ECONOMY

A long pre-polls period will harm the economy

Eleni Louri-Dendrinou, a professor at the Athens University of Economics and Business and chief economic adviser to Prime Minister Costas Karamanlis, sees the drive for reforms across Europe as an incentive for a greater effort to speed reforms in Greece. In an interview with Kathimerini, she describes the reforms implemented so far and those still to come, dividing the latter into three major themes: putting public finances straight, creating a more business-friendly environment to attract foreign direct investment and strengthening social cohesion by providing for the lower-income groups. She sidesteps speculation about early elections and says that reforms will continue unabated through 2007. There is widespread talk about a delay in reforms in Greece. Do you agree we are behind? And in which sectors? Since 2004, a comprehensive and cohesive reform plan has been implemented. The goal is to strengthen competitiveness, create a more outward-looking economy, maintain strong growth and create jobs. This was necessary, since the delays seen earlier in the decade cost us greatly. Our country was not properly prepared to participate in the eurozone and to cope with the post-Olympics period and, at a more general level, the challenges of globalization. The delay in implementing reforms was not an issue just in Greece but throughout the European Union. This debate peaked a couple of years ago, when it became clear that the Lisbon Strategy did not produce the expected results. Talks involving the member states, the European Commission and the social partners led to the revision of the strategy and a commitment by all to apply the necessary reforms. Of course, despite the existing will, these problems are not instantly solved. The reforms concern all citizens and must result out of dialogue and a study of the possible effects. As in social security, for example, where we will avoid surprises and engage in a long-term dialogue with all concerned parties. Which of these reforms have actually gone beyond the planning and legal stage and produced tangible results? Quantifying the benefits of implementing a reform is a difficult thing, especially when many reforms are concurrently taking place and affect many sectors. There are also qualitative benefits that may not be immediately perceived. However, we can judge the course of the economy by looking at the relevant indicators. In Greece’s case, these indicators improve and will continue to improve, according to the European Commission’s autumn estimates. The deficit is now below the Stability Pact limit (2.6 percent of GDP in 2006); growth, at 4.3 percent in the third quarter of 2006, is among the strongest in the eurozone and unemployment has declined steadily, to 8.8 percent in the second quarter of 2006. Exports are rapidly increasing (13.1 percent in 2005, 19.7 percent in the first eight months of 2006), as is investment (9.5 percent in the first three quarters of 2006). In 2005, the net number of enterprises increased by 28,400. I would like to comment especially on the business environment. Our effort to improve it, combined with fiscal responsibility, is turning Greece into an attractive place to invest. Many investments that had stalled are now being implemented. Do you believe the talk that upcoming elections affects the pace of reforms? A prolonged pre-election period has never helped any country. I believe, therefore, that the pace of reforms will continue unabated in 2007. What must be done over the next 16 months (to elections)? Which basic reforms must be implemented by then? We must continue to clean up public finances. Our aim is to achieve balanced budgets within five years. For the citizens, finishing the second phase of tax reform is especially important, because it will lower taxes for individual taxpayers and will boost the spending power of low and middle income-earners. We will also boost social cohesion by increasing benefits to the poor and the unemployed. Concerning businesspeople, we are into the third phase of cutting transaction costs and we will revise the investment law to place emphasis on investment in Greece’s provincial regions.