ECONOMY

The high growth rate is no substitute for more progress on reforms

For some months now, the government has appeared uncertain about its next steps. Prime Minister Costas Karamanlis systematically avoids enunciating any broad program of reforms and, despite Greek society’s eagerness for changes, simply repeats what he has already announced. It is, therefore, no coincidence that his speech at the American-Hellenic Chamber of Commerce conference on Tuesday only found a place in the small print of the daily press on the following day. He simply said nothing new, gave no hope to the anxious average citizen and did not convince any businesspeople that it is worth investing in Greece. Of course, given the difficult economic situation and the fact that the country is under supervision of its public finances by the European Union, one would not properly expect the prime minister to announce relief measures under such circumstances. However, everyone, particularly the gainfully employed, is eager to hear of measures that will guarantee a quick exit from the tunnel and support the economy’s growth prospects. Instead, we are disappointed when we hear all the international organizations noting delays in reforms, that competitiveness keeps declining and that individual markets remain fettered to the state, oligopolies and «closed-shop» interests. Speaking at the same conference, US Ambassador Charles Ries delivered several admonitions, suggesting that «Greece must accelerate its pace, particularly in the areas of tax reform, deregulation of the energy market and encouraging partnerships between the private and public sectors (PPPs).» International rating agency Standard & Poors, which had downgraded Greece’s credit rating a year ago, argued in the same spirit in a new report. To be sure, after 20 months in office, the government did submit a bill for the deregulation of the electricity and natural gas markets this week. But when are we going to see investments in these sectors – in three to four years at the earliest? The law on PPPs was passed, but we have not seen one in practice. Are large public works projects making any progress? Of course not. No one doubts the prime minister’s good intentions. The only bad thing is that the dangers are serious and that the pace is subdued at a time when there should be a sense of urgency. Karamanlis may be happy because Greece’s growth rate is three times that of the eurozone average. However, he may be forgetting that this is based on rising private consumption that is fueled by unchecked bank lending. He may also be forgetting that the economies of our neighbors are growing at faster rates than ours, which will gradually deprive us of our leading position in the region. The prime minister says he is happy that his government «is proceeding steadily and resolutely with the necessary fiscal adjustment.» But he should be aware that the adjustment is basically being achieved through cuts in public investment and in wages and benefits. The deep and wasteful state remains omnipotent. The government has still not dared to close down one useless department of those that serve only those who are supposedly employed in them. If the evil is not struck at the root, wage and salary earners will continue to bear the burden of fiscal adjustment. Karamanlis was absolutely right in saying that the reforms are opposed by vested interests, the privileged and the forces of stagnation. But if the government undertakes no radical reform, the black front of reaction will rule for ever.