IOBE worries about lax budget
The Greek economy is growing fast, but much effort and a tightened timetable will be needed to avoid delays in the implementation of the budget and structural reforms, a report released yesterday by the Foundation for Economic and Industrial Research (IOBE). IOBE is affiliated with the Federation of Greek Industries (SEV) and its reports usually reflect industrialists’ views. The IOBE report uses data from business surveys to show that there is broad support for reforms but there are questions about the government’s ability to push for reforms and implement them. While there is a consensus on the need to increase productivity, boost employment and improve public finances, there is difficulty in getting society, and the business world, to accept specific reforms, the report remarks. Opposition to reforms in education, public health, market deregulation and state administration must be overcome as quickly as possible, the report’s authors say. IOBE approves of corporate tax cuts, efforts to cut red tape and the extension of shops’ opening hours to help improve the business climate. But it also remarks that there have been serious delays in opening up the energy market and that, as a result, the electricity, fuel and natural gas markets are still oligopolistic. The IOBE report is also critical of the draft 2007 budget, remarking that the effort to lower the deficit and public debt has slackened and that next year’s budget is also more lax on spending than this year’s. According to preliminary data on the first half of 2006, it seems that the economy will grow by at least 3.4 percent and may even reach the 2005 growth level (3.8 percent). This, according to European Union data, means that Greece’s growth is the fourth fastest in the eurozone and 13th among all EU members. Private consumption remains the motor of growth. It is still rising, while investment is slowly catching up. The growth of consumption is, to a large extent, due to credit expansion, while the rise in investment is due to a better business climate and the recovery of public investment from the lows of 2005. IOBE forecasts that total investment will rise at least 6.5 percent, far higher than the forecasts made by the European Commission (4.6 percent) and the Organization for Economic Cooperation and Development (4.1 percent). Services will also help boost the supply side, but industrial output is also expected to recover slightly after falling in 2005. The unemployment rate, after remaining at 9.7 percent for about a year, dropped to 8.8 percent in the second quarter of 2006, its lowest level of the past decade. This is very encouraging, according to the report, since the work force, that is, the percentage of the population that is either employed or actively seeking a job, is also expanding.