Greece as an EU member: A beneficiary but not a learner
The Greek economy is going through a period of adaptation and the country needs to set and prioritize new goals capable of leading to growth within the framework of fiscal discipline and the single European market, says Takis Politis, a researcher at the Foundation for Economic and Industrial Research (IOBE) since 1975 and now its scientific director. His views, expressed in this interview with Kathimerini, may be described as cautious; the country is having to adapt all at once to the new reality of globalization, the European single market and to the abandonment of an agricultural economy. This cannot but involve considerable difficulties. The main tool, Politis believes, is education, which is essential for facilitating the shift of large sections of the population from agriculture to other sectors of the economy without necessarily causing internal migration. High growth rates are needed to absorb unemployment caused by the meltdown in the traditional buffer provided by the public sector. Politis says that the fall in employment while Greece’s growth rate is higher than the EU average is a contradiction in terms, signifying that the country’s economic progress is creating comparatively fewer jobs. This limited capacity of the Greek economy to translate growth into new jobs can only be overcome through the pursuit of serious and comprehensive structural changes. Prospects What is the position of the Greek economy and what are its prospects? In order to appraise developments we need to take careful stock of certain facts; first, Greek growth rates have indeed been high in recent years. However, the factors feeding it seem to be weakening. Interest rates will not continue falling as fast as in recent years, offering weaker support to investment and consumption. Second, after a period of buoyancy, private business investment is showing signs of fatigue; thirdly – and I believe this is the most important thing – the euphoria of the prospect of joining the eurozone has been replaced by a climate of uncertainty. It is as if we don’t know where we are going and what our goals are. How difficult is the goal of real convergence with EU partners to attain? We all pay lip service to this goal but without knowing how to quantify it with two or three indicators, as with the Maastricht treaty criteria of inflation, deficit and debt. Nevertheless, it is not confined to the one indicator of per capita income which is usually mentioned. Real convergence is a process of continuous, fast adaptation in all sectors of economic life: structures, the functioning of the economy, in behavior. The European Union monitors the convergence of its economies with about 80 indicators measuring performance, employment, innovation, research, structural reforms, social cohesion and environment. Real convergence, therefore, means progress in all sectors. On this basis, the most likely prospect at this moment is a slowdown of growth in 2002. How do you see things developing thereafter? What happens thereafter depends on how fast we all realize that a chapter has closed and the methods of the past will no longer yield results and are an impediment to progress; I am referring to the political leadership, enterprises, workers and public opinion at large, which continues to be enchanted by the idea of an omnipotent and protective state. What should be the goal of economic policy? Obviously, the promotion of real convergence. This does not mean only selective intervention in certain sectors. It means an integrated policy of modernization and adaptation of the Greek economy. But this depends on certain prerequisites. What are these prerequisites? First, securing monetary stability; if inflation rises systematically above the eurozone average there can be no growth and real convergence. Second, a reduction in public debt, which must be brought down to less than 60 percent of the gross domestic product by the end of the decade. Third, the modernization of the state and public administration, so that today’s cumbersome and bureaucratic state is transformed into an effective instrument for implementing the government’s policy guidelines. The fourth prerequisite is the expansion of the private sector with competitive enterprises, able to function effectively in the conditions of the single market. Reorganization How much has Greece benefited after 20 years in the European Union? We have benefited but not learned. We could have adopted the models of social and economic organization but have not done so. Have enterprises benefited most? They will have actually done so when they learn the rules of competition. Unfortunately, they keep calling for protection so many years after our entry, forgetting that without the EU, this country could have been much more easily embroiled in Balkan upheavals. Do you believe we are ready for effective participation in the eurozone? The euro is not just a change of currency. The common currency is the necessary complement to a single market. It forces us to function in accordance with the harsh rules of a single market. In this sense, I am not so sure we are ready to function successfully within the single market, which is the real change our entry into the eurozone wrought. What serious repercussions might there be? It is well known that the big problem with monetary unions arises with asymmetries, that is, different speeds among the member economies. If we diverge from Europe, the single monetary policy can cause a serious problem. If, for instance, there is fiscal relaxation by some of the larger members of the eurozone, we must do the exact opposite. The same applies to interest rate policy. Should Greek firms pay greater attention to European or world markets? Obviously, to world markets, but with Europe as a priority. The main thing, however, are the numerous structural changes which must take place within enterprises themselves, in four main sectors: modernization, production, trading and administration. There’s a strong core of modern enterprises in Greece, mainly in industry. They’ve already been exposed to global competition, in many cases since the early 1980s. These can serve as the driving force for the restructuring of the economy; although they are relatively sheltered from political developments, this does not mean they are not influenced by reforms, especially those that must be carried out in the tax system.
