ECONOMY

Gov’t stakes electoral hopes on the economy, its strongest card

The economy will be the present government’s strongest card in the forthcoming – and probably early – elections. As it was before Bill Clinton’s re-election, «It’s the economy, stupid» seems to be the aptest comment on the balance of factors likely to influence the outcome. Sure, the Greek economy has not solved all its serious problems: low competitiveness, the cumbersome and often corrupt civil service, and the web of intertwined business interests. But despite the delays, or even mistakes, in these strategic sectors, in its three-and-a-half years in office the government has tidied up public finance and liberalized markets – freeing the creative forces of private enterprise, which is reflected in sustained high growth rates. Although main opposition PASOK party leader George Papandreou takes pride in the work of his party when it was in power for almost 20 years, the hard figures refute that: Public debt cataputled from 29.7 percent of gross domestic product (GDP) in 1981 to 108.5 percent in 2004. Our living standards, as a percentage of the EU average, fell from 77.5 percent in 1981 to 66.3 percent in 2000, but rose to 73.6 percent by 2003, mainly thanks to sizable inflows of EU subsidies and unchecked borrowing. Unemployment, from 4 percent in 1981, shot up to 11.3 percent early in 2004, the drachma underwent three devaluations beside being on a continuous slide, and the number of civil servants grew from 327,000 to 596,000 in 2004. When the present government came into office, the country was already fiscally derailed, with low competitiveness and large social and regional inequalities. To be sure, despite the successes, some of the delays of the present government have been nearly exasperating: It took it three-and-a-half years for it to submit its first land zoning plan, while public utilities continue to generate deficits paid by the taxpayers. But one thing is sure, it has stopped the economy from going downhill. First Costas Karamanlis’s administration managed to bring the public deficit to below the EU-mandated ceiling, at 2.6 percent of GDP from the staggering 7.9 percent in 2004 which placed it under supervision by Brussels. Public debt is also steadily de-escalating: From 108.5 percent in 2004, it is expected to fall to around 100 percent this year. And, more importantly, Karamanlis is going to the elections without the packages of handouts that had marked both of the previous government’s terms. Second, economic growth is robust and increasing: 3.7 percent in 2005, 4.3 percent in 2006 and 4.6 percent in the first quarter of 2007 – one of the highest in the eurozone, along with Ireland, Finland and Luxembourg. The qualitative characteristics of growth are also improving and are now spurred more by private investment and exports, in contrast to the large public works in preparation for the Olympic Games under PASOK. GDP per capita will approach 80 percent of the EU average this year and, after the GDP revision expected to be approved by Eurostat, will exceed 95 percent. Third, unemployment was down to 9.1 percent in the first quarter, from 11.3 percent three years earlier. Real disposable income rose 4 percent in 2006, against 3.6 percent in 2005 and a 1.8 percent average during PASOK’s last eight years. Revenue shortfall, government plans more privatization schemes Economy and Finance Minister Giorgos Alogoskoufis is said to be among the ministers favoring early elections, fearing that a prolonged pre-election period will cause further deterioration in the weak budget revenue figures in the first half of 2007. The latest data made available to ministers by the General Accounts Office have reportedly caused concern, and Alogoskoufis is coming under increased pressure from other ministers for more credits. The most likely early election date is considered to be September 23. The government has planned to submit to Parliament on October 1 an initial draft budget for 2008, which will further trim the public deficit. The government plans a new wave of privatizations in the infrastructure and energy sectors in its next term, aspiring to turn the country into a major transit hub in the region, a senior minister told Kathimerini. «In order to succeed in this strategy, we need further investment in ports and airports. Part of these investments and their management, such as terminals and cargo stations, will be undertaken by investors through public/private partnerships,» he said. Implementation of the plans will require the reopening of the hot issue of letting private investors into the container terminals of Piraeus and Thessaloniki, which the government was forced to abandon late last year after strong union reactions.