ECONOMY

Sustained growth needs investment in education and social cohesion

Businessneeds a strategic plan for the Greek economy, one that can boost competitiveness and maintain high growth rates in coming years. This will require bold political decisions to boost productivity and the production of goods and services. Currently, growth rates are fed by strong consumer demand, which, in turn, is maintained by low interest rates (credit to households has been expanding at rates of more than 20 percent), the buoyancy of the construction sector and the bonanza of European Union investment subsidies. However, such favorable factors have expiry dates and do not spread the benefits evenly throughout the economy and to all social groups. Characteristically, a big part of this demand is satisfied by imports, which are growing at a much faster rate than Greek exports. Moreover, the big projects create wealth that is accumulating in the hands of a few (according to Eurostat, social inequality in Greece has surged in recent years). Therefore, a change in the priorities of economic policy is called for. In a Financial Times survey published a week ago, the Greek regions appear among the laggards in competitiveness in the European Union. This unenviable position is not likely to improve after the entry of the 10 new members on May 1. The survey also refers to marked gaps in know-how and human resources in the least competitive countries. It is apt to conclude, therefore, that the most crucial parameter is the investment that ought to be initiated by firms and the government in technology, research and education. In this field, Greece ranks in last position among the 15 EU members, below even 60 percent of the average. Its spending in this field represents just 35 percent of the sums devoted by the more northern countries. The survey lists Finland and Sweden among the world’s most competitive economies. It is evident that their technological and educational success is closely linked with skills in human resources and the productivity of the economy. Another crucial factor toward competitiveness and the maintenance of high growth rates is the ability to attract big foreign investments, which greatly depend on the application of new technologies. This requires radical changes in public administration, which the new government has promised. In this context, the privatization of a number of public enterprises, involving strong strategic alliances and an infusion of capital from the private sector remains important. These privatizations are necessary in order to boost productivity in key sectors for growth, such as telecommunications, energy, transport and banking; reduce costs; bolster competition; and apply new technology. This would also push the stock market into a new upward cycle, further facilitating investment. Most economic analysts agree that a sustainable growth model for the future must pay great attention to social cohesion. The tightening of the gap between the higher and lower income groups promotes prosperity by maintaining a demand for goods and services at high and stable levels.