Consumers and businesses are less confident

European Union data are showing a definite worsening of consumer confidence in the Greek economy’s prospects. There are indications that the high expectations of last spring, obviously related to the change in government after the March 7 elections, have significantly declined and the climate is worsening each month. An increasing number of Greek households are pessimistic about the way their income and, consequently, their purchasing power, will evolve in the coming months. At least consumers remain relatively more optimistic than they were in the same period last year: According to Eurostat data, the consumer confidence index in August – which reflects the results of a survey conducted in July – was minus 28 (that is, the percentage of those who believed that their financial position would worsen in the short term exceeded those who believed the opposite by 28 percentage points). Last year, the same figure was minus 40. According to information so far, the September confidence index has only marginally improved, and that may be a result of the euphoria, or relief, that greeted the successful hosting of the Olympic Games. Experts, however, forecast that confidence will take a turn for the worse in October. This development reflects the sense of uncertainty prevailing among Greek households that are aware of economic inertia and have grasped the message of most Greek companies that it is time for retrenchment and job cuts. It will be very interesting to see, this week, the businesses’ expectations index published each month by the Foundation for Economic and Industrial Research (IOBE), to see whether, indeed, businesses expect a darker future. Whatever their outlook, businesses are concerned about the economy’s future. The inflated budget deficit and public debt – the worst in the eurozone this year – are posing obstacles to growth and the smooth implementation of the 2005 budget. The pervading climate abroad that the Greek economy – and official statistics about it – are not to be trusted has discouraged the few prospective foreign investors. At the same time, businesspeople understand that the current government does not have any plans to promote growth and neither has it set specific targets to encourage the private sector to invest. No privatizations have been announced, no measures taken to boost productivity and competitiveness. It is remarkable that when the heads of big state-controllled enterprises call for reforms they face the ministers’ wrath.