Greece is no exception to the pessimism and negative climate permeating the European economy, despite continuing to grow at a fast pace, with difficulties clearly visible even to the greater optimists. Consumption is showing signs of a slowdown, inflation has shot up to 4.3 percent in February and businesses are seeing their profits seriously dented. On top of this, the climate of recession in Europe is naturally hitting exports and the expected proceeds from tourism. The economic gains from the Olympic Games seem to be the only ray of hope for the optimists. However, it is not a foregone conclusion that the event will have an appreciably positive impact, for the simple reason that most projects under way currently cannot produce prosperity if their use is only limited to the one month that the Games are held. Economy ministers have been holding a series of consultations this week which will culminate in today’s Cabinet meeting on the state of the economy. The government is giving clear signs of abandoning its rather «distant» observation of international economic developments, based on the unconvincing claim of a strong economy. Nevertheless, realizing the difficulties is not sufficient for dealing with the situation; this requires measures! The «big guns» cited by the government until recently – the Olympic Games, the inflow of European Union investment subsidies under the Community Support Framework programs and fiscal stability based on a budget surplus – have proved to be ineffectual fireworks. It is clear that even if the Greek economy continues to grow at double the rate of the EU average, the real economy will fare no better at the end of the year. The 25 percent average drop in profitability of listed firms and the fact that one-third of them reported losses for 2002 is indicative of the performance of non-listed businesses. Given this climate, if the consultations and meetings with representatives of business and the Cabinet meeting end again in expressions of wishes and hopes, the disappointment will be strong. The economy urgently needs measures to overturn the negative climate. The problems cannot be solved all at once but the market needs to be given a strong signal that the government is no mere spectator of developments, that it is not merely praying for the economy’s salvation. The crisis is affecting firms irrespective of size, except in certain sectors. The objective is to pep up investment and consumption, but in a way that will not fuel inflation. Moreover, this must be done in accordance with the dictates of the EU Stability Pact, of which the Greek presidency seems to be a vigilant guard. All indications are that the war in Iraq will start in the next two weeks and oil prices will naturally give inflation a new boost. The government has to prove it can put up an effective defense to the downturn in economic activity – and time is not on its side.