ECONOMY

Government must find way to spur growth

The circumstances of uncertainty, characteristic of the economy, are mirrored in the new draft budget the government has just presented. The rise in the international price of oil perhaps symbolizes the existing state of uncertainty, but this is neither its only feature nor its most important one. The consequences of the cost of the Olympics as well as vast social security problems may have more important consequences in the long run. It should be noted that, in spite of its efforts to limit public spending, the government has been forced to increase the amounts allocated to cover pension and all other kinds of social security fund obligations. Overall, expenditure will increase, either to meet obligations undertaken in the past or because of the need to cover extraordinary items or payments that cannot be deferred. Explaining the causes of expenditure increases is very important, but regardless of the reason, the fact they are rising is even more important. Spending increases do not allow for easy reduction of deficits. At the same time, it is not easy or even possible to maintain a rise in tax revenues if the rate of growth is not maintained at a high level. Growth is the crucial factor to the success of the effort to put public finances in order and to meet the budget’s targets within the time framework agreed with the European Union last month. Growth is indeed the most critical factor for the government, as well as for the economy and the market. Yet, as the public funds to be spent for investment purposes in 2005 will be limited, it is most important that the private sector becomes more active. It all entails playing a game with time, since the activation of private funds presumes the making of important political decisions, as well as an effort on the legislative front. It is a fact that the success of financial and economic policy depends more than ever today upon the creation of a framework mobilizing currently inactive capital forces.