Social spending

The government’s social and economic development measures, pre-election handouts in other words, with which it hopes to sway undecided voters, were announced yesterday by Prime Minister Costas Simitis. National Economy Minister Nikos Christodoulakis described the measures as a comprehensive package that is aimed at promoting redistribution in favor of low-income groups as well as providing incentives for growth. Overstated as the government’s claims are, one must acknowledge that the measures address existing needs and problems facing specific sections of the population. However, their timing and fragmented nature make it hard to say whether they address the right set of priorities. Given the current degree of tax evasion and undeclared income, it is hard to predict the extent to which certain measures – such as those aimed at helping farmers – will also help people whose financial situation does not justify state support. Despite any reservations, the government measures do not just spread out the available 2.360 billion euros, but rather distribute it to categories of people who really need help. However, this is simply not enough for any fair-minded observer. Although no one doubts that many of the recipients of government aid deserve the announced benefits, one cannot ignore the fact that the handouts appear to serve shortsighted pre-election objectives rather than long-term social planning. What is more, no one can bypass the fact that the handouts have been announced despite an exploding deficit and excessive spending. This has sparked speculation that the handouts are funded with borrowed money, creating debts that the citizens will have to repay in the future. In light of the fiscal strain and the timing of the measures, the government’s pledges are a cause for concern. Simitis seems to be taking the well-trodden road of promises and handouts, which we will have to pay for in the future. He is doing so because, three years having gone by without substantial structural reforms, he cannot offer incentives for new jobs, improve productivity or boost income produced by the private sector – which could make some fiscal room for more social spending. The measures do address existing needs. But they are hostage to traditional pre-election tricks.