ECONOMY

PM must address the disarray in public investment

The budget figures for the first half of 2005, released on Friday, were not great but could not be described as terrible either. Public revenues were up just 3.6 percent, against an annual target of 11 percent, and expenses overshot the targeted rise of 4.8 percent by almost two percentage points. Nevertheless, the deficit was down 11 percent year-on-year, which shows that the government’s efforts for fiscal rehabilitation and fiscal adjustment are beginning to bear fruit. It is encouraging, for instance, that the budget’s primary expenses (mainly the public servant payroll and grants) rose only 3.5 percent, against a target of 5.3 percent. But the results do reveal some important gray zones in the government’s economic policy, which the prime minister should seriously turn his attention to and instruct his ministers to apply themselves directly. First, the figures reveal that the public investment program is in disarray, with total outlays down 45 percent from the first half of 2004. The government had budgeted for 8.05 billion euros of public investment, down from 9.60 billion in the same period of the Olympic year, but the actual figure fell much shorter. This is unacceptable at a time when the government’s main concern should be to speed up the rate of growth in order to reduce unemployment, improve incomes and achieve the targeted fiscal adjustment. And public investment should have been especially bolstered this year as private investment is also sinking and foreign inflows are nowhere to be seen. My research shows that this shortfall was not due to lack of funds but to lack of ideas and «mature» projects – to use the terminology favored by ministers. This means either that Public Works Minister Giorgos Souflias had no plans for projects that could have been approved for subsidies by the European Union, or that he did not promote them for reasons unknown, thereby dealing a serious blow to the country’s construction industry, which grew strong in the preparatory period for the Olympic Games and could have pulled the economy forward. Four of five other ministers are showing the same procrastination and are inclined to statements regarding electoral matters and a possible government reshuffle instead of deeds. It’s time the prime minister got tough. The second gray zone is the continuing conspicuous waste in the public sector which is forcing the Finance Ministry to borrow from abroad in order to meet current administrative requirements. I have learned that this borrowing amounted to 32 billion euros in the first half, when the maturing debt-servicing obligations were only 21 billion. The difference obviously went to cover hospital deficits, subsidize public transport fares, the arms industries and some utilities’ social insurance funds. Will there ever be an end to government waste?