Political considerations postpone much-needed economic reforms

The sorry state of public finances, combined with the skepticism, to put it mildly, with which the European Union regards the financial data provided by Greece, will lead, unavoidably, to unpopular measures in order to fix the problem. These measures, however, will probably not be enacted immediately but after six months, at least, when it will be known whether the Parliament will elect a new President of the Republic by the required three-fifths majority or whether new elections will have to be held. The prevailing opinion is that, until next spring, the government will avoid making decisions on major issues such as privatizations or reforms in the labor market and social security, that is, issues that risk eroding the government’s popularity. But can the government let a whole six months pass with such delaying tactics? Can the economy prosper and grow under such conditions? Certainly not. Sources within the government believe that it will opt for a middle way between inaction and radical reform, especially to recover from the recent shocks arising from the fall of the helicopter carrying top Church figures and the forced resignation of Agricultural Development and Foods Minister Savvas Tsitouridis. According to these sources, the government will try to provide a boost to the economy by awarding some important projects to the private sector. This would also appease the business community, which is becoming restless by the government’s inaction. On top of that, the government has to contend with two major business groups: those who claim to have been excluded from generous state contracts under the previous Socialist government for political reasons and who now are seeking what they think is their due, and those who were favored by the previous government and seek to protect their turf from intruders. The government cannot afford to ignore either. The solution, therefore, would be to provide new investment opportunities in order to keep everyone satisfied, at least in the beginning. This is because the economy would later require radical reforms to cut the deficits and the debt and, especially, to boost productivity and competitiveness. Once again, the fate of the Greek economy is tied to political considerations and the electoral cycle, irrespective of whether elections take place in March or not. The government is afraid to tackle privatizations and other reforms that other countries tackled long ago. And this does not only include old capitalist states but countries which, 15 years ago, were part of the old Soviet bloc and are now rushing to attract foreign direct investment.

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