Government chooses boosting growth over fighting inflation
The government would rather allow higher inflation than sacrifice economic growth, Economy and Finance Minister Nikos Christodoulakis told an audience of businessmen yesterday. «The government’s foremost goal is to maintain high economic growth… even if inflation stays at a high level,» Christodoulakis said in a speech made at the Athens Chamber of Commerce and Industry (EVEA). Last year, Greece’s gross domestic product grew by a higher-than-expected 4 percent, five times the average growth achieved by the 12 eurozone countries. By contrast, inflation stayed at almost double the eurozone level, and in February, the combined effects of cold weather and high fuel prices boosted the annual pace of inflation to 4.3 percent, from 3.1 percent at the end of January. Christodoulakis told his audience that a high GDP growth provided the «best shield» against the global economic slowdown, exacerbated by uncertainty over the effects of a likely war in Iraq. Christodoulakis said that, although the government still pursues fiscal stability, it will not cut back growth-boosting public spending, indicating that the fight to lower the country’s excessive debt will take a back seat, for the time being. Although Christodoulakis has repeatedly said he would follow the «populist» route of spending increases to boost consumption, his declaration was widely interpreted as opening the door to such spending increases. With national elections coming up, at the latest by May 2004, and the ruling Socialists consistently behind in the polls, it is widely believed that the government will pull all the stops to be re-elected. In the same vein, Prime Minister Costas Simitis admonished his ministers yesterday to do what they can to accelerate the absorption of funds from the European Union’s Third Community Support Framework (CSFIII) program. Combined EU, state and private funds finance projects worth about 51 billion euros. Although it is normal for fund absorption to accelerate toward the end of a CSF cycle – and CSFIII runs from 2000 to 2006 – Simitis insisted yesterday on timetables being brought forward. The complex auditing rules imposed by the EU, but also the excessive and inflexible Greek bureaucracy and sheer lack of interest by several ministries in promoting programs that will receive funding, means that there are few tangible results to show from this program. Among the sectors where funding delay is particularly acute are health and welfare, fishing and transport. In the last sector, there are already fears that the State will not be able to absorb funds earmarked for the modernization and expansion of the country’s railway system. On his part, Christodoulakis called on businessmen to become more aggressive in their efforts to boost exports and to refrain, if possible, from raising prices excessively as a result of fuel price hikes.
