ECONOMY

Hoping for early elections

The pre-election climate can have deadly consequences for the public finances and the Economy Ministry is preparing for the worst should general elections take place in March 2008. High-level ministry officials told Kathimerini that they fear a repetition of the chaos seen in public finances before the 2004 election. Then, in less than 30 days, there were promises and actual spending for benefits which were higher than the total of the previous three years. Economy and Finance Minister Giorgos Alogoskoufis, who will be responsible for reining in such promises, does not appear certain he will succeed in the task. Greece has just emerged from the European Union’s Excessive Deficit Procedure (EDP) and the pre-election cycle appears to be threatening to destabilize its economy again. Recent data on the execution of the budget in the first five months of the year showed it is off-target by about 700 million euros as public revenues are lower than projected and spending has exceeded limits. Although reports suggest that revenues are now beginning to pick up, the summer recess along with a protracted election period will make public finances suffer in the rest of the year. This would undermine both the current budget and that of 2008. Future moves will have to be planned very carefully. Officials note that although Greece is enjoying a high rate of growth, the country is also dogged by institutional weaknesses which at any point could take the budget considerably off-target. It is also clear to Alogoskoufis that he has precious few allies among his colleagues when it comes to fiscal containment. This was also evident when the country was under financial supervision. Strong statements and innuendo were common at the time, while it was hard to find any favorable mention of the economic policy being followed, which was supposed to be a collective government decision. It was the prime minister himself who put his weight behind the effort to have the EDP lifted, and that eventually sufficed to deter pressure and demands from his ministers. And it is again Costas Karamanlis who carries the burden of the forthcoming election. The outcome of elections has always depended on the work accomplished as well as unforeseeable factors that can change the landscape. The fact is that if elections are not held this fall, then economic developments could cause problems for the next government, which may have to meet the countless promises made or find funds for expenditure that had not been budgeted. Meanwhile, the private sector has become a key factor and a positive parameter for the economy. Investments are increasing, unemployment is declining (just 8.4 percent in April) and exports are growing. These developments as well as many others illustrate the qualitative change under way in the country’s economy, which the two main parties must safeguard at all costs.