PM to present eight-point plan at TIF

The government will face, over the coming two months, two tests of its economic policy priorities. First, Prime Minister Costas Karamanlis must convince public opinion, and businesspeople in particular, that he has the economy under control and that his policies will produce the necessary surge in growth while tightening fiscal discipline. The PM will spell out his policy plans at the Thessaloniki International Fair (TIF) early next month, as his predecessors have traditionally done every year. A sterner test awaits Economy and Finance Minister Giorgos Alogoskoufis, who has to submit, in October, a progress report to the European Union, the first of three that must be submitted by the end of next year, by which time Greece must have lowered its deficit to an acceptable level (below 3 percent of GDP). Alogoskoufis is publicly optimistic, insisting – as he has done throughout his 17 months in office so far – that public finances will be put right without painful, and unpopular, spending cuts. Alogoskoufis has presented Karamanlis with an eight-point program, some of it dealing with short-term issues such as privatizations, and another part with longer-term issues, such as social security reform. The program’s main points involve public-private partnerships (that is, private financing of public sector infrastructure programs); better management of public utilities in order to minimize costs to taxpayers; dialogue on social security reform; a national plan for growth that will cover the period 2007-2013 and whose main aims will be to reduce regional inequalities and accelerate convergence with the advanced EU economies; better management and development of state property; more privatizations; and less red tape. Karamanlis’s TIF speech will revolve around these priorities, likely with few specifics. Karamanlis’s and Alogoskoufis’s credibility will be tested in the coming months by means of the deficit and growth targets they have set. With state revenue lagging far behind the goals set in the 2005 budget, fiscal policy will be the most difficult test. Reservations have also been expressed lately about the government’s ability to meet its growth target of 3.5 percent for 2005. Failure, especially on the deficit, will mean tighter EU supervision and pressure for spending cuts.