ECONOMY

Why the Kokkalis proposal is not worthy

Investment in information technology and telecommunications was the «in» thing of the last decade; it was supposedly the magic solution. The issue resurfaced last week, when Intracom President Socrates Kokkalis suggested his company’s absorption by OTE Telecom. However, the proposal has come too late to be credible. According to the fashionable model of the 1990s, a deal of this type would have improved productivity and contributed to growth. Such prospects were priced in by almost all stock exchanges, particularly in the smaller ones where quick, profit-hungry investors invested in promising firms. And so, during the 1997-2000 period, bourses experienced rapid rises and falls. On the Nasdaq, which is mainly comprised of technological stocks, share prices quadrupled between March 1997 and March 2000, but have since fallen to their levels reached before the boom. European exchanges exhibited similar behavior. Germany’s Neuer Markt dived, while the French Nouveau Marché fell to its lowest levels since March 1996, when it was created. Investment in IT and telecoms rose in Europe, including Greece, as a percentage of GDP. A European Union study estimated the rise at 6 percent in 2000 from 2.4 percent in 1991. The rise was similar in the US. However, the benefits of all this investment in new technology are not at all clear. Most available research studies tend to conclude that the impact on productivity improvements has not been as strong as we previously thought. They also suggest that the impact on growth in the US has been stronger than in Europe. And it takes some time for the investment to be translated into changes in people’s lives. The development of new technologies is no answer to dealing with unemployment. Even if productivity rises in some sectors, it is absorbed by higher pay for certain categories of employees while others see their jobs go. The government has to vastly boost its sense of urgency. In theory, it still has a long way to go before its term expires, but in reality the time margin it possesses for engineering effective solutions is no bigger than six months. After this, the country will be absorbed in the mobilization for the municipal elections in the autumn, the results of which will then be dissected and evaluated endlessly. Thereafter, the Olympic Games of 2004 will begin demanding more and more of the government’s time, funds and energies as the date approaches. If an agenda has to be created for this period, it is quite simple: promote the organizational changes that will facilitate the country’s development. And these changes would have to consist of much more than just declarations, grant approvals and investment in new technologies. The game of digital technology was played during the last decade and the Greek economy missed it. Any more of it now is only based on personal or company strategies. And it is precisely for this reason that it is not credible. Attempts to dispose of the country’s tourism assets appear to be less than encouraging as last month Hellenic Tourism Properties, the asset management arm of the Greek National Tourist Organization, extended the tender for expressions of interest in the Parnitha casino to the end of this month. BoG’s report said that overall the Greek economy is expected to weather the current global slowdown better than other eurozone states with a projected growth rate of 4 percent for this year, which is due to slow by up to half a percentage point in 2002. The central bank’s forecast for next year corresponds to the Organization for Economic Cooperation and Development’s figure and is more optimistic than the official prediction of 3.8 percent and the European Commission’s 3.5 percent. The International Monetary Fund’s 3 percent is the most pessimistic.