ECONOMY

GDP growth rate will be crucial for economy’s future

The GDP growth rate will be a decisive factor for the economy in 2005-2006. The European Commission’s spring estimates, released yesterday, dramatically reduced economic growth forecasts to 2.9 percent this year and 3.1 percent in 2006. Even though these are just estimates – which may prove to be off the mark – they are a strong blow for the Greek economy and, of course, worry Economy and Finance Minister Giorgos Alogoskoufis. Slower growth could be an even bigger blow than the eventuality of the 2004 budget deficit rising beyond 6.1 percent of GDP. If the estimates prove correct, this will lead to a further shrinking of state revenues and the start of a vicious circle of state deficits and more taxes being raised to cover them. The Commission’s growth forecasts are a reflection of the state of the Greek economy. Our deficiency in economic competitiveness reflects the awful truth: Our goods and services are not attractive enough for foreigners to buy. By contrast, we import a lot and have adopted a lifestyle beyond our means. Our society, fed for many years by influxes of EU funds, seems to have lost its self-preservation instinct, whose presence would at least imply a desire to develop and a positive stance toward life. The state of diminishing competitiveness was lucidly presented yesterday in the report made by Development Minister Dimitris Sioufas, who was flanked by a number of his fellow ministers and Bank of Greece Governor Nicholas Garganas. We have heard many similar reports and we will hear a lot more, since the government, unaware of the irony, has proclaimed 2005 as the «Year of Competitiveness.» If the government’s aim is to use these reports to blame the Panhellenic Socialist Movement (PASOK) for everything, it will soon be in for a nasty surprise. PASOK, now the main opposition party, was punished in the national elections of March 7, 2004 by losing power. What people need now is an escape from this morass the country finds itself in. That is, to regain competitiveness and see investments flow in again. This is a difficult proposition given that for many years we muddled through by consuming EU aid and simultaneously showing total indifference to creating products that could be exported. We propagated, mostly for internal consumption, the false idea of a strong economy. The government must undermine the prevailing culture of indifference. If it tries, its expected electoral defeat will be preferable to any hollow victory.