ECONOMY

The budget is at the service of narrow electoral goals

The state budget is slowly but surely being adapted to the needs of general elections, due by May 2004 at the latest. At the same time, the Finance Ministry’s habitual resistance to calls for extra spending is being eroded by the day, while even the State Accounting Office is keeping an ear for the demands of various social groups, which visit the Panepistimiou St building daily to demand additional appropriations. According to these indications, Prime Minister Costas Simitis, who has the final word on when the elections will take place, may well move them up to this year. His goal will be, if not to remain in power, at least to lose narrowly enough to conservative New Democracy so that it can acquire a blocking minority (121 deputies) in the subsequent election of a new president of the republic, which will occur around March 2005 (the Greek Constitution states that the president must be elected by a minimum of 180 MPs after three ballots, otherwise new elections are called). A narrow loss would also give the Socialists the strength to fight, in the name of «the people,» any measures proposed by a right-wing government. Both Economy and Finance Minister Nikos Christodoulakis and his deputy in charge of expenditure, Giorgos Floridis, have lately toned down their calls for fiscal orthodoxy and appear more flexible. This has had an effect on the budget. Previous efforts at a «faithful execution» now appear empty words. State Accounting Office officials say they have been inundated by demands from various ministers for all sorts of bonuses to be awarded to civil servants. Even the most outlandish of the demands, say these officials, are not summarily dismissed by the ministers, as would have been the case before, but are simply put on the back burner, to be possibly used later, at some strategic juncture. The results of this change of heart are already apparent: In the first quarter of 2003, spending rose by an incredible 25 percent compared to the same period last year, way off the government’s target of 6 percent (for the whole year). Another sign of laxity is the decision to increase the number of hirings in the state sector this year. Initially, this proposal had faced Christodoulakis’s veto, but, finally, Interior Minister Costas Skandalidis, also a big proponent of a revised pay scale for civil servants, got his way on hirings. Christodoulakis even added that the new pay scale may be applied from 2004, provided the necessary resources are found. However, Skandalidis is pressing for immediate action, mindful of the benefits for the ruling party. Amid all these demands, ministry officials are placing their hopes for a reasonably balanced budget on settling big company accounts for the period 1993-98. This measure, initially limited to small and medium-sized enterprises, will require some 90,000 firms to pay significant amounts to avoid a thoroughgoing audit of their books. These measures, described by officials as «taxation sorties,» seem to be, at present, the only way for the State to ensure some additional revenue. Another resort is borrowing, which, however, places a further burden on the government’s enormous debt. Already in the first quarter of 2003, the State borrowed 14 billion euros. At least Greece’s participation in the euro allows it to borrow at rates lower than those the US, or the UK, have to pay.