ECONOMY

Lack of clarity in public accounts weighs heavily on the economy

The Greek economy is used to being «centrally guided» – perhaps not so much today as in the past – and state intervention remains crucial. The huge amounts in European Union investment subsidies are handled by the government, which decides which firms get projects and procurements. It is the government that determines when to raise the tax burden or allocate any number benefits. The biggest burden, however, is the absence of policy, particularly in the way it manifests itself today. The budget debate that is to end in Parliament today has intensified the aforementioned concerns. Few deputies deal with the substance of public accounts, being busier than any of us with political developments and their chances of re-election. The 2004 budget seems to be an accurate reflection of political expediencies. For a start, the expenditure foreseen are not based on any sound projections. According to well-informed sources, the accounting mix-up is so great that even had the government wanted to put matters on a proper basis, it would need at least a few weeks. The government remains insincere in its defense of the budget figures. It will not admit, for instance, that its fiscal policy is expansive, since the deficit is estimated to grow – whichever way it is measured. As the latest quarterly report from the Foundation for Economic and Industrial Research notes, this expansive policy continues on «trends already observed in 2003» and will intensify if overruns are repeated. Obviously, there is no valid excuse for the relaxation of public finances when, as the government itself insists, the economy is showing high growth rates. And it cannot be blamed on the cost of natural disasters – the first argument that was used. We could even argue that neither is the fiscal overrun due to expected pressure from spending on the necessary Olympic projects. The loss of control is explained by a number of factors: The government dare not reveal the secret special accounts it had created as part of the effort to meet the Maastricht criteria for entry into the eurozone. Economy and Finance Minister Nikos Christodoulakis has not tried to clear up the labyrinth of public accounts, perhaps because he could not muster enough political courage to face his responsibilities which date back to the days when he was a deputy minister before he departed for the Development Ministry. Or perhaps because he has not receive the okay from the prime minister who has stuck to the public relations slogan of «a strong economy.» And so, the economy has enveloped a big «fiscal lie.» Instead of the government tapping the benefit of low interest rates to drastically reduce public debt, it opted for refinancing public expenses. It has used the partial sale of public enterprises in the same way and for the same reason. Unfortunately, it is now too late to limit the adverse effects. This is evidenced by persistently high inflation and deficits, which affect operating costs and profits. The year 2004 will be very bad for the weak links in the economy, and this will become more evident when the dust settles after the Olympic Games. Businesspeople are well aware of this reality but have no options other than forging ahead, hoping to avoid the worst. But for this hope to be realized, there must be long-term political prospects, wiping the board clean in public accounting and international investment interest.