Time for real economy

Economy and Finance Minister Giorgos Alogoskoufis is trying to get a grip on the tasks of the real economy in 2007, after claiming reasonable success with the problems of public finances during his tenure so far. The main task is seen to be that of attracting private investment to boost the competitiveness of the economy and the export of goods and services. In effect, the aim is the reorientation of the economy. The likelihood of early elections makes the challenge even greater, but irrespective of such a prospect, officials consider the priorities as follows: First, the application of a new investment incentives law, which came into force yesterday and provides for subsidies of up to 60 percent to the budget of a project. Second, the wider use of public-private partnerships in public services and infrastructure. Third, the full implementation of measures already approved for the reorganization of public businesses and organizations. The relevant legislation was passed in December 2005 but has since met with strong reactions, particularly from unions, as evidenced in the latest case of amending labor regulations at OTE telecom. Fourth is accelerating the absorption of investment subsidies under the European Union-subsidized Third Community Support Framework (CSF III). Of the total sum of 32.2 billion euros, about half still remains to be absorbed, while theoretically CSF IV is to commence this year. Fifth is the promotion of the 2006-2013 Digital Strategy program for the country. This includes, for instance, boosting the penetration rate of broadband services to 7 percent of the population by 2008 – from just 0.1 percent three years ago. Sixth, the privatizations committee that is presided over by Alogoskoufis has adopted decisions regarding utilization of the assets of the Tourism Development Company (ETA), such as the Flisvos marina, the Corfu casino, the golf course at Afantou on the island of Rhodes as well as a number of hotels. The government has been seeking a strategic partnership for OTE with a major foreign telecoms operator. The privatizations program for 2007, which targets revenues in the order of 1.7 billion euros, includes in part the government’s stake in Athens International Airport and a number of other listed and non-listed companies. Growth In March, the European Union’s Economy and Finance Minister’s Council (Ecofin) is expected to approved Greece’s 2007-2009 revised Stability and Growth Pact, which envisages an average annual rate of growth of 4 percent. Inflation is projected to continue declining and employment to rise by an average rate of 1.8 percent, sending the jobless rate down to about 6.5 percent in 2009. Exports are seen as rising strongly, 6.5 percent in 2007, 7.3 percent in 2008 and 7.6 percent in 2009. Real wages are projected to rise 8.9 percent this year, 9 percent in 2008 and 9.1 percent in 2009. The Stability and Growth Pact assumes a positive international climate, with a favorable spillover effect on investment and exports. Private investment will be one of the main factors to contribute to an increase in gross domestic product, and is expected to grow by an average 8.2 percent annually in real terms, bolstered by lower corporate taxes, the new investment incentives law, the institutional framework of the public-private partnerships, the positive external economies to emerge from the major infrastructure projects of the past decade and the application of structural reforms. Imports of goods and services are also seen rising by an average of 7.2 percent annually.