Remedial action

Early this year, we noted that the meltdown in stock markets across the world over the past three years – which has also cast the Athens bourse into the doldrums – combined with the signs of alarming pressure on the domestic market justified reservations over the optimistic scenarios on the Greek economy. Such scenarios, which are also touted by the government, invoke Greece’s high growth rate to back the claim that the local economy will not be seriously affected by the international economic slowdown. If that were merely an upbeat scenario, intervening developments have rendered it all but totally irrelevant. The looming war on Iraq is bound to create complications, and the expected – even if temporary – hike in oil prices could pose a major problem for Greece. Apart from the potential consequences of a war in Iraq, Greece has suffered extended damage from the recent wave of stormy weather, as the heavy winter and numerous storms last summer have serious damaged agricultural production and animal farming, the road network and several infrastructure projects. Although early assessments are largely estimates, it is still worrying that they put the cost of remedial work up to 1.5 billion euros. Furthermore, February inflation is expected to hover at about 4 percent, and credit institutions are experiencing lean times (as reflected in their balances for 2002 and their interest rate policies), consumer demand is low and there seems to be a growing number of non-performing loans. This picture raises legitimate concerns over short-term developments and the ability of the State and the private sector to withstand the pressure – even more so given that the public sector has shouldered the huge burden of sponsoring and preparing for the 2004 Olympics. Faced with this peril, there is a need to redesign short-term economic policy and to abandon prognostications that show Greece emerging unscathed from the heavy winter and the coming war. In such a situation, the State must re-examine and cut superfluous or counterproductive expenses. This, of course, refers primarily to some Olympics-related expenditures, an area where the cost and the manner in which funds are distributed reflect the illusion of greatness that seems to permeate various officials involved. Hope as we might that pressure on our economy will be brief and less intense than we fear, we should by no means be caught off guard.