Does the economy need an election?

The holding of a general election is almost always associated with increasing state expenditures, not only for the organization of the polls but also because governments often have the tendency to give rather generous handouts. With Prime Minister Costas Karamanlis remaining adamant that «the elections will be held on time,» one may reasonably wonder whether that time has now come. And this is not merely a political question but an essentially economic one, too. The debate over early elections is taking on such dimensions that several recent decisions have been viewed as election-linked. Examples include a guarantee offered to soccer club PAOK for a -2.2 million five-year loan and a Finance Ministry decision to use sizeable funds to pay for a range of civil servants’ allowances. However, such moves may not be seen as expedient at a time when Greece needs to save up to -1.7 billion to reduce its public debt, plus a further -430 million to achieve a balanced budget by 2010. Latest data on the implementation of the 2007 budget do not paint a very bright picture, with expenditure growing faster than projected and revenues lower. Only revenue from VAT has been steadily above target levels, which has in turn sparked some optimism, given that VAT revenues are an indicator of economic activity. The more robust the economy, the more VAT collected by the state. However, as national elections draw nearer, more and more companies tend to «forget» to pay VAT, perhaps counting on the perceived leniency of the tax authorities in the runup to the election. At the same time, many pending issues are put off until after the elections. Such issues include the postponement of various arrangements relating to unlawful building activity and deregulation plans. However, the economy needs a stable environment and clear boundaries, otherwise the door is left open to stagnation and private interests. Perhaps the most apropos comment in this respect was one recently made by Dimitris Daskalopoulos, president of the Federation of Greek Industries, when he said, «Clearing things up [regarding the elections] would help boost the economy.»