Minister outlines economic reforms
The government’s recent agreement with the Hellenic Telecommunications Organization (OTE) on its early retirement program was the first step in the government’s plan to gradually align work conditions in the state and private sectors, one of its top priorities in its reforms now to be extended to banks’ social security funds, work hours and overtime. In this interview with Kathimerini, Economy and Finance Minister Giorgos Alogoskoufis claimed that these changes, in combination with public-private partnerships (PPPs), would result in a more efficient economy and other improved growth rates. Despite the call for a confidence vote (due for last night) by PASOK leader George Papandreou, the minister was optimistic that the tide of reforms could not be stemmed, and that the need for reforms would eventually lead to a climate of consensus within Greek society. Last Wednesday, the main opposition leader called for a censure vote against you. What do you think Papandreou was trying to achieve? I think that it was inappropriate both from the political and parliamentary point of view, because, without providing any evidence or admitting the PASOK government’s enormous responsibilities for the state of the Greek economy, Papandreou tried to score a point in order to rally his own party, which, as everyone knows, has a number of problems. The government has given its answer through its prime minister. I have nothing more to add. It is self-evident there is collective responsibility for drafting economic policy as well as other polices; the government deals with the country’s problems collectively. That is our duty; that is what we are doing. Instead of adopting a serious, responsible stance toward the reforms, the opposition leader, I am sorry to say, has chosen the road of conflict, without having any positions, proposals or solutions to suggest. That is an easy road to take, but it is a dead end. What are the government’s structural reforms aimed at? We are trying to change everything that has kept Greece back in recent years – the structure of the economy, which must become more competitive, the structure of the state, which must become efficient and more friendly toward its citizens, and the inequalities in the system. Greece has the ability to move forward. It is my deep conviction that with these changes, it can take a step forward in order to give everyone a better life. Most of the changes concern the functioning of the broader state sector. That is the only way we can fight waste and deal with the problems in the social security system and stagnation in the markets. The reform of the taxation system has gone ahead, as has the new development law. We have already announced the third pillar of the new development policy with PPPs. Nevertheless, our most recent initiatives are also very important. The gradual convergence of work conditions in the state and the private sectors, something that began with the agreement reached with OTE, now to be extended to banks, are reforms that will result in a more efficient economy and higher growth rates. You seem to be putting an emphasis on PPPs. Could you elaborate on that? The PPPs complete the new development paradigm, based on entrepreneurship, competitiveness and looking beyond our own borders. Following the taxation reform and new investment law, we are providing ways for business initiatives to create the infrastructure the country is in need of. The state cannot function as a business. We are offering the private sector a way to provide public services, naturally without affecting the state’s role in society, which in any case is safeguarded by the constitution. At the same time, such joint ventures mean that infrastructure projects will be completed at the least financial cost, faster and more efficiently. Moderate adjustment How concerned are you about the lack of revenues and large deficits? Is there a risk that the deficits could get out of hand? Dealing with fiscal imbalances is extremely difficult, as they are deeply rooted in the functioning of the state and it will take time to achieve this goal. We have chosen the difficult task of making a moderate, but definite, fiscal adjustment. One of the major issues is the reorganization of Finance Ministry mechanisms to enable us to fight tax evasion, a great challenge. We also have to do away with the idea of inflexible expenses. In an environment of growth, such inflexibility is of minor importance, but we must put a stop to the growth of the state sector. Our goal over the next few years is to reduce the state’s share in the total GDP by 1 percent a year. The entire government, the ministries, will all have to do their part in this and espouse the government’s general political goals. We are moving ahead steadily; we know where we are going. As was shown in Portugal, the fiscal problem was not resolved because the growth rate declined. How do you hope to achieve 3.9 percent? Now that the Olympics are over, we want growth to come from private investment and business initiatives. That is why we lowered tax rates; that is why we made the new investment law. That is why we are promoting PPPs. The first results from the new development policy are encouraging. Since the Olympics, growth has remained at high levels. It was 4.2 percent in the last quarter of 2004 and 3.5 percent in the first quarter of 2005. This growth came from exports, private construction and private demand. Since we are expecting an increase in public investment in the next few months and prospects for tourism are encouraging, I believe that growth will be maintained at a higher level than in the eurozone. Consistency, continuity Your predecessors were always very optimistic, even if subsequent events did not bear them out. Does the same apply to you? I have never ignored the difficulties, but one cannot overlook our country’s major advantages. We can reorganize the economy, if we are consistent and if we persevere, if we are persistent and steadfast in our goals. They say that we learn to walk by falling over. In retrospect, what would you have done differently? I would have done largely the same things. I can’t see what I might have changed. I believe we are on the right track. George Papandreou recently appears to be adopting several correct positions regarding the role of the state. Despite the events of last week, might this not be a good opportunity to agree on the reforms the country needs? We are familiar with Papandreou’s stance. What is certain and generally accepted is the need for reforms and changes if things are to move ahead. In this effort, the climate of consensus that we are steadily working toward is helping to achieve these goals speedily and safely. I believe that all groups in society are contributing to this in their own way. PASOK’s responsibilities More and more voices are being raised in Europe, particularly after the French and Dutch «no» to the European Constitution, regarding a gradual departure from the euro; against the Economic and Monetary Union and, more specifically, the European Central Bank for insufficient development of the eurozone. Could the European Central Bank develop a more growth-oriented policy? The European Central Bank is responsible for monetary policy. It is not the economy ministers’ job to comment publicly on the bank’s actions. Our job is to create the conditions for growth within conditions of fiscal stability and structural reforms. With regard to the Third Community Support Framework (CSFIII), is the European Commission likely to suspend payments or force us to return funds because of poor work and omissions in the past? No, it isn’t. Last week, after many months of negotiation, the government managed to have this issue closed once and for all. The European Commission approved the system of administering and monitoring the CSF. Nevertheless, PASOK bears major responsibility because it humiliated the country with projects that were executed badly, with a complete lack of transparency as well as budget overdrafts. Whatever we have achieved has been done because we were different and, from the outset, we cultivated a relationship of trust with the European Commission. Would it have been better never to have carried out the audit of public finances? Would some other approach have been better – for example, for the Bank of Greece to have done it? The audit was done in the best way possible. I believe everyone realizes we were right to do it. It was carried out by Eurostat in cooperation with the Economy and Finance Ministry. The Bank of Greece had no authority, but was involved where appropriate. In your 15 months in office, you have traveled a hard road. People see you as efficient, but not very popular. Do you feel you are on your own? Before I entered politics, I held responsible positions both in Greece and abroad. I have never achieved anything by following the easy way. What is important is to do one’s duty. I entered politics to make a contribution. As for being popular, while that is important for a politician, results are more important. I have never felt alone in this effort. I have always enjoyed the trust and support of the prime minister and work closely with many of my colleagues. We must not forget that the effort is always collective.