Government struggling to live up to its promises

Halfway through its term, the government has implemented a good deal of its pre-election goals regarding the economy. A high growth rate has been attained (though not the 5 percent forecast), reforms and privatizations have made progress and unemployment has fallen by about the 3 percent promised; businesses have become more outward-looking, the public deficit has shrunk, a new investment incentives law is in place, the absorption of European Union investment subsidies has accelerated and a framework for public-private partnerships has been instituted. However, the government still has a lot of work to do. An important pledge was that of educational reform, where efforts have not yielded results. It had also promised to increase spending on education to 5 percent of gross domestic product (GDP). Since 2004, this has remained at 3.5 percent and in 2007 it will fall even lower as GDP is about to be revised upward. Another important promise, affecting the vulnerable group of low-paid pensioners, seems to have been forgotten. The special pension «solidarity» supplement (EKAS) was going to be raised from 140 to 320 euros and farmers’ pensions from 230 to 330 euros. The raises have been almost zero. In its pre-election manifesto, the New Democracy party had frequently referred to the cost of living and inflation. It had argued that prices could not be contained through administrative measures and threats but with structural measures, boosting the competitiveness of enterprises, ensuring the smooth functioning of the market mechanism, establishing transparency and promoting a full-fledged consumer movement. And, as regards competitiveness, Greece remains among the EU laggards, despite the designation of the 2005-2010 period as years of competitiveness and the setting up of a special national council. The results in this field have been disappointing. Inflation has not receded and the market is still full of cartels or situations resembling cartels. Inflation remains about double the European Union average and, although the price level remains below the EU average, Greece is the third most expensive nation in the Union if purchasing power is taken into account. The government had at least suggested that it would offer permanent employment status to about 200,000 contract workers in the public sector. The process is still under way but it concerns only about 30,000 to 40,000 people. Further, it had promised a bolstering of the Public Investment Program, at the expense of public consumption spending. Despite annual increases, the sums devoted to investment have fallen as a percentage of GDP (4.3 percent in 2005 and 2006, against 5.5 percent in 2003). Not much can be said of the government’s record in improving the attractiveness of the country for investment, domestic and foreign, which it had pledged. According to the World Bank, Greece ranks 80th worldwide, a little below Sri Lanka and Kyrgyzstan. By the end of June, the Economy Ministry had received 2,398 investment applications, their budgets totaling 5.3 billion euros, of which it approved 1,467, worth 2.6 billion.

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