The coming era of the euro makes domestic economic reforms even more urgent if Greece is to remain competitive with its 11 eurozone partners and if Greeks can improve their living standards to the levels of other European Union countries, Bank of Greece Governor Lucas Papademos told Greek Kathimerini in an interview published yesterday. Raising (our) living standards is absolutely tied to Greece’s ability to improve its international competitiveness in an international environment of sharpening competition. This means, in practical terms… improving productivity and achieving higher growth rates, Papademos said, adding that fiscal policy must also be conducted in a way that will help economic growth, that is by cutting inflation and achieving budget surpluses. The euro era officially began on January 1, 1999, when eleven countries agreed to establish a stable exchange rate for their currencies. Greece joined in January 2001. The most significant change, however, comes in 15 days’ time when the first euro coins and banknotes enter in circulation. National currencies will circulate alongside the euro for a transitional period of just two months. It is only now that Europeans will be able to directly compare their purchasing power, and Greece is lagging far behind on that. Its income averages about 70 percent of the EU average. Papademos implicitly criticizes the government for, among other things, having failed to make the public administration more effective, using privatizations merely as proceedings with which to fill state coffers,and letting public debt spiral. The state must make a series of changes that will underpin the economy’s effective operation. The civil service must become effective and support market liberalization… Privatizations cannot merely take place in order for the state to receive revenues, but to lead to a more effective production. Tax reform, considered premature until now because of the convergence needs, must now become the top priority, said Papademos. In order to reduce its budget deficits, which amounted to over 10 percent of the country’s gross domestic product (GDP) in 1995 but which actually produce a modest budget surplus (0.1 percent of GDP) in 2001, the government raised revenues rather than cut spending. This often took the form of taxing whole categories of professionals who avoided paying taxes and cracking down on companies that would not pay the Value Added Tax. It also led, however, to heavier taxation for everybody, including wage earners and pensioners. Papademos feels the time has now come for the government to make a serious effort at reining in spending. Papademos advocates continuing budget surpluses in order to bring down public debt, now hovering at over 96 percent of GDP. Greece has undertaken to bring debt down to 60 percent of GDP by decade’s end. Contrary to many market watchers, who believe the euro will continue to remain weak against today’s global currency, the dollar, Papademos believes it can easily strengthen in the near future, if Europe accelerates its growth. According to Papademos, the weak points of the US economy are high trade deficits and a high level of debt by households too reliant on credit cards for their consumption. Market expectations apparently underestimate Europe’s future economic performance compared to that of the United States, he said. – Foreign Minister George Papandreou pays an official visit to Damascus for meetings with the Syrian government. Talks are expected to focus on the recent escalation of violence in the Middle East and on bilateral affairs. To Wednesday.