Business grows wearier

The government’s policy of selling off about once a month segments of its stake in the National Bank and other public organizations in order to pay public sector wages; foreign investors’ tendency to turn their backs on the Greek economy and transfer their money to other, more dynamic economies; and the rise in public spending envisaged in the new budget, despite the continuing growth of public deficits, is creating a great deal of concern among the business community. Circles in industry and trade take the view that the prime minister is sacrificing the Greek economy for the few pre-election points that may won by such an unprincipled policy. In private discussions with financial reporters, business people have expressed deep disappointment and fear about the future, the main reason being the realization that the country’s public finances are in a bad state and bear no relation to the dressed-up picture projected by the government’s public relations machine. The resurgence of opaque procedures in public bookkeeping and the recent report by the State Audit Council on the concealment of many public expenses from official data has initiated the latest round of reminders. Then came Economy and Finance Minister Nikos Christodoulakis’s announcement that he will sell a further stake in the National Bank, rekindling overriding concern that such phenomena may be only the tip of an iceberg of huge deficits that will burst onto the economy next year. Unproductive investment A second source of deep anxiety about the course of the economy is the conviction that has taken hold in the business world that investment in recent years has not enhanced productive potential, particularly regarding the country’s ability to expand in a sustainable manner into foreign markets. This is confirmed by the continuing growth of current account deficits and rising inflation. It is argued that it is one thing to invest, for instance, in the transport network, energy and new technology, augmenting productive potential and the competitiveness of enterprises, and quite another to waste resources – on a scale unthinkable in the past – on building a spate of stadiums or gigantic office blocks and the like, that do not contribute to any restructuring of the economy. This is consumption pure and simple which creates no capital reserves that will lead to an increase in national income in the future. In other words, the government seems to be saying: «The party is on now; Let’s enjoy ourselves.» The absence of any credible economic development plan by the main opposition New Democracy (ND) party to tap Greece’s comparative advantages and attract foreign investment is yet another reason why the business community is not its most happy at present. A number of withdrawals by foreign firms from Greece in the last year is taken as a sure sign of the limited potential of the domestic economy at the present juncture. Further uncertainty is also sown by the frequently contradictory statements of senior ND members on the economy. For instance, no one can safely say today what the party’s exact position on privatizations is! And the picture is not likely to become any clearer in view of ND leader Costas Karamanlis’s apparent disinclination to be more specific in order not to jeopardize his electoral prospects. The fourth and most important factor behind the anxiety among businesspeople is the widespread corruption in public administration, particularly in certain key decision-making quarters that affect investment. This, of course, is not anything new, as confirmed in recent years by the most authoritative international agencies which have rated Greece quite high on corruption tables. But in the last year or so, especially since public life has entered the pre-election orbit, the phenomenon seems to have seriously intensified, jeopardizing the prospects that investment schemes can be implemented as scheduled.