NEWS

Election, entanglement and the economy

The political situation looks complex, but those in the know see progress being made. In the political field, Prime Minister Costas Karamanlis is clearly calling the tune. His leadership role is being consolidated and his position on the political scene is unquestioned. What he says gains public acceptance, it has a forceful impact on the political environment and, so far at least, provides a cover for the government’s evident weaknesses and its ministers’ amateurism. This is also reflected in public opinion polls, which indicate a high level of acceptance for the premier, higher than that of his party and government. At the same time, PASOK leader George Papandreou is still battling to establish himself. Either because he has made a bad impression or his discourse does not move the general public, there is some grumbling and questions are being raised behind the scenes. Sources say that if he does not measure up, a leadership issue will soon arise. It is not known how much of what is being said in private will be expressed publicly. If the pressure on PASOK officials from victims of the government’s anti-corruption drive grows, then this criticism may become public, but as yet nobody believes it will have any effect, despite Papandreou’s shortcomings. It is not by chance that the PASOK leader has been sending terse messages to potential doubters or leadership contenders in his party. Of course he takes every opportunity to indicate his distance from «tainted» former government officials and his solidarity with them is only nominal. He is building bridges with the premier on the issue of entangled interests and is practically campaigning for a consensus solution for the presidential election. Not a few observers believe that Karamanlis and Papandreou will agree via other channels on a candidate. Some are prepared to hazard a guess that the candidate will be Foreign Minister Petros Molyviatis. If that is so, then one source of uncertainty has been removed. In order to circumvent new general elections in March a minimum of consensus on the presidential issue will probably be ensured as a matter of course, and the key issues will be decided during the four-year term by the initiatives and effectiveness of the government. As for the economy, the situation is slowly coming under control. The initial commotion caused by the budget audit seems to have been averted. Fears of major complications have subsided and only the bruises remain from the way it was handled, which was anything but skilled. Eurostat’s recent examination of the crucial period in 1999 showed that Greece satisfied the fiscal criteria and indeed entered EMU on its merits. When spending on armaments, transforming interest into principal and other expenditure that had not originally appeared were calculated, the deficit rose to 2.85 percent of GDP from 1.8 percent, which the government of Costas Simitis had declared at the time. Vilification and looming condemnation were thus avoided. Ecofin will hold two more important meetings to completely clarify the fiscal situation. This Wednesday and Thursday, they will discuss the outcome of the audit and there will be a new, unofficial presentation of the new budget for 2005. There will probably be comments, but Economy Minister Giorgos Alogoskoufis will insist on supporting his decisions for a mild adjustment without asking for additional time. He made a wager with himself when he announced that he will reduce the deficit by 3 percent in a single year, without imposing extra taxes and purely by reining in expenditure. Ecofin Whatever happens on November 15-16, Ecofin will discuss the Greek fiscal situation again, so as to decide whether to activate the excessive deficit procedure. Alogoskoufis is already preparing for this. He recently met the ambassadors of all the eurozone member states at the residence of the Dutch ambassador to Athens and planned meetings with European Commission officials in Brussels. He believes he will surmount this obstacle so that he can go on and devote himself without distraction to sorting out the new economic policy by presenting the tax and development legislation to Parliament. Then he will present the real estate tax law that will make provision for VAT, reduce conveyancing tax and facilitate conveyancing, but with the tacit proviso that it be enforced in 2006 so that everyone can prepare for it. At the same time he will highlight the program of the State Real Estate (KED) and Olympic Real Estate companies to capitalize on state property and land. The new administration of KED has already started documenting them, and has located areas in Ileia and elsewhere which can be quickly designated for development and given to private operators through tenders. Meanwhile, the Olympic Real Estate company is evaluating proposals for the refurbished area in Faliron and a metropolitan park at Hellenikon, seeking the best and most profitable combinations. Though the entanglement front is still open and is creating a climate of unrest, the government believes it to be manageable. It assumes it will emerge stronger from the showdown. It believes that the once-powerful figures will be diminished, the regime will become more transparent, and that many people will realize that they have to comply with the rules of healthy competition. Unblocking tenders In the new year, a new law will come into effect that Public Works Minister Giorgos Souflias says will allow many new tenders that had been stuck to proceed unblocked and will, in six months, enable the start of procedures for new projects worth about 2.5 billion euros. In these circumstances, if oil prices do not upset everything and tourism develops after the promotional boost from the Games, the economy will find its way. It may not keep up the pace demanded by entrepreneurs in their usual impatience, but a new situation is developing in the economy. Circumstances may demand more aggressive policies. But the government made its calculations and this is the path it has chosen. Its effectiveness will become apparent. We are certainly not on the threshold of disaster. Besides, our economy has frequently proved how durable it is.