ECONOMY

Finance minister to focus on fiscal policy in election runup

Economy and Finance Minister Nikos Christodoulakis yesterday appeared as the guardian of fiscal rectitude in remarks made after the swearing-in of a new deputy finance minister. Nikos Farmakis replaced Giorgos Floridis as one of Christodoulakis’s three deputies. He will be in charge of monitoring state expenditures at the General Accounting Office. Floridis became public order minister, replacing Michalis Chrysochoidis who was elected by the ruling PASOK party as its new general secretary. In welcoming the new deputy minister, Christodoulakis set the ministry’s priorities until the general elections, which must take place by May 2004 at the latest. Christodoulakis’s five priorities, in the order that he stated them, are: to draw up the 2004 budget and implement the current budget as planned last fall; to merge social security and pension funds as part of the reform of the social security system; to finish the new pay scale for civil service employees; to strengthen the welfare state by providing for the neediest; and to devise a new and, presumably, tighter method to monitor public expenditures. While there is something to be said for all these points, everybody knows that selective spending by the government will be the government’s main weapon in the period ahead of the election. Past examples show that fiscal austerity and living up to election promises do not go hand in hand. Keeping to the targets set a for the 2003 budget will be especially tough under the circumstances. Already, in the first five months of the year, the deficit has shot up 75 percent, and raising additional revenue appears close to impossible, unless there is a big boost in economic growth. However, the economy is already growing quite fast; boosting it may require tax cuts, which are incompatible with the goal of producing a budget with a very small deficit. As for the «reform» of the heavily indebted social security system, although Christodoulakis, and the rest of the government, insist it will keep the system solvent until 2032, the marginal changes they have instituted have merely papered over the cracks, postponing a most serious solution. The new pay scale for civil servants will benefit most of them substantially – ironically, it will be his own ministry’s civil servants that will benefit least – thus renewing the strong bonds between the ruling party and one of its main constituencies. The state of public finances is the trap this government will have set for the next – whoever wins the election. Christodoulakis, who as deputy finance minister was a master of creative accounting, insists on presenting finances in a more favorable light than their real state allows. As things stand, he has no other option.