Faster and deeper

Everyone agrees that the Greek economy’s growth rate will be higher than the eurozone average in the coming years. Conditions are ripe for such a development, if not to the extent of Ireland’s growth rates in recent years, at least similar to Portugal’s. For many, this will be welcome proof that the continuous and huge sums coming Greece’s way in the form of investment subsidies through the Community Support Framework (CSF) programs are not wasted. This alone, however, does not solve the crucial issue of the long-term sustainability of the development effort, nor does it provide assurances that political expediencies will not undermine the economic potential promised. In recent days, the concern that has been mounting in market circles and spreading a negative climate to the stock market proves that something more is needed in terms of policy to consolidate a certain degree of confidence. It is not a coincidence that rumors have been growing over the ability of the government’s economic chief, Nikos Christodoulakis, to deliver on his promises to businesses, either made directly or indirectly. Will the pace of the program of privatizations be kept up? Will the government ease its rigid managerial control of public enterprises, particularly those listed on the stock market? Will Christodoulakis be able to restrain the insatiability of his inert but expensive colleagues in the government? Will a new climate prevail and the necessary degree of market deregulation be effectively promoted to intensify business activity? Will investors – particularly foreign institutionals – put their money back in the Athens bourse? Christodoulakis is aware of all this. Even though he may feel the web of public administration and the thorns of the party machine tightening around him, he has still not lost the desire for surprises and bold moves. Those taking an interest in current developments in the economy and coming into contact with the ministers responsible, find that each good idea receives the proper attention, is not shelved, and, in any case, is used for the production of new plans. We should not be surprised if in the coming weeks, important deals are announced, bringing about significant changes in the holdings of the broader public sector. Every such move will amount to a breach in the thick wall of the public sector and forge new links with the private sector. Banks are surely the first field of action, as conditions are riper in this sector, while those of energy, telecommunications and decentralized productive services are being examined in a systematic way. However, this is not enough in itself, either to curb the growing unemployment which is seeping into the system as competition is beginning to bite deeper, or to create the prerequisites for endogenous and sustainable growth over and above that which is based on EU funds. The country needs faster and deeper growth; acceleration is only attained through more investment; depth is gained through changes in the way business activity is conducted, that is, through structural intervention. The situation in which the Greek economy finds itself at present dictates that depth must come first, if speed is to manifest itself at all. In other words, if changes are not realized in the next 18 months, they are most likely to be delayed for up to another three whole years. Many observers believe that the government will not run its full term to 2004, and will call an early election around the end of 2003. Even if we consider that the political significance of municipal elections in the fall of this year will not affect the ruling party’s policies, the outside time limit for the government to ignore any mid-term political cost without jeopardizing its already limited chances of re-election is thought to be the middle of 2003. So, if the government wishes to see its initiatives bear fruit in terms of income, new jobs and business prospects, it cannot afford any delays. There is an additional and particularly important reason that accentuates the need now for good synchronization of policy and economic possibilities: By 2004, the market will have discounted the Greek economy’s potential for absorption of the remaining funds of CSF III, which runs to 2006. If, by then, there is no real prospect for substituting private investment funds for EU subsidies, one easily arrives at the conclusion that the growth rate will fall after 2006, especially considering that the «push» given by the projects for the 2004 Olympic Games, which will strongly support the economy in the coming two to three years, will have tapered off. If this happens, the impetus behind Greece’s fast convergence with its partners will have been lost.