ECONOMY

New Democracy promises 5 percent annual growth

New Democracy’s economic program, unveiled yesterday, promises to result in sustained annual economic growth of 5 percent, despite repeated warnings by its leader, Costas Karamanlis, and other officials that growth was bound to slow down from its current level of about 4 percent because it was solely driven by Olympics-related construction and infrastructure projects partly financed by the European Union. Overall, and with few exceptions, the program essentially says that New Democracy will continue on the path of the current Socialist government, only do things better and with greater efficiency. Notable are its plans to reintroduce most of the social security reform provisions it had first announced during its last period in power (1990-93), which had encountered severe opposition and which the Socialist government had partly abolished. New Democracy also plans to withdraw state participation from OTE Telecom and all banks with the exception of Agricultural Bank and sell Olympic Airlines to a foreign carrier. ND also announced a reduction in corporate tax from 35 percent to 25 percent, a measure partly implemented by the government in its latest law on investment incentives and already promised by George Papandreou, the ruling party’s candidate and leader-in-waiting. Karamanlis’s promise to provide the «real picture» of public finances, which he accuses the current government of distorting, hints at a repetition of Portugal’s experience, where a center-right government’s «re-examination» of the finances resulted in higher deficits and debt levels and a campaign to reform public finances which actually stunted growth. This re-examination is Karamanlis’s safety net against his missing the 5 percent growth target. Besides a lower corporate tax, New Democracy would offer a number of tax breaks to companies, especially small and medium-sized ones. These would include reduced tax on transferring a company to new ownership, provided the new owners keep the firm operating for at least seven years. The Karamanlis government would subsidize employers’ social security contributions to encourage them to hire young unemployed and jobless mothers, increase minimum pensions, and raise fourfold, to 80,000 euros, the tax-exempt portion of inheritance. New Democracy does not show the exact cost of its program but says it will find resources from higher revenues that the accelerated economic growth will bring; it will also crack down on tax evaders – as all previous governments have promised – and gain more revenue from «better organized» tax inspections, keeping down public spending, cutting the cost of servicing the public debt, lowering defense spending, and saving money by leaving the execution of infrastructure and public utility projects to the private sector. The program promises to improve Greece’s dismal record in attracting foreign direct investment by strengthening the agencies responsible, such as the Hellenic Center for Investment, cutting down on bureaucracy and expanding private financing for public projects.