ECONOMY

Public sector growing

The paradox of the Greek State is that despite the fact that the government declares it is following a privatization policy, in practice its role in economic activity is expanding. In this virtual privatization, reality is being shaped in a way wholly at odds with official speeches and declarations; a significant part of GDP continues to be generated by public corporations funded by national or EU subsidies. It cannot be a coincidence that roughly half the total capitalization of the Athens bourse is accounted for by firms directly or indirectly under the control of the State. This is the result of the part-flotation of almost all public enterprises, most of which continue to operate with the same or similar mentality as before. The Greek market is too small to have an effective shareholders’ movement that will impose meritocracy on how state organizations are run. Besides, many of the shareholders of public corporations are other public organizations, with government-appointed managers. However, the issue is not just that control of management remains with the State. It is also where money flows to; public tax revenue in 1994 was 21.5 percent of GDP and budget figures put it at 25 percent in 2003. In the EU as a whole, public investment as a percentage of GDP has been steadily falling in the last decade, but in Greece it is projected to go up from 3.2 percent of GDP in 1995 to 4.2 percent in 2004. Surely this is not the best recipe for privatization.