Eight years after the official start of the crisis, and with the presentation of the first “post-bailout” budget proposal, it is lamentable that despite citizens’ sacrifices, the economy remains weak and vulnerable.
Other than a smattering of positive signs, such as the small drop in unemployment, investments are scarce, entrepreneurship is anemic, Athens is listed as the worst of 100 cities in terms of finding a job, and Greece keeps sliding on global competitiveness lists. Private debt is growing. Young people keep leaving. The banks are unable to fund a recovery. Now the pre-election period and uncertainty caused by court cases against past pension cuts are adding to the overall uncertainty.
The 2019 budget proposal paints a positive picture. According to its introduction, it aims to strengthen economic activity and social cohesion.
The general government’s surplus, it says, contributed “decisively to restoring international credibility in the management of the country’s public finances, to lifting economic uncertainty and creating a climate of confidence in the economy, to upgrading its credit worthiness and to a significant reduction of the Greek public sector’s borrowing costs.”
The European Commission’s first report under the reinforced supervision regime notes other things. It refers to Greece’s “uncertain” fiscal course, the delays in adopting structural reforms, the pending decisions on the court cases regarding pensions, the country’s inability to return to the markets and the high cost of Greek bonds, which burden the private sector.
The draft budget that the leftist-led government has presented does not appear to tackle structural problems. The 910 million euros in expansionary measures may help consumption up to a point, but if they come at the cost of further reductions in the Public Investments Program, they will not help economic activity very much nor will they contribute to social cohesion.
Handouts and the hiring of new public sector employees (and increases in the pay of older ones) do not help businesses grow.
When high taxes are turned into handouts, when wages remain low and social security contributions are excessive, the economy remains weak – and the handouts don’t last.
Without entrepreneurship we cannot speak of social cohesion.