A heavy price

Upon his return from an Ecofin meeting yesterday, National Economy Minister Nikos Christodoulakis admitted, at last, that the budget deficit will grow over the next year. Yet he rushed to say that this will also occur in most European states. Christodoulakis thereby tried to allay concerns about the fiscal strain caused by the government’s pre-election handouts. The minister seemed to treat the fiscal numbers in other countries as his much-needed alibi – the missing argument – though he still avoided enumerating our local excesses. Christodoulakis obviously felt the need to apologize. The question is why: No one ever said that creating deficits is sacrilege. Economists accept the accumulation of debt during periods of recession; they see it as necessary in times of economic crisis, while they acknowledge its contribution to growth when money goes toward investment spending. What the minister essentially implied is that Greece is a special case. This is because funds have been wasted in a counterproductive fashion, while the government’s latest plans for redistribution with one eye on the ballot actually follow a large wave of redistribution to the benefit of a small minority. But pressure is now coming from a different direction. And that is a serious problem, as burgeoning pressure can get out of control and exert further pressure on the fiscal economy. Had the budget overruns on projects been checked when the formula for awarding public projects was in place, the latest handouts would be just a drop in the ocean and fiscal pressure would be containable. Had free market principles permeated the awarding of public projects and the economic system functioned in an efficient fashion without the distortions caused by our «national suppliers» or middlemen, no one would object to social spending for the lower-income groups and the poor. Even were we certain that the deficit numbers mentioned in the budget were genuine, few would raise the question of deficits at a time when our EU peers have taken the opposite course. However, the signs are too visible to ignore, and we can’t help sounding the alarm. The primary concern is that Greece will have to pay a heavy price for this pre-election spending spree when the lights of the Olympic Games go off. Excuses of the sort that «deficits are also swelling in other countries» fall short of allaying such fears.

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