Economic policy aims reveal continuity, but also big claims

Economy and Finance Minister Giorgos Alogoskoufis yesterday presented the main aims of the new conservative government’s economic policy in Parliament. The aims of the new government’s economic policy are remarkably similar to those of the previous Socialist government: fast economic growth, less unemployment, and convergence of wages and pensions with the EU average. It only claims it will do it better and that the previous government not only failed to deliver on its promises but presented an inaccurate picture of the state of finances. Alogoskoufis said, for example, that the 2003 budget will show a deficit equal to 2.7 percent of the country’s gross domestic product (GDP) instead of the originally forecast 1.4 percent and added that GDP growth in 2003 was 4.2 percent rather than 5 percent. Alogoskoufis presented a few concrete goals for the government’s four-year term: reaching an annual growth rate of 5 percent; reducing the unemployment rate by 2.5 percent; increasing the employment rate from 56.7 percent to over 60 percent; and increasing pensions and wages to a level near the EU average within eight to 10 years. In the latter case, he avoided specifying whether he meant the average of the current 15 members or the average of the 25 members, or possibly 28 – including the 10 new members which will join on May 1, and likely future entrants Bulgaria, Croatia and Romania – that the EU will expand to within the next 10 years. In the latter case, convergence would be a breeze. Besides these goals, Alogoskoufis made a lot of general promises about better governance. He said that better spending methods, the crackdown on tax evasion and high growth itself would create, by the end of the government’s four-year term, savings equal to 4 or 4.5 percent of GDP or «6.5 to 7.5 billion euros in today’s terms.» It is through these savings that major policy initiatives will be funded. This sounds more like the usual wishful thinking expressed by every government in turn – especially concerning the «crackdown on tax evasion.» The reality is that, taking comfort in the present government’s declarations that it will abolish the financial crimes squad (SDOE) which it accused during the pre-election period of being a nest of socialist fanatics bent on harassing businesses, businesses are evading paying taxes on a large scale, by refusing to issue receipts. The scope of the phenomenon was already apparent in the early days of the government’s term. Deputy Finance Minister Adam Regouzas, a former tax inspector, alerted Alogoskoufis to the extent of the problem, which could significantly reduce government receipts. Since then, the government has toned down its rhetoric over SDOE and is now talking about «reforming» the agency. Regouzas himself has issued instructions to SDOE agents to stop making «police-style inspections» and «harassing» businesses. The instructions, however, go on to encourage the same agents to be «strict» in applying the law and imposing sanctions on businesses for issuing fake receipts or failing to issue them at all, concealing sales or trying to doctor cash register data. This shows that the first part of the instructions, about not harassing businesses, is purely for show, a practice that the present government, so far, has heavily relied on. Alogoskoufis also referred to the much-trumpeted revision of state finances, saying that it is already under way. While accusing the previous government of doctoring the books, he called on the opposition to cooperate with the government’s economic policies «for the good of the country,» adding that he will seek consensus for all reforms.

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