Simitis’s mandate is short on policy specifics

Prime Minister Costas Simitis’s clear and strong mandate – winning 71 percent of the vote for party president at the ruling PASOK Party Congress that ended on Sunday – is hardly a guarantee that the pace of structural reforms will be accelerated, observers said. An expected Cabinet reshuffle could even possibly slow the program down as new ministerial appointees get attuned to their new surroundings. Seeking to bolster his position against party dissidents and the government’s reputation after a number of policy reversals, notably social security reforms, Simitis had brought the congress forward by six months with his call for a strong leadership. While the premier received overwhelming support from party delegates, the high rate of approval has no bearing on the government’s program of structural reforms, said Stephanos Manos, leader of the Liberals Party. I’m not optimistic as to what’s going to happen. Simitis did not receive a mandate to do specific things. In fact, he never mentioned anything specific, he said. For me, a mandate is something that goes into specifics. The Liberal Party leader said it is even possible that after a few days, we will go back to where we were, with no drastic changes in what will be done. In fact, the privatization program has proved to be more expensive than anticipated. Instead of raising cash, the government is spending money. In the case of Hellenic Shipyards [sold to German shipyard HDW-Ferrostal last Thursday], the State has pumped 600 billion drachmas into the shipyard, Manos argued. Schroder Salomon Smith Barney consultant Miranda Xafa, however, characterized the enhanced support for Simitis as a positive point. Nevertheless, two factors are likely to derail government efforts to speed up structural reforms, a program that includes further equity sales in state-owned enterprises, reforming the civil service and tax system, and opening up the energy market and closed guilds. Municipal elections scheduled for October 2002 will hobble the government until then, Xafa said. The adverse global economy brought on by the attacks on the USA and the war in Afghanistan is the other factor that will complicate the State’s efforts to proceed with structural reforms. This is especially true for national flag carrier Olympic Airways, which has been struggling to find a buyer and could yet see its current efforts flounder amid the present global airline crisis. The net result is that it is not clear that we will see a significant acceleration of structural reforms, the SSSB consultant said. Dimitrios Maroulis, analyst at the economic research department at Alpha Bank, said it is more important to see Simitis’s victory as the elimination of a significant uncertainty for the government. While concerns remain over the momentum of structural reforms, the program itself has speeded up in recent months, especially after the prime minister succeeded in expediting the PASOK Congress, he said. The most important was the sale of Hellenic Shipyards. And if industrial bank ETBA and Olympic Airways find buyers this week, the government will have made very important progress, Maroulis said. The pace of structural reforms is also tied to the predicted Cabinet reshuffle planned for next week. Liberals Party leader Manos noted that a minister does play a significant role, as he can accelerate or delay things. Agreeing with the assessment, Xafa said a market-oriented minister will do much to speed things up, whereas the reverse is true for one who is less friendly to a free market. Manos, however, points to the disadvantages of a new economic team, noting that new appointees could delay structural reforms as they will need time to learn the ropes. On the other hand, maintaining the present lineup has its pros and cons. If [Papantoniou] stays on, we should not expect additional delays. However, I don’t see any enthusiasm about the reform program, he said.

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