ECONOMY

Stable development policy

The newly elected conservative government’s development will not, in the end, differ much from its Socialist predecessor’s: it will be heavily dependent on European Union funds and will be based on the implementation of a further series of large infrastructure projects. This approach is expected to be given by Prime Minister Costas Karamanlis in his keynote speech during the inauguration of the annual Thessaloniki International Fair (TIF) in early September. This decision by the Karamanlis government represents a clear political choice, aiming to maintain a fast GDP growth rate and avoiding a fundamental restructuring of the economy that could be the source of social conflict. If this proves to be the main policy inspiration, it could well lead to disappointment in the markets and the business community, where it is widely believed that the Greek economy is in dire need of decisive restructuring in order to attract direct investment and to become more competitive. Such plans should also not be expected to gain the trust of or to satisfy middle-income earners. Some people think that such a government policy will hold for only a limited period of time, specifically, until the election by the Parliament of the next President of the Republic next March. The election will require the agreement of the Socialist party if general elections are to be avoided. Until such consensus is secured, the Karamanlis government will avoid the application of any policies that might cause a backlash or harm the interests of specific groups. These policies would include privatizations and the restructuring of the Social Security System. For the time being, expectations are centered upon the implementation of new infrastructure projects and the hope that Greece will continue receiving a significant amount of European Union funds after the termination of the Third Community Support Framework program (CSFIII) in 2006. Initial negotiations in Brussels appear to be positive and the future appears promising since the new president of the European Commission, former Portuguese Prime Minister Manuel Durrao Barroso, comes from another small southern European country. It is thus estimated that Greece may secure through CSFIV up to 23 or 24 billion euros in direct EU aid, compared to about 34 billion acquired through CSFIII. CSFIV will be activated in 2007; also, one third of funds earmarked through CSFIII have yet to be used. The large sum of expected funds could lead to high economic growth rates until the end of the decade. One of the main goals of the Karamanlis government is to present a new infrastructure development program in September, which will focus on the so called Public-Private Partnership projects. They are expected to include the construction of a major road tunnel under the Maliakos Gulf in central Greece, the revamping of the Corinth-Patras National Road and construction of the Ionian Highway connecting Antirio with Ioannina. During his speech at TIF in September, Prime Minister Karamanlis is expected to emphasize his governmentãs commitment to balanced regional development.