Perilous handouts

Greece has clearly entered a pre-election period. Every initiative by the country’s political parties is now taken with an eye fixed on the ballot. The Socialist government, in particular, is expected to overwhelm the public with new measures, handouts and promises in an attempt to gloss up its bruised image and create the most conducive possible environment in which to aim for re-election. As of Tuesday, the government of Costas Simitis will be making a host of announcements that will peak at the International Trade Fair in Thessaloniki early in September. There is nothing strange about any of this, one might well say; we are, after all, in the runup to national elections. The main questions that arise concern the nature and the size of the handouts, their projected social and economic yield, and their implications for the economy. The government is at pains to reassure us that the planned handouts will not go beyond what the economy can afford, nor will they upset the country’s fiscal discipline – as set by the European Union. In the face of growing fiscal concerns and burgeoning demands by various segments of the population, the PASOK government has vowed not to give up on its fiscal obligations. However, people in the know are aware that the country has long breached its fiscal discipline commitments. Olympics-related projects have put a severe strain on the economy and public spending has skyrocketed, although much of it remains hidden. Meanwhile, accumulated hospital debts hover in the range of 1.5 billion euros (500 billion drachmas), that is about 1 percent of the national income. The Farmers’ Pension Fund (OGA) alone owes hospitals about 200 billion drachmas as it has failed to pay the fees for the insured who have received medical treatment in these medical institutions. Municipalities are also heavily in debt, with more than 300 of them standing on the brink of economic insolvency, as the recent convention by the central union of municipalities (KEDKE) revealed. At the same time, social groups are making ever higher demands on the government, which is putting extra pressure on the fiscal economy. Greece’s oft-praised fiscal discipline is increasingly coming into question. It is common knowledge that eurocrats in Brussels are raising eyebrows over Greece’s official fiscal numbers, while Eurostat officials are coming to Athens next month in order to check on the country’s defense spending and its impact on state finances. Besides, everyone suspects that the State’s excess spending will come to the fore after the parliamentary elections and that the country will enter a fiscal crisis before the end of 2004, after the completion of the Olympic Games. When it comes to fiscal discipline, the government’s deeds must match its words – more crucially, when we are in a pre-election campaign period.