Battle over economy

Prime Minister Costas Karamanlis and opposition leader George Papandreou are preparing for «the battle of Thessaloniki,» where both will make important speeches outlining their economic policy priorities. Karamanlis will speak at the opening of the Thessaloniki International Fair (TIF) in early September where, traditionally, Greek prime ministers set out the following year’s economic agenda. Papandreou will speak a week later. As the prime minister, Karamanlis is expected to tread carefully, emphasizing the government’s accomplishments so far and avoiding committing himself too deeply to future handouts, while Papandreou is expected to both criticize the government’s performance and make promises of his own to attract voters. With elections due by April 2008, at the latest, it is widely considered that Greece will enter a pre-election period right after October’s local government elections. And while governments tend to relax their policies and provide all sorts of handouts in the final year of their terms, Karamanlis is constrained by the fact that Greece not only has to lower its deficit to levels acceptable by the European Union (below 3 percent of Greece’s gross domestic product) at the end of the year, but must also maintain it at that level over the following years. Otherwise, the EU will continue its close monitoring of the economy and may impose unpopular spending cuts. The task to lower the deficit is complicated by high oil prices, leading Economy and Finance Minister Giorgos Alogoskoufis to declare that «the government may offer something (in the way of handouts) without for a moment deviating from our commitment to reduce the deficit to below 3 percent (of GDP)». Karamanlis is thus expected to focus on the expected windfall in the form of European funds through the Fourth Community Support Framework program (2007-2013). He will repeat his pledge to commit 80 percent of these funds, about 16 billion euros, to regional development. He will also use the sale of stakes in banks as proof that he has fulfilled his pledge to reduce the size of the state sector. Papandreou, on the other hand, is expected to promise rises in pensions, unemployment and other benefits for low-income people.

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