to grow. Whereas from 1992 to 1994 GDP grew at an average of 0.4 percent (as opposed to 2 percent in the US), from 1994 to 1996 it rose 3.3 percent (3.8 percent in the US), and from 1998 to 2000 by 4.8 percent (4.5 percent in the US).

The lesson from Canada’s experience is that the government has to make credible plans and communicate their benefits to citizens. The measures must be clearly defined and economic assumptions must be prudent, delivering more than they promise. The current fiscal consolidation program in Canada was a result of the global economic crisis and the stimulus response to it leading to a deficit of 4.9 percent of GDP. It includes corporate and personal income tax reductions, the closing of tax loopholes, infrastructure investments, reining in defense spending and controlling public sector wage growth. This time there has been no reduction in the growth of transfers to provincial governments – which are expected to have erased deficits in 2017, along with the federal government.

“Consolidation has to be initiated as soon as possible. Don’t be timid. Early progress will boost confidence in the private sector and support the economy,” comments a senior Canadian official involved in the program. “Focus on spending reductions and measures that will increase potential growth.” According to the OECD, Canada is on the right track: It expects its GDP to grow by 2.5 percent this year and 2.7 percent in 2015. In short, restraining spending does not preclude growth. Greece – with its depression and asphyxiation, with taxes that keep rising, with the lack of political and public support for the program – clearly has much to learn. The question is: If we in Greece did not know how best to achieve consolidation, why did the troika not know better?

ekathimerini.com , Thursday June 26, 2014 (22:37)  
The judiciary’s responsibility
Findings raise eyebrows
Countering Turkish swagger in the Eastern Mediterranean
Time is running out in Afghanistan
Cyprus court ruling opens way for bailout funds
The Cypriot supreme court ruled as unconstitutional Friday four bills on bank foreclosures whose passage by parliament prompted international lenders to halt payments on the country’s 10-bil...
Greek PM appoints new defense, development ministers [Update]
Greek Prime Minister Antonis Samaras named his development minister to the defence ministry portfolio on Friday to replace Dimitris Avramopoulos, who is set to become an EU Commissioner. Nik...
Inside News
Big monthly drop for stocks
The local bourse lost about one-seventh of its capitalization in October as the benchmark declined 13.73 percent within the month despite Friday’s gains of almost 1 percent. The wave of glob...
Eurozone inflation up, unemployment steady, Eurostat reports
Eurozone inflation edged up to 0.4 percent from multi-year lows while unemployment was little changed, official data showed on Friday, providing only limited reassurance that a modest econom...
Inside Business
BASKETBALL
Obradovic watches Greens thrash his Fenerbahce
The second homecoming of former Panathinaikos coach Zeljko Obradovic, now at Fenerbahce, was not as emotional as last year’s, but it was certainly was the night of an emphatic triumph for th...
SOCCER
Berg returns to add spice to Panathinaikos´s Cup win
The second round of games for the group stage of the Greek Cup produced plenty of interesting games and results in midweek, but it still lags the upset potential that the knock-out stages of...
Inside Sports
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
 RECENT NEWS
1. Big monthly drop for stocks
2. Cyprus court ruling opens way for bailout funds
3. Greek PM appoints new defense, development ministers [Update]
4. PSI victims protest in Athens, Thessaloniki
5. Archaeologists find underground vault in Amphipolis tomb
6. Eurozone inflation up, unemployment steady, Eurostat reports
more news
Today
This Week
1. Man shot dead, woman injured in Vathis square attack
2. Cyprus’s Georgiades bets on economy for Irish-style bailout exit
3. Germany’s 10-year bonds decline before euro-area inflation data
4. Archaeologists find underground vault in Amphipolis tomb
5. Greek retail sales rise for third month in a row
6. New defense minister to be appointed without reshuffle
Today
This Week
1. Austria’s creative bookkeeping beats Greece on secret debts
2. End of reason, end of humanity
3. Clean bill of health for Greek banks from stress tests
4. Samaras pledges action after flash floods in Athens
5. Eurobank, National Bank restructurings eliminate capital gap
6. Athens flood damage assessed, compensation payments to begin
   Find us ...
  ... on
Twitter
     ... on Facebook   
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright © 2014, H KAΘHMEPINH All Rights Reserved.