Remedial action

The spring report on the European Union economies that was made public yesterday confirmed talk that Brussels is worried about the course of the Greek economy. The report by the European Commission notes that fundamental economic indicators are in decline, although it fell short of giving an exact estimate. Needless to say, the report is at odds with the self-praise of the previous administration over Greece’s purportedly strong economy. The focus now must be on what can be done. The most immediate problem, as the EU report says, is the ballooning deficit, not because it could prompt sanctions against Greece but because they dictate painful remedies (that entail political cost). The deficit is a result of Olympics projects and unchecked fiscal expenditure. The government must trim spending and hence adapt its planning to the new realities. Of equal importance is the problem of the stubborn public debt and of inflation which is fueled by constant price hikes. Both problems undermine growth (which is estimated to fall after the Games) and underscore the need for the much-delayed structural reforms. The Commission is not the only one to sound the alarm. A Bank of Greece report, due for release on April 29, is expected to raise issues related to long-term economic growth and which will determine its prospects and ability to create new jobs. As a result, one would expect that the central bank report will also emphasize the requisite structural changes in the economy. The Summer Games have, for the time being, deflected attention from these crucial issues. But these are bound to become top priority once the Olympic curtain has fallen. The new government must hammer out its economic policy over the summer period. It should be ready to present its remedial action by September – or the Thessaloniki International Trade Fair at the latest. Time is running short.

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