High economic growth will continue, PM’s adviser says

Greece’s high growth rate is not a circumstantial phenomenon but will last for almost the whole decade, said a close adviser to Prime Minister Costas Simitis. Speaking at an international conference on retail trade, organized by the Greek Association of Retail Traders, Simitis’s chief economic adviser, Professor Ghikas Hardouvelis, said that for the next five or six years, Greece’s gross domestic product (GDP) will grow at an annual pace of around 4 percent. Hardouvelis was responding to comments made earlier this week by the European Commission, in its spring economic forecasts, where it warned that Greece’s rapid economic growth, which topped the European Union in 2002 and will likely do so again in 2003, is «extremely unlikely» to continue beyond next year, because of a number of structural deficiencies that have not been properly addressed by the government, such as low productivity, rigid markets including the labor market, and high structural unemployment. Greece’s expansion – at 4 percent last year, exactly four times the growth of the eurozone – is attributed to a large extent to the construction boom ahead of the 2004 Athens Olympics and aid from the European Union through the Third Community Support Framework (CSF III). «We must not consider 2004 as a kind of milestone for the economy, since many important investments that were to take place in the regions (outside Athens) have been postponed for beyond that date,» Hardouvelis said, acknowledging that a lot of funds have been siphoned into the Athens area for the needs of the Olympics. The government insists that 80 percent of the money invested through CSF III – a total of 51 billion euros, including state and private sector investment – will go to regions outside Athens, helping to decrease the disparities in income. Several ministers have also said that there will be a CSF IV that will also provide funds for important infrastructure projects, including the extension of the Athens Metro. It appears doubtful, however, that CSF IV, when it is agreed, will allocate as much money to Greece as CSF III, which expires in 2006. The European Union is going to give priority to the much poorer incoming members from Eastern Europe and, even though southern states like Spain and Portugal have pledged to fight alongside Greece for a continuation of the considerable aid they receive, this may result in little more than deadlock. The richer states are determined not to increase their spending in favor of the poorer ones. A decline in Greece’s growth rate will defeat its goal of «convergence,» that is, to reach an income level close to the EU average, by the end of the decade, as Simitis has repeatedly declared. MP Giorgos Alogoskoufis, New Democracy’s spokesman on economic affairs, who also spoke at the retailers’ conference yesterday, said that the government’s economic policies have reached a dead end. «We cannot achieve our future goals with the government’s tactics of tax-and-spend, its delays (in dealing with structural problems) and with the civil service in its present shape,» he said.