ECONOMY

Happy 2006, the really crucial year for the economy

Most of us fall victim to convenience, forever labeling present circumstances as crucial, a crossroads in a transitional phase that will mark the future. No matter what we say about 2005, the really critical year for the Greek economy will be the next one. For this year, things are more or less given; there will be significant fiscal problems, although the final public deficit as a percentage of GDP for 2004 will only be known in March. Most probably, it will be a little higher than 6 percent. The EU has given Greece two years to bring this below the prescribed limit of 3 percent, and this will have to be achieved next year, when we will not be able to employ the creative accounting methods of the past or blame extraordinary expenses on the Olympic Games. But let’s suppose that all that concerns public deficit has little importance for our lives – although this is not true. What will the situation be in the «real» economy of business? The government is now trying to speed up the absorption of EU investment subsidies and is preparing a bill on the joint public/private financing of infrastructure projects; an investment incentives law is already in place. The crucial question is whether these initiatives can spur growth dynamics that manifest themselves in 2006. The government will have the potential in the next few months to shape an environment that will maintain consumer and business confidence in 2006; for consumers to spend more and for enterprises to invest more. Without optimism, there can be no growth, and without growth there can be no tackling of fiscal imbalances or the social insurance issue and other structural problems. Of course, there are many factors outside government control, notably international circumstances, growth in the eurozone and the prices of raw materials. However, these factors affect all economies to varying degrees and the important question is whether the government is taking sure steps toward convergence with the rest of the eurozone, in relation to the other economies. For even forecasts of future developments are relative.