ECONOMY

Telling the whole truth will help public finances

The 3 percent raise in the salaries of public servants and the 4 percent increase in pensions, which the government announced last week, offer no substantial help to households. Economy Minister Giorgos Alogoskoufis acknowledged as much when he said he would have been the happiest man if the increases could have been larger. «We have given the largest possible increases in a year that is the most crucial in recent times,» he said. Why this year is crucial is well known: The country has to bring its budget deficit to below the EU-mandated 3 percent of gross domestic product, otherwise the present supervision by the European Commission will continue and become even tighter. This is a simple truth but political leaders have never told the people simple truths: For instance, the reality that you cannot give pay raises that you finance with borrowed money because, ultimately, payments by dud check boomerang on wage earners and the economy. Precisely for this reason, because the people were not told the full truth, few have realized the danger that the country’s great debt poses for them. The taxi driver that was taking me home the other day recognized me and asked me how the economy was doing. When I told him that the government was trying to put some things in order, tidy up public finances and reduce the deficit, he replied: «What do I care about the deficit? What I care about is what raise I will get.» Naturally, I said only the US prints the dollars with which it pays off its debt, we do not print euros that can do the same. He was unconvinced. Only when I explained that for interest on public debt we pay 9.5 million euros annually and that he pays some of this sum did he begin to understand. Therefore, governments need to fully inform citizens of the economy’s problems and opposition parties must show greater responsibility. President of the Republic Karolos Papoulias, who is the first Socialist to hold the country’s highest post, said in a speech on Europe’s challenges and visions during his recent visit to Italy: «Without macroeconomic stability we cannot achieve growth and without growth we cannot build the welfare state. Macroeconomic imbalances accumulate debts and ultimately take with both hands from the weaker groups what they have given with one.» This is the big truth.