A six-month window for the economy

Greece, like the other members of the EU’s eurozone, will experience the great change of adopting the single European currency on January 1. The switch comes at an especially challenging time, on the heels of the terrorist attacks on the United States on September 11, the war in Afghanistan and the recession that has been plaguing the major economies of the world. But each country has its own strengths and weaknesses. Greece will, on the one hand, experience a higher growth rate than its EU partners, thanks in part to monetary stability stemming from the euro, but also due to the support of funds from the Third Community Support Framework and Olympic projects. The European Commission forecasts a growth rate of 3.5 percent of GDP for Greece in 2002, while the International Monetary Fund puts it at 3 percent. Both see an EU average at 1.3 percent. On the other hand, political events mean that the Greek government will have to move fast to carry out whatever reforms it can. National elections are due by the spring of 2004, which makes 2003 a pre-election year. This, in effect, will make it highly unlikely that the government will take any measures that might turn out to have a high political cost. But electioneering will begin well before the coming year is out, as local government elections will be held in October. These are traditionally seen as a sign of the government’s popularity, meaning that once again the ruling PASOK party will try to avoid unpopular measures. Therefore, the team under National Economy and Finance Minister Nikos Christodoulakis has set a target of June or July for the reforms it wants to carry out. The minister, who was appointed in October, has already moved aggressively, with the privatization of the Hellenic Bank for Industrial Development (ETBA), by allowing the state-controlled giant National Bank of Greece to face the future on its own (including the merger with Alpha Bank) and by introducing more growth-oriented elements into the 2002 state budget. Sources and current evidence create the impression that the government’s new economic team will try to make its mark by taking more aggressive steps toward privatization and the opening up of markets.