A dilemma for the economy

Kathimerini has long challenged the myth of Greece’s «strong economy» – always based on specific data that demonstrate the country’s fiscal woes and faltering productivity. We have repeatedly pointed out that once the EMU target was met, the country should have focused on structural reform and drilled to the heart of economic issues like competitiveness and productivity, which determine long-term prospects. Concentration on these key economic issues, however, presupposed fiscal stability so that the government’s economic policy could more effectively embark on the reform and restructuring needed to meet the challenges of a highly competitive environment. On taking over, the new government found that public finances are in crisis – a crisis which was disguised through extensive creative accounting – which put the brakes on an effective development policy. This dire situation presents the government with a dilemma: What would be more beneficial for the country? Should it fully reveal the problem, or go for a controlled disclosure that would keep the deficit below the 3 percent threshold so as not to invite EU interference? A full disclosure would clear the mist surrounding public finances but, on the other hand, it would constrain economic policy by forcing austerity measures that would limit short-term growth even as it cleansed the economy to prepare it for the highly competitive international environment. Should the government opt for a partial disclosure, it will have more room to maneuver without compromising short-term economic growth. On the other hand, this would extend the adaptation period and, once again, mandate the use of creative accounting. The government is edging closer to the second option, for it seems to be the more pragmatic one. We can only hope that it will also prove to be the more effective one.

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