ECONOMY

Time for hard choices

Yesterday’s reshuffle produced no surprises and only changed one of Economy and Finance Minister Nikos Christodoulakis’s three deputies. Giorgos Floridis, charged with fiscal policy, was promoted to Public Order Minister and replaced by Nikos Farmakis. The 58-year-old Farmakis, an orthopedic surgeon, has been a former deputy minister in the Health and Labor ministries but has had no experience managing state finances. Still, Prime Minister Costas Simitis apparently appointed him upon Christodoulakis’s recommendation. Fiscal policy is certainly the area in direst need of surgical repair. During the first five months of the year, spending increased 12.3 percent, compared with a 5.2 percent target for the year, and revenues increased only 2.8 percent instead of the 5.6 percent forecast in the 2003 budget. As a result, the deficit increased to 6.7 billion euros, a massive 75 percent increase from the 3.8 billion recorded during the same period last year. Greece’s deficit, according to the forecasts it has submitted to the European Commission, is supposed to be declining, not expanding. Farmakis will have to clash with all ministers, even the heavyweights, in order to ensure that spending is contained and the budget properly implemented. His colleague Apostolos Fotiadis, in charge with the revenue side, will have an equally uphill battle. Many taxpayers simply have little more to offer. Revenues for the Public Investment Program are also severely lagging: just 613 million euros during the first five months, compared to 1.9 billion in the same period last year. This reflects severe difficulties in absorbing European Union funds from the Third Community Support Framework (CSFIII). The deputy minister in charge, Christos Pachtas, insists all is going well but, obviously, it is not. Even with these problems, the economy remains the Socialist government’s last chance to change the unfavorable climate against it and ensure re-election. The best Christodoulakis can do is give a boost to the market. In recent days, he has been trying to do just that. Earlier this week, he announce new incentives for investments, which, by taking a chapter from Ireland’s book, proved a welcome surprise, provided they are implemented. For the first time, domestic and foreign investors will be able count on a stable low-tax environment. In this effort, Christodoulakis will inevitably face opposition. Another announcement, concerning the extension of opening hours for retail shops, was roundly criticized by many of his Socialist colleagues. Christodoulakis, despite his frequent verbal attacks on a state-driven economy, has so far not attempted a fight with those who believe the opposite. Turning public opinion around in the final 10 months before elections will also entail some populist measures, such as big pension increases. Christodoulakis is already talking to civil servants about a new pay scale that will raise salaries, for many of them quite significantly.