ECONOMY

Unforeseen and foreseeable obstacles

unforeseen-and-foreseeable-obstacles

The economy is performing better than many had expected, judging by the relatively small recession in the first quarter of this year compared to the same period in 2020. Private bank deposits are on the rise as retirees, civil servants and others did not experience any pay cuts and have had little opportunity to increase consumption.

Greece may not get what it expected to receive this year, but, nevertheless, it will receive 1.6 billion euros from the European Union recovery fund. Also, the repayment of liabilities to the tax authorities / insurance funds and banks in up to 420 and 240 installments respectively, generates feelings of relief. Can something go wrong? Well, there is always such a possibility.

For example, there could be a problem with debt repayments if the interested parties include in them their up-to-date bank loans. In this case, the banks will refuse to take provisions for loans that are being serviced and the repayment agreement will be blocked. Connecting household debt to the tax authorities (110 billion euros), insurance funds (€35 billion) and banks (€120 billion) is a theoretically correct concept, but there is a risk that debts to the state will “contaminate” servicing debts to banks. The Finance Ministry did not provide for this eventuality: Merging all debts into one repayment scheme was too big a temptation not to consider. In two weeks we will know if it was a good idea or not.

However, the real problems lie elsewhere. The education system, after a year of pretending to educate our children from a distance, is dragging on without substantial and mature reforms. The functioning of the judiciary is a liability. It delivers justice at terrible delays, and although it takes three to four years of reform effort and stable leadership in justice to run it, the Justice Ministry plans to select a short-lived leadership, with judges who, due to age, will remain in office for only one year. Reforms in key institutions that can affect economic growth have either not been started or have stalled. The only thing that has been done is the tax reduction: The tax rate for profits fell from 28% to 22%, and for dividends from 15% to 5%.

Is this enough for growth? Does the well-known “trickle-down” theory apply to us? No – especially in a country that is overindebted and lags in economic development. The state should give direction, pave the way for new markets, pursue policies with a sense of public purpose, and assume its public responsibilities.

In this country, the state is limited to another role: It gives out (taxpayers’) money to businesses without setting conditions (e.g., companies to be financed by the European Union recovery fund are not obliged to reduce their environmental footprint), and even withdrawing from its basic duties: For example, with the new labor bill, it abandons the duty to control the workplace – something that no one in Europe or America has dared do.

The Labor Inspectorate becomes an independent authority, the state abandons the obligation to protect workers and the government avoids the dissatisfaction caused by the absence of such protection. Labor problems will be the fault of the independent authority, not the minister in charge.