Unveiling the fiscal problem

Few have paid heed to the country’s fiscal problems. The majority ignore the fact that these constitute, perhaps, the main stumbling block to any upswing in the economy. Back in the mid-1980s, the significance of the problem was underestimated until things finally came to a head between 1989 and 1990, forcing the State to borrow at a rate of 27 percent to pay off wages and pensions and to implement policies for balancing public finances. It was understood back then that in order to strengthen the economy, the State must tidy up public finances, control expenses and collect enough revenues to fund social and investment policies. For a brief period, the concept of fiscal austerity dominated political rhetoric and helped provide a sense of economic stability. Unfortunately, this was never viewed as a central obligation in economic policy, thus resulting in the prevalence of damaging practices like those during the 1980s. From 1996, when the problem subsided, rather than introducing a set of reforms that would bring about fiscal stability, the government tried to disguise and gloss over the problem. It took a plunge into creative accounting, producing accounts to cover concealed expenses and using privatizations as a means of funding this parallel, hidden management. As the years went by, these accounts grew, a burgeoning fiscal strain that threatened the very functioning of the State. Moderate estimates put the revenues from privatizations after 1997 at 8-9 trillion drachmas, that is, about 20 percent of public debt. But the debt has remained unchanged as a percentage of GDP, if not grown bigger in absolute numbers. The question is: What happened to those huge funds; how were they spent and what will happen when the revenues from privatization dry up? This concealed fiscal crisis, it seems, will result in many future woes.