New economic policy

The annual report by the Bank of Greece governor usually triggers debate over economic policy and acts as a guide for what needs to be done. Over the past few years, which saw the country shift onto a steady European course and the independence of the central bank being consolidated, the bank’s yearly report has gained even greater weight. The report that the governor released yesterday underscores a plethora of shortcomings and shortfalls, describing Greece’s faltering competitiveness vis-a-vis our European Union peers as the most significant problem. Furthermore, the bank report sets out the goals that economic policy must attain in order to step up convergence with the EU average, an area in which Greece is still lagging more than three years after joining the eurozone. Since 2000, and later on when, after ensuring Greece’s eurozone membership, the Simitis administration relaxed its efforts and gave up the drive for structural reform, Kathimerini has repeatedly criticized the incessant mantra about Greece’s (ostensibly) «strong economy.» Yesterday, the governor of the central bank, Nicholas Garganas, stressed how, three years after Greece’s eurozone entry, the national economy is still dogged by imbalances and huge challenges. Garganas noted that unemployment is dropping at a very slow rate while the inflation rate is hovering high above the EU average. Moreover, he said, the balance of payments deficit has grown, the fiscal situation has worsened and economic convergence will continue to be a major challenge over the next decade. Narrowing the gap separating us from our EU peers will remain a long-term goal. In order to accelerate the process, the government must focus on mobilizing the country’s productive forces, boosting the growth rate, and enhancing productivity and competitiveness. All these objectives demand a reorientation of economic policy that will succeed in infusing the national economy with fresh momentum and thereby regain the ground that was lost as a result of the complacency of the previous administration. The Bank of Greece governor’s remarks are all the more crucial against the backdrop of government initiatives to hammer out a new economic policy. It is important that the conservative administration sets productivity and competitiveness as top priority – a step that will be a tonic to the country’s production base and will lead to the creation of new jobs. The government’s economic planners must evaluate the central bank’s recommendations for structural reforms, entrepreneurship incentives, acceleration of privatizations, upgrading education and public administration modernization – as parts of a new economic policy. There is plenty of time until September to hammer out a policy that will be compatible with the expectations of the Greek people.

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