The odd return of government interventionism

Since the announcement of the government’s timid privatization program about two years ago, we have returned to an odd «socialization» – or, as the practice used to be better known, nationalization. Under the weight of the negative global economic climate which many predict will further deteriorate, the power, strength and role of the State is gaining strength, both in running the Greek economy in general and in citizens’ daily economic transactions. Factors boosting this process are the open issues of allocation, increases in the absorption of European Union investment subsidies, and the preparations for the Olympic Games, which largely account for the fact that Greece currently has the highest ratio of public tenders to GDP in the European Union. But these two factors alone cannot explain the trend. In various sectors, there is an evident government disposition toward direct involvement in the country’s economic life, such as the unfortunate decision to have retailers display prices with the whole words of «euros» and «cents,» which was modified and postponed a couple of times and then withdrawn. This has been followed by the so-called «popular» bonds, which are supposed to protect savings against inflation; the effect of the move will be to «redistribute» public debt. In the end, bond buyers’ gains will be rather limited and the cost of servicing the debt (interest on the bonds) will be paid by unaware taxpayers. The role of the state-run Agricultural Bank (ATE) seems to have been similarly upgraded. In this case, the «socialization» concerns loans given to farmers under especially favorable terms. Whether this is the way to rationalize the bank is doubtful. It might have been had ATE transparent and credible financial statements that did not hide large past losses and had it real profits. As regards privatizations, the stock market downturn does not allow for flexible moves, which means partial flotations while the State retains the management. But the government does not really seem capable of effecting substantial privatizations. It has only turned over to private enterprise businesses of secondary importance, such as marinas and casinos. In all, the State seems to be making a dynamic comeback in the country’s economic life and nothing indicates that this will change before the next elections. And it is extremely likely that it will not change should there be a change in government. The question arises as to what private firms can do to defend themselves? The obvious answer is to carry out the rationalization that the State cannot do, by absorbing the costs it adds to economic activity.