Preventing accumulated problems from bursting to prominence needs action now
It seems that 2006 is already here. A number of analysts expect that year to be a critical one for the Greek economy. Problems that have slowly accumulated in recent years are projected to come to a head then, while the windfall boosts to growth from the Olympic Games and European Union investment subsidies are very likely to be limited. It is no coincidence that the European Commission’s spring report, released last week, trimmed its forecast for Greece’s growth rate for 2005 to 3.3 percent, when the respective EU average is projected to accelerate, rolling back the prospects for real convergence. The government needs to study and adopt policy measures urgently in order to tackle the visible threat of slower growth in coming years. Any such measures need a maturation period of one to two years before they will produce noticeable results. The Commission’s report caused something of a sensation in Athens, as it listed Greece among the member states with a high fiscal deficit. As it is mainly based on public projects and EU investment subsidies, Greece’s economic growth does not reflect reality. The government needs to plan for measures that will produce jobs and income by facilitating entrepreneurship. These should include a reduction in the taxation of profits, the elimination of a great deal of red tape, and the opening up of new sectors of economic activity that can attract investment. And all this has to be done in the next three months, when priorities are on the Olympic Games and when there is an acute fiscal problem and public organizations are undergoing changes in management. The year 2006 is definitely ahead of schedule. The government may still have a measure of post-election euphoria but it has to start producing policies now.