The tragedy of investments

The tragedy of investments

Everyone knows that Greece is no paradise for private investments, as the investment/business environment that has (perennially) been cultivated is anything but friendly. And while we all agree that “something needs to be done” to reverse the situation, nothing has changed at the institutional level – at least for the better. Things basically stay the same, with a few new measures and reforms introduced every so often, usually in a bid to accommodate some clientelist initiative that has struck a chord with some minister or privileged party member, and responsibilities are increased or decreased here and there – though more often they are distributed between more people. The end result is even more measures that work against investments by making the framework more complex, unyielding and damaging.

Therefore, when a government, minister or prime minister seeks to bolster investments, they may need to intervene in the hostile institutional framework (challenging established anti-investment practices) in order to lift the obstacles standing in their way – with all the damaging effects a move like this can produce in such conditions. On the other hand, if no one intervenes (as is usually the case), this structured, investment-hostile environment (rife with legal snarls, red tape, lack of oversight and discipline, responsibility shirking etc) continues unhindered doing what it does best: preventing investments and appearing to be doing so in a democratic, by-the-book manner.

In this respect, the system works very effectively. The ill-fate of so many investments that were granted privileged status and fast-tracked so they wouldn’t be bogged down in red tape is proof enough: Of the 19 investment projects inducted into a 2010 law speeding up “strategic” investments and bypassing the investment-unfriendly system, just two have made it to construction phase this year. The other 17 are either in hiatus or have been dropped altogether.

It is not just private investments that fail in Greece, though. All of them fail, even public ones. Just look at the sorry state of the Public Investment Program, especially over the past two years. Some say this is deliberate, in order to allow for large primary surpluses. Unfortunately, things are much worse than that: The State General Accounting Office gives the money to the Finance Ministry, which then distributes it among the different agencies in central government for them to make investments. That’s where things get really tricky: Disparate interests clash, studies are stopped midway or shuttled back and forth, obstacles are raised, plans are scuppered, no one is held accountable and when each funding period expires, the Finance Ministry informs the State General Accounting Office that, unfortunately, the funds could not be absorbed.

This tells us that whoever believes a simple tax reduction will bring an explosion in investments and alter the country’s image is wrong. The truth is closer to the fact that the country’s image needs to change to bring about an explosion of investments. And this requires a modern reform plan, consensus and cooperation between the state and the private sphere. It also takes time.

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