Tackling the fiscal crisis

Despite the objections voiced by the Socialist opposition party, Wednesday’s parliamentary debate left no doubts about the sorry state of the fiscal economy. But although Prime Minister Costas Karamanlis highlighted the mismanagement of the previous, PASOK government, he was less specific on what has to be done. In a way he didn’t have much choice, as the coming period will be dominated by Olympic preparations and the events themselves. The government must focus on the Olympics, reduce risk, and carry out a decent Games that will boost the country’s image abroad. It would be years before we managed to shake the burden of a failure. Hence one cannot ask for too much – for the moment. In October the fiscal crisis will be back in the limelight. Greece’s economic policymakers will come under intense pressure from Brussels to trim deficits and meet Stability Pact rules – even though these have already been challenged by other countries. We are fortunate in that fiscal reform is set to be implemented on the back of global growth. Global economic growth in the near future is expected to hover above 4 percent and international trade set to grow between 8 and 10 percent. Furthermore, the European economy will also be on a modest upswing, hence facilitating Greek efforts for economic restructuring. Karamanlis’s government must hammer out a comprehensive and credible economic policy to take maximum advantage of the upbeat economic climate and reduce deficits with minimum side effects. Greece must get on with structural reforms – debate on which is set to gain in intensity in the wake of EU expansion. Eurozone members are deeply concerned about investment capital moving east because of the great gap in incomes and taxes. This is a conundrum that our country will have to deal with when Bulgaria and Romania join the bloc in 2007.

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