ECONOMY

Industrialists warn that 2005 budget goals will not be met without spending cuts

The rise in the price of oil rendered necessary the revision of the targets set in the draft 2005 budget, Odysseas Kyriakopoulos, chairman and executive president of the Federation of Greek Industries, said yesterday. «The draft budget is based on a forecast that the average price of crude oil in 2005 will be $40 per barrel; the price has currently exceeded $50,» Kyriakopoulos said at a press conference. «Despite the fact that (the price rise) has not turned into a major oil crisis, it must be made clear that the period of cheap energy is effectively over,» Kyriakopoulos said. According to SEV, the rising energy costs will affect the growth rate in 2005 and, consequently, public revenue. As a result, the target set in the draft budget, to reduce the deficit to 2.8 percent of GDP, below the 3 percent level acceptable to the European Union, is seen as dubious. Kyriakopoulos remarked that the rising fuel prices will increase production costs and added that «it would not be unreasonable» for that extra cost to be passed on to consumer prices. SEV officials were certain that transport costs would rise. While the latest rally of oil prices will affect the global economy, the effects on Greece, with its dependence on oil imports, would be even greater, noted Kyriakopoulos, adding that there was an «urgent need» for fiscal discipline. If the budget is to achieve its deficit target, then public spending must be cut, he added. SEV officials also stressed the need for a new round of privatizations. Vice President Theodoros Fessas said that the conservative government may have expressed a willingness to proceed with sell-offs of state companies but has done nothing concrete yet. He repeated SEV’s longstanding position about a «smaller, more flexible and less spendthrift state.» Fokion Deliyiannis, SEV’s expert on energy referred to the high cost of energy for industries. He said that natural gas prices were too high, meaning that there was no incentive to substitute gas for more polluting fuels. He added that the reduction, two years ago, in taxes on oil for industrial use, rendered crude oil more attractive as a fuel. SEV’s position is that the cost of building the natural gas infrastructure should not be included in the price of natural gas. Concerning diesel fuel, SEV has reiterated its call for a tax harmonization as envisaged by an EU directive. If the directive is applied, the tax will be cut from 125 euros per thousand liters to 20-21 euros. In any case, SEV officials remarked, the government’s main priority should be to help boost enterprise competitiveness. Corruption Referring to the recent public debate about the collusion of business and political interests, Kyriakopoulos said that the issue «cannot be confronted through more paperwork. More political and effective solutions are needed.» Kyriakopoulos was referring to the oft-expressed position of the present government that the provisions of the law preventing owners of mass media operations from bidding for state contracts to be tightened further. The SEV chief expressed his support for the government’s aim of keeping businesspeople out of politics but also declared himself against any «legalistic» solutions. The solution, he said, is through the operation of the rules of competition and not «through laws that burden everyone but the intended target.» Kyriakopoulos said that the law on the «main shareholder» and corporate activity had too many side effects and imposed undue restrictions on the board members of a company that wants to bid for state contracts. This is not just an issue of efficiency: These restrictions violate rules on personal data. The new provisions proposed by the government, to extend ineligibility for board membership to fourth-degree relatives of media ownerships, as a bureaucratic nightmare. «For God’s sake, no more paperwork,» he said. «The existing law inhibits company activity.» He added, however, that it was a positive sign that both major parties agree on the need to fight corruption.