The Greek economy is being shadowed by a series of uncertainties which make business leaders believe that 2003 may prove a much more difficult year than last. The unfavorable forecasts were fueled in the last 10 days by the first announcements of company results for 2002, the 10-percent fall in exports, the slide in the business expectations index drawn up by the Foundation for Economic and Industrial Research and the 22.7-percent decline in private investment compared to 2001. The possibility of a war in Iraq and the fluidity in the domestic political scene now come to exacerbate the effect of the combination of these negative developments on business confidence. For a start, it is considered an almost foregone conclusion that a war will seriously affect oil prices. The rise will further undermine consumers’ confidence in the economy and is also projected to push up the prices of other raw materials, thereby fueling inflation, especially if the war drags on for two to three months. Already, the recent harsh weather is expected to push inflation up considerably in February. Second, the threat of war is certain to hit the country’s tourism industry, which hoped for a recovery from last year. In case the war’s duration is prolonged, its negative effects on the entire European economy will probably have a cumulative effect, and a deep and protracted recession cannot be ruled out. Third, the suspension of the policy of privatizations, apart from perpetuating the structural problems of the Greek economy (low productivity, waste of resources) will seriously undercut budget revenues. If one takes into account the much higher expenses accruing from the recent extensive landslides and damage to infrastructure, it becomes clear that the outlook for the much-needed reduction in public deficit and debt is not good, and at a time when Brussels is keeping a watchful eye. Fourth, the pre-election period effectively begins following the current six-month Greek presidency of the EU (whether elections are held early or in the spring of 2004), which increases the government’s vulnerability and makes it susceptible to giving in to demands of the party machine and the strong trade unions in the public sector, particularly given PASOK’s flagging popularity at the polls. There is concern among business circles that this vulnerability will be translated into a wave of hirings in the broader public sector and other benefits, which are bound to dent the competitiveness of the economy and will be difficult to correct in the medium term. A fifth factor is the aversion of big foreign firms to productive investment in Greece. According to sources, recent data which is about to be announced in a study shows that net foreign investment in Greece has been negative in recent years. This development creates a particularly unfavorable outlook for incomes and employment in a few years’ time, especially in view of the shrinking of the bonanza of EU investment subsidies after enlargement. And sixth, the doubts that have started being raised about the prime minister himself – even though still only timidly – and his ability to win the next election look very likely to intensify after the expiry of the EU presidency in July. This would make matters even worse for the economy.