Christodoulakis tries to soothe employers’ fears

Economy and Finance Minister Nikos Christodoulakis said yesterday that any measures designed to benefit low-income groups will not be taken at the expense of fiscal policy. Christodoulakis’s remarks were seen as a response to the concerns of business circles that excessive handouts ahead of national elections might derail fiscal policy, with the government being forced to raise taxes in order to compensate. Odysseas Kyriakopoulos, chairman and executive president of the Federation of Greek Industries (SEV) called on both the government and the opposition to show restraint in their pre-election promises. Yesterday, Christodoulakis met Prime Minister Costas Simitis to discuss the so-called «social package» that would reportedly include about 1.3 to 1.5 billion euros in handouts to lower-income groups and civil servants. They were joined by Michalis Chrysochoidis, general secretary of the ruling PASOK party. Later, Christodoulakis and Simitis met with SEV officials. «The government is in constant touch with the SEV executive in order to shape up development, employment and social cohesion in the country,» Christodoulakis said after the end of the second meeting. He added that the government would draw a «balanced plan» that would not neglect the need to increase competitiveness. «In no case will any handouts to lower-income groups be made independently of fiscal planning,» Christodoulakis said. The government’s main fiscal challenge is to lower Greece’s massive debt, still over 100 percent of its gross domestic product. Kyriakopoulos said that he asked the government to show restraint in its promises ahead of elections. He added that Simitis assured the SEV executive that fiscal discipline would be followed. Kyriakopoulos added that the economy’s major problems are low competitiveness, low employment and high inflation. He said that excessive price rises in certain sectors are the result of problems with market competition. SEV’s demands SEV officials told Simitis and Christodoulakis that they wanted, above all, a full-fledged tax reform, including lower corporate taxes. They also asked for a new law on investment incentives that would not tie up these incentives with any specific job-creation targets. The government has unveiled a rough draft of such a law, which includes a stable tax regime for big investors. There are concerns, however, that these provisions may be watered down in the final text. SEV officials also asked for a more active economic diplomacy, focusing on promoting Greek products abroad. Greek exports have been declining for most of the past 10 years. They also wanted an end to tight regulations on labor markets that skew competition and fuel inflation. Finally, they asked that the state stop playing the businessman by selling most of the public companies it owns.