ECONOMY

Bold changes needed in next term

The government’s recent successful placement of a 20 percent stake in Postal Savings Bank – reducing the state’s holding to 45 percent – and of a 10 percent stake in OTE telecom – bringing the state’s share to 28 percent – has concluded the ruling New Democracy party’s privatization agenda. However, analysts argue that even though the specific program yielded -6.2 billion, lessening the country’s public debt by that amount, it has not changed the economy’s structure, which is still dominated by an outsized and anti-productive public sector. Public spending as a part of GDP, which now stands at 44 percent (compared to the former PASOK government’s 48 percent), is still disproportionately high for a country facing the array of problems that Greece does. For instance, in states that have liberalized their markets (Ireland and Spain, for example), the respective rate of public spending does not exceed 34 percent. The state’s dominant control is also proven by the fact that the number of public servants is still excessive, having remained unchanged in recent years. In 2001, for example, the wider public sector employed 36.7 percent of the work force, and the rate in 2006 stood at 36.2 percent. Such data point to the economy’s key structural problem, as it is controlled by a huge public sector staffed by an excessive number of personel, primarily producing deficits and characterized by inefficiency, poor service to citizens and with a strong tendency toward corruption. At the same time, such characteristics stand as proof of the government’s lack of boldness in its privatization program. Take for example Olympic Airlines (OA), which continues to operate at a monthly deficit of over -350,000 and does not own a single aircraft. It could be argued then that the government should be obliged to either upgrade or sell the national carrier, or even shut it down altogether. To be sure, nothing has been done about OA in the last three years. Open sores Similar conditions also prevail at the Hellenic Railways Organization (OSE), whose deficit jumped from -500 million in 2004 to almost -1 billion this year, without any notable improvement in the quality of service. The havoc prevailing at OSE was such that even some of the carriages bought for the Kalavryta cog railway line were bigger than the line’s tunnels. The so-called armaments industries are also in a similar state, virtually operating only as providers of employment to political friends. Furthermore, the Public Power Corporation (PPC) has been operating with an outdated network and production. However, Development Minister Dimitris Sioufas stubbornly refuses its further privatization. Sioufas has also ruled out any partnerships between PPC and major European companies which would facilitate its restructuring. PPC is controlled by the so-called «deep state,» which has joined forces with trade unions in permitting no changes at all, leaving the market wondering how long new and competent PPC CEO Takis Athanasopoulos can survive. The list is long and includes the country’s collapsing ports, with upgrade plans having been blocked by trade unions. On what grounds could one then argue that the current government’s privatization program has been implemented? Interestingly, the European Commission in a recent report spoke of high administrative costs that weigh on the economy’s productive sector. It said reducing that cost could boost the country’s annual growth rate by 2 percent, i.e. -4 billion. Moreover, the Commission views Greece as the country with the biggest problem of red tape, estimating that GDP losses as a result of excessive bureaucracy stand at an incredible -15.5 billion annually. There are obvious conclusions to be drawn, the first being that the government cannot afford to waste any more time. It should soon call elections in order to get a clear mandate for the changes it has to make in its second four-year term in office. Prime Minister Costas Karamanlis is said to be fully aware of the urgency of the changes needed for a leaner and more efficient state. He should act on them.