Greek firms must act to boost competitiveness
Old difficulties often leave such strong impressions on memory that they continue to distract attention from current or future problems. A whole generation of politicians and economists in this country has grown up with the danger of imported inflation. This is now a thing of the past. Today, the Greek economy is facing a completely different problem inside the eurozone: low competitiveness in comparison to the other member states. Both in relation to last year and, above all, as measured against the long-term average rate of growth in competitiveness, there has been appreciable deterioration. In the third quarter of this year, the euro gained 3 percent against the dollar and about 1 percent against the yen but receded 2 percent against the British pound. According to data issued by the European Commission, this appreciation of the euro has burdened the cost of production in the eurozone by 4 percent for 12 industrial nations in this quarter. But the biggest headache for the Greek economy is that its competitiveness is deteriorating within the eurozone, leading to a concomitant loss of income and employment. In theory, since the prices of Greek imports are mainly calculated in dollars and our exports, quoted in euro prices, are mainly destined for the eurozone, there should be no particular problem. According to data for the end of September, the competitiveness of Greek products in relation to other eurozone members is still at a positive level, despite a drop from a year ago. However, this is a misleading picture; the production cost of Greek products is in negative territory if compared to the long-term average. The fact is that Greek products still retain their competitiveness inside the eurozone on account of an accumulated reservoir created in past decades through repeated devaluations and the constant slide in the drachma. But now with the common currency, there is a visible danger of this advantage evaporating. There is no national currency to slide or be devalued any more and, therefore, an improvement in competitiveness can only come about from limiting production costs. This truth lies behind the dwindling of exports, while the growth rate for imports has only been dampened due to lackluster demand. A reduction in the cost of production depends on the cost of raw materials, the cost of employment, the organization and know-how of enterprises and costs added by the State in the form of taxes. It is in these areas that a government, through its policies, can improve competitiveness. But because such initiatives cannot be guaranteed to be particularly effective, the burden of adjustment falls mainly on enterprises. And they have to move fast.
