Exports and foreign investment are the economy’s weak points, minister says

Economy and Finance Minister Nikos Christodoulakis and New Democracy MP Giorgos Alogoskoufis yesterday presented similar visions of Greece’s economy in a future European Union made up of 25 members but differed significantly over the present state of the economy. Both were among the speakers in the annual conference on the state of the Greek economy organized by the American Hellenic Chamber of Commerce. «It is certain that no one can claim that all is going well for the Greek economy,» Christodoulakis began his speech, in a mood of self-criticism. The greatest weakness of the Greek economy, which is currently growing faster than any other EU member state’s, is the lack of exports. «We do not export enough high-technology products to developing countries and we have not yet attracted a significant amount of foreign direct investment,» he said, adding that these were signs of an inward-looking economy. Despite a recent rise, Greece’s exports are the lowest, in real terms, of all EU countries. FDI inflows were abysmal in 2002, just $50 million. In order to solve the economy’s problems, said Christodoulakis, all the government has to do is to continue with its present policies. He described the economic policy’s main goal as achieving real convergence with the other 14 EU members, meaning raising per capita income to the average level of the current, 15-member EU. This target, he said, is the essence of the Socialist government’s policy. That policy, Christodoulakis said, has four axes: prudent macroeconomic management and fiscal stabilization; use of technology and education to boost development; attempts to minimize differences among the country’s regions; and boosting even more public investment in infrastructure projects. Fiscal policy, Christodoulakis said, aims at a balanced budget, a cut in the State’s consumer expenses, lower public utilities’ debt, and a gradual reduction in spending on armaments. Financing the welfare state is not done at the expense of fiscal stability, Christodoulakis said. The minister claimed that one of the reasons for Greece’s high debt – over 100 percent of its gross domestic product (GDP) – is its high defense spending, around 5 percent of GDP. If defense spending had not been as high, public debt would be lower by 25 percentage points, he said. Christodoulakis also referred to the government’s continued program of selling shares in state-controlled companies. In 2003 alone, shares were offered in the National Bank of Greece, the Public Gas Corporation, the Public Power Corporation, and betting company OPAP, while the Athens Stock Exchange was completely privatized. Christodoulakis also said that the labor market needs further modernization, with emphasis on linking pay to productivity. For his part, Alogoskoufis agreed with Christodoulakis that «the opportunities arising from the EU’s enlargement are greater than the dangers,» but presented a dismal picture of the present state of the economy, saying that Greece needed a different policy to make most of the opportunity. He called for spending cuts, a simpler tax regime which will not be subject to change almost every year, and a different policy in tax inspections. Alogoskoufis said the crucial issues were attracting foreign direct investment and ensuring a balanced development of all Greek regions. Without a better state administration, he said, these goals will prove elusive. He added that the present government had exhausted its potential, limiting itself to piecemeal measures.