Editorial
Prime Minister Costas Simitis’s government yesterday called a Cabinet session on the euro. This would be fully legitimate had the meeting not been dedicated, nearly exclusively, to the administrative aspects of launching the new currency. There is no doubt that there are numerous practical issues which have to be tackled on time, so as to ensure the smooth introduction of the European currency. No one underestimates the threat of serious psychological or even political obstacles that could arise if, for example, a large number of ATMs failed to work for a few days following New Years Day, forcing citizens to converge en mass on the banks to withdraw their pay, pensions or savings in order to cover their needs. No doubt, a large number of comparable problems remain to be solved as soon as possible. These, however, are problems which have to be dealt with by lower-level administration. The Cabinet should be concerned with another kind of euro-related issue. The introduction of the euro as the single currency in the majority of European states constitutes a major challenge, particularly for our country which continues to occupy the last position among eurozone members. The issue of genuine convergence between the Greek economy and the other 11 economies will be even more acute. Shortcomings, which have till now been hidden, will become evident to greater sectors of the combined population, as the existence of a single currency will facilitate comparisons. The harmonization of prices across Europe will be rapid, sidelining Greece’s more expensive and hence less competitive products. On the contrary, the convergence of Greece’s level of income with that of the other European countries will be much slower, as wealth cannot be distributed unless it is generated by a genuine increase in the productivity of the Greek economy, given that the monetary mechanisms (devaluations, interest rates) which either improved the country’s competitiveness or conveyed the illusive impression of nominal convergence (inflation) are no longer available. Adaptation to the new reality requires a new mentality among the political elite and the public. The launch of the euro does not signal real convergence; it rather imposes a very strict framework for action that will challenge the validity of government triumphalism of a powerful Greece.
