Cutting waste means setting priorities

As summer comes to an end and political life trickles back to its usual pace, ordinary citizens might think that the government and the opposition are locked in a relentless match yet again. Indeed there is such a match, but it’s not between the government and the opposition. It is, rather, between ministers and their senior colleague in charge of economy and finance, Giorgos Alogoskoufis. Most ministers are in a difficult position and are waging a persistent struggle, using meetings, unconfirmed reports, or any other means as weapons to win a little something extra in the battle for funds Alogoskoufis will allot them under next year’s budget. In this battle, Alogoskoufis is the favorite to win. To be sure, together with his deputy, Petros Doukas, he can already show significant progress, having already kept the rise in primary expenses (mainly public sector wages plus grants) about 3 percent lower than the annual target in the seven months to July. Of course, the overall fiscal picture remains dark, given the high expenses for debt servicing that have accumulated from the past. Also, the rise in revenues has been well below target, which has swelled the public deficit. The proceeds from privatizations are within target, but these go directly toward reducing public debt and are no great help in the current fiscal situation. Moreover, things promise to be yet more difficult next year; 2006 is the second year of fiscal adjustment, in which the deficit will have to fall below the European Union-mandated 3 percent of gross domestic product. Even if it is theoretically possible to ask Brussels for a further, third year of adjustment, the political decision is to complete the program in 2006. The government, that is, must learn to function on less money next year. In practice, however, things are not so easy. Everyone knows that there is room for cutting back expenses, but they also have a good excuse for asking for more. The ingrained and established strict practices of the bureaucracy militate against any cutbacks, for a start. And there is, of course, a tendency for overspending on the periphery of the public sector, with a direct impact on the budget. Success of the program hinges on decisions regarding the actual necessity of some expenses. For instance, how necessary is the resurrection of the rural police, for which the government has announced 10,000 appointments? How many absolutely necessary hirings are required in schools and hospitals? How much do public enterprises really need to invest? Ministers are usually reluctant to answer such questions, being prone to believing that success in their task primarily depends on the size of the budget they are allotted, rather than on its more efficient management. Besides, there is no precedent for a politician who went down in history for making savings. Those who did either played leading parts in wars or were linked to grand projects and costly works of art. Unsurprisingly, the natural tendency of politicians is toward waste.