ECONOMY

New team in charge of economy

By appointing Giorgos Alogoskoufis responsible for economic policy as minister of economy and finance, Prime Minister Costas Karamanlis has avoided a potentially divisive conflict between Alogoskoufis and party elder Giorgos Souflias. The latter, much to Alogoskoufis’s chagrin, had been put in charge of drafting New Democracy’s economic policy ahead of the election. In deciding whom to appoint and where, Karamanlis chose the expert over the senior politician. Alogoskoufis, 48, is a market-oriented economist without being an unbridled free marketeer, just like his PASOK predecessor Nikos Christodoulakis – with whom, incidentally, he co-authored a paper («Fiscal Deficits, Seigniorage and External Debt: The Case of Greece») in 1991, criticizing the policies of PASOK founder Andreas Papandreou for having brought Greece to the brink of bankruptcy. The main thrust of Alogoskoufis’s policy will be the same as Christodoulakis’s: sustainable high growth, fiscal prudence and an effort to attract direct foreign investment. The difference is that ND has accused the outgoing PASOK government of being fiscally imprudent (a debatable proposition) and of having failed to attract enough investment (true). An immediate problem for Alogoskoufis is whether to restate public finances by discovering deficits hidden, using various devices, by the previous government. This kind of tampering with the accounts is a global practice. If it runs out of control, it may lead to dire consequences: a spiraling debt, declining competitiveness and, ultimately, economic stagnation. Incumbent governments like to overstate their predecessors’ incompetence, saying that they have found empty coffers. But, in the case the present government is tempted to follow its fellow conservatives in Portugal, it should also be aware that this may lead to overly restrictive policies that will not only hamper growth but also keep ND from delivering on many of its, already extravagant, policies. This decision must be made quickly – ultimately by Karamanlis himself – in view of Friday’s visit by Eurostat, the EU’s statistics agency. Alogoskoufis’s deputy ministers will be Adam Regouzas, 58, a former tax inspector, most likely to be in charge of implementing the budget; Christos Folias, 53, a successful businessman – he and his brother founded fast-food chain Goody’s – and former Euro MP; and Petros Doukas, 52, a former deputy finance minister in ND’s last government (1991-93), with extensive experience in the banking and investment sectors. Doukas will most likely be in charge of reducing Greece’s massive debt, whereas Folias may take over as the minister in charge of overseeing the inflows of EU aid. The new development minister is Dimitris Sioufas, 60, a veteran MP and a former minister of health and social security, whose controversial social security reform in 1992 temporarily saved the system from bankruptcy. It was probably seniority that prevented 50-year-old Yiannis Papathanassiou, a former head of the Athens Chamber of Commerce and Industry, from being appointed minister instead of deputy minister. Joining him will be 58-year-old Giorgos Salagoudis.