ECONOMY

Is a velvet touch enough?

The so-called «mild adaptation» of the economy and the piecemeal handling of certain sticky problems apparently constitute the essence of governmental policy regarding its economic policy over the next two years. Government sources say that the aim is not to create major shocks in the economy, which usually upset and provoke reaction from various social groups, but to resolve some longstanding and significant problems affecting some, while offering the private sector more incentives for investment. This way the government expects it will not jeopardize its re-election prospects and simultaneously will maintain the satisfactory growth rates of the past few years. This, in essence, is its political plan, according to reliable and converging information, regardless of whether the market agrees with this soft approach to the economy’s needs – or «velvet,» in the words of a Cabinet member – which deflates the opposition’s ability to rally behind big issues. The top priority is certainly the tough issue of improving public finances, as pressure from Brussels to take tough fiscal measures is immense. Nevertheless, the government has let it be known that such measures could eventually be avoided, hoping the drive to contain public expenditure, already under way, will be effective and that extra revenue, as forecast in the 2005 state budget, will be found. Government officials suggest that the 2004 revenue receipts were artificially low and that some of it will surface in 2005 (such as through the settlement of outstanding tax cases). Preliminary announcements on the new tax system in real estate to be implemented on January 1, 2006 are also expected to boost the property market and generate considerable added revenue. Of course, all this is nothing more than estimates and we can take nothing for granted. The only sure thing is that the government still has great scope for pulling in revenue in 2005 through full and part privatizations that are in the pipeline. This indeed is a good contingency plan. Government officials avoid talking about this to prevent hostile responses, mostly from unions. The officials take for granted, and are not keeping quiet, the privatization in 2005 of Emporiki Bank. The Postal Savings Bank will be listed on the stock exchange; later (probably in 2006) the Bank of Attica will also be privatized, while OTE Telecom’s part-privatization will continue further, together with the abolition of guaranteed lifetime employment for all newly hired staff. Regarding structural changes, the liberalization of shopping hours will proceed with a law imposing uniform hours across the country. The social insurance problem of Emporiki will be resolved so as to deal with the bank’s financial obligations and facilitate its privatization. At the same time, changes will also take place in the labor market, starting from reducing overtime costs for enterprises. All this will happen in the first months of the year, according to government plans, and will boost the competitiveness of the economy, government members suggest. This precisely is the «piecemeal» solution to important problems being touted, which will gradually lead to deep reforms. Meanwhile, the program on jointly funded projects (public-private partnerships) is about to get under way, first with the works on the national road at the Maliakos Gulf area and the underwater road tunnel in Thessaloniki, with development of Olympic Games sites to follow. The government is planning to start tenders with the concession to private parties of operating Olympic venues this fall. That is because this effort requires careful preparatory steps designed to attract interest by Greek entrepreneurs (since this program concerns 11 different property development cases). Yet before standards are set and exploratory contacts made by consultants for conceding these installations, the government will table the Olympic projects bill in Parliament some time in February. It will map out site uses on a case-by-case basis, specify details, and resolve any multiple ownership issues.