Heat is rising to implement faster reforms

The government plans to focus hard on its economic reform agenda in the coming months, wishing to avoid being sucked into a climate of inertia likely to result from a preoccupation with the municipal elections in the fall. The latest economic data is rather encouraging: Gross domestic product grew at a rate of 4.1 percent in the first quarter of 2006. Last week, Prime Minister Costas Karamanlis and Economy Minister Giorgos Alogoskoufis reviewed the situation and, according to sources, concluded that the reforms have to be speeded up. The desire to prevent the economy from being undermined by political developments is expected to be reflected in the prime minister’s keynote economic policy speech at the opening of the Thessaloniki international Fair at the beginning of September, at which will likely reconfirm that he intends to meet his pledges before the end of the government’s present term. Presently, it is felt that important developments in the banking sector will have a positive influence on the general climate. National Bank, the country’s biggest, is set for its mammoth, 3-billion-euro rights issue which will finance its acquisition of Turkey’s Finansbank. Ministers are also optimistic regarding the privatization of Emporiki Bank – Greece’s fourth largest – which they hope will be over by fall. The government is also feeling the urgency of completing reforms in public utilities, which are seen in dire need of a tidying up of their finances and of changes in labor regulations. In this field, senior ministers are split between two approaches, one expressed by Alogoskoufis, who is pressing harder for the reforms, and the other, pedaled by Transport and Communications Minister Michalis Liapis, who favors a softer, less unpopular approach. Currently, the difference has been shelved but in their last meeting ministers agreed to cut utility managers’ bonuses.

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