ECONOMY

Finance minister warns of dangers of war against Iraq

Greece yesterday added its voice to the growing chorus of European countries opposing military action against Iraq, saying it would be better to direct the energy toward economic growth. At a Security Council meeting on Monday, both the German and French foreign ministers warned of the consequences of a war against Iraq and said there was nothing to date that warranted military action. Russia yesterday spoke out against a war. Industrialists and economists meeting at the World Economic Forum in Davos, Switzerland have also warned of the risks a war could have on the fragile global economy. Saying that «there is no war which cannot be avoided,» Economy and Finance Minister Nikos Christodoulakis noted that military action against Iraq could create wide-ranging economic, political and social problems, not just in Greece but worldwide. Oil prices, for one thing, could soar to as high as $40 a barrel, putting pressure on inflation and a brake on economic growth, although the recent appreciation of the euro could blunt some of the impact. The tension could discourage investors and also add to geopolitical instability. Christodoulakis said it would be better to focus on boosting economic growth especially at a time when the EU is projected to see shrinking growth in the first quarter of the year. He said economic activity is expected to pick up to 1.2-1.5 percent by year-end. The eurozone is estimated to have expanded at a below-par pace of 0.8 percent last year. Underscoring the government’s reluctance to undertake more radical structural reforms despite pressure from the European Commission, Christodoulakis said the State «will not push through radical fiscal measures» in the name of fiscal consolidation. «We will focus on growth-enhancing measures,» he said, noting that a sluggish economy would not contribute to structural reforms nor attempts to balance public finances. He said structural reforms mentioned by the Commission were already incorporated into the government’s program. On unemployment, the highest in the EU, he said the government aims to bring the rate down by one percentage point this year, falling to below 8 percent next year. The number of jobless last year is estimated at slightly below 10 percent. This could be done by increasing mobility in the labor market, allowing part-time employment in the public sector and adopting measures targeted for women. In its recent report, the European Commission urged Greece to tackle the high level of structural unemployment and to increase the employment rate, particularly among women. It also pointed to the lack of flexibility in the labor market and the high degree of segmentation.