Election plans may hurt economic prospects in 2003

Economic forecasters appear rather cautious regarding the prospects for the Greek economy in 2003; measured expectations of enterprises and consumers are clearly less optimistic in relation to 2002. This attitude is due to the prevailing uncertainty as regards international economic developments, the possibility of turnabouts which the government may make in its economic policy – given that 2003 is a pre-election year, and the crisis of confidence arising from Eurostat’s revision of the official figures of the economy last month. Dented confidence The true picture of the Greek economy in the last two years from Eurostat’s revised data is much less favorable – and this is bound to dent confidence. Budget surpluses became deficits, projected for 2003 as well. Moreover, an analysis of the figures of the new budget confirms that the fiscal streamlining that now appears more necessary than ever as a result of the sharp jump in the country’s debt is not being pursued forcefully enough. Indeed, certain analysts express the view that the 2003 budget contains elements of a laxer fiscal policy with respect to this issue, being more expansive than the 2002 budget. What this means is that the government is ready to proceed, when it thinks the moment is right, to increases in benefits, supports and plenty of hirings in the public sector, evidently putting its own party interests above the economy. Tellingly, government targets of strict curbs on public spending in recent years have always been overshot. It is therefore pertinent to wonder why such a strict policy will be implemented in a pre-election year. Privatizations The acceleration of privatizations appears to be another basic element of economic policy. However, it is clear that the way this policy is pursued does not help with the reform of the Greek economy, which aimed to increase its productive capacity with new investment and boost its competitiveness. For these are not privatizations meant to attract foreign capital for direct productive investment; they merely amount to auctioning through the stock market of segments of public enterprises, designed to boost revenue and reduce public debt. But even this prospect appears uncertain, as it largely depends on developments in global markets and the Athens bourse, where things are not projected to change appreciably. The revenue budgeted from privatization in 2003 exceeds 3 billion euros; a large enough sum to cause serious fiscal complications if not achieved. It is nevertheless certain that high growth rates will be maintained in 2003, thanks to the huge inflows of EU investment subsidies. These are estimated at about 15 billion euros, or about 10 percent of the gross national product, which the government and international organizations estimate will rise by 3.8 percent. It is not hard to imagine what the absence of this money would have meant.