ECONOMY

Gov’t targets social sector reforms

Prime Minister Costas Karamanlis is set to finalize the last details of his annual keynote economic policy speech for the opening of the Thessaloniki International Fair (TIF) in September at a meeting with Economy Minister Giorgos Alogoskoufis. With early general elections later next month now considered a given, a top government official said Karamanlis will outline his party’s program for the next four years, when «there will be a turn toward the reform of social services.» The main axes of this reform policy are said to be as follows: First, boosting support for the 2 million Greeks who live under the poverty line through the National Social Cohesion Fund, whose resources will reach 2 billion euros by 2010. Second is a change in the national minimum pension, which will incorporate the special «solidarity» supplement for pensioners from 2009, and will bring pensions up to about -550-600 per capita for about 400,000 retirees. Third is the reform of the social insurance system through a broad social and political dialogue, without encroaching upon mature pension rights. Fourth is reorganization of public administration with the utilization of European Union investment subsidies for the first time. The EU-subsidized Fourth Community Support Framework (CSF IV) investment program will include a autonomous program for «Improving the administrative capacity of Public Administration,» for which EU and national funds totaling 675 million euros have been earmarked. Fifth is adjusting the salary structure for public servants, with the gradual incorporation of benefits into their basic pay. Sixth is the completion of reforms in health and education. As regards economic policy, the agenda for the next four years includes: First, the third phase of tax reform, focusing on property, with the abolition of the Large Realty Tax and its replacement with a single tax on all properties and bold reduction in inheritance tax. There will also be a review of taxes levied on behalf of third parties, which the European Commission has said must be done away with. Second is moving forward with a new generation of privatizations, which will mainly concern infrastructure work, ports and airports and will be combined with private/public partnerships. Third is to speed up the deregulation of markets, particularly in energy. Fourth is the continuation of fiscal rehabilitation with a view to eliminating the public deficit, or even attaining a small surplus in the 2010 budget. Tight spending and incomes policies The prime minister’s speech at the Thessaloniki International Fair is projected to focus on reforms rather than the provision of benefits, which will be limited and within the stringent margins affordable by the budget. One of these is thought to be the extension of the benefit for large families with three children from 2008. Within this restrictive framework, the General Accounts Office is working on a draft which envisages a rate of increase in public spending much lower than that of gross domestic product, and in revenues much higher. According to this draft, spending is projected to rise by 5.5 percent to -56.3 billion next year, with primary spending rising 6.5 percent in order to finance the benefits already announced. The incomes policy provides for pay raises of 3.5 percent for salaried staff and 4.5 percent for pensioners. Spending for public investment is seeing as rising by 4 percent to -9.1 billion. Revenues are projected to rise 8 percent – an ambitious target given the reduction in tax rates. Ministers hope that the recent measures against tax evasion will have maximum impact.