Economic reform

The Cabinet meeting today is expected to discuss the real state of the economy and to map out the necessary economic policy. These issues were the focus of last night’s meeting at Maximos Mansion, chaired by conservative Prime Minister Costas Karamanlis, which focused on the coordination of the economic ministries (it was attended by the ministers of national economy, development and public works). The government wants to tidy up public finances and cut down on some luxury projects, but this will be harder than it sounds. The ongoing evaluation of public finances by the newly elected conservative administration reveals that, contrary to the rosy picture painted by the former Socialist government, the economy is actually in a sorry state, thanks to extensive creative accounting. It is indicative of the situation that the PASOK government’s estimate of the deficit was 1.2 and 1.4 percent of GDP for the previous and this year respectively, when the figure in fact hovered at 3 percent. The deficit may in fact have exceeded the 3 percent threshold with the government concealing it so as to escape sanctions from Brussels. Another problem is the massive budget overruns in Olympics-related projects, which the government is unable to contain. Many venues and infrastructure works are still incomplete and time is running short, allowing contractors (which had received favorable treatment from Socialist administrations) to blackmail the government. A realistic approach mandates acceptance of the fact that any attempt to overhaul the economy can only start after October, when the costly events will be over. All these problems mean that both 2004 and the next year will be extremely tough years. Should we add to this the cost of implementing a number of fundamental campaign promises, then one can understand the concerns of Economy Minister Giorgos Alogoskoufis. Unlike PASOK, which did not hesitate to cook the books in order to gloss over reality, the New Democracy administration must take daring political measures to achieve structural reform. This is a tangible aim, but it will not come about without some social and political cost. New Democracy will most probably have to pay the political cost of remedying a situation that was not the result of its own policies. This, however, is part and parcel of governance and the government will have to shoulder the burden if it wants to tackle the economic challenges that put the country’s future in peril.

Subscribe to our Newsletters

Enter your information below to receive our weekly newsletters with the latest insights, opinion pieces and current events straight to your inbox.

By signing up you are agreeing to our Terms of Service and Privacy Policy.