Tough autumn for the economy

Economic analysts agree that in fiscal terms, the current year will be tougher than 2003. On one hand, the budget overruns in Olympics-related projects – a cost that cannot be avoided at this stage – have put an additional strain on the fiscal economy which was already in a sorry state. On the other hand, the inflow of European Union funds is expected to fall short of the – revised – projections that put the size of the EU package at least 1 billion euros below the forecast of the now-departed Simitis administration. The combination of these two factors leads one to the unpleasant conclusion that tabling the budget for 2005 in the autumn will prove thornier than expected. Efforts to trim the deficit will demand a string of tough and painful measures. Restructuring the economy will require drastic political decisions. The economic woes are further exasperated by a number of disconcerting signs coming from the private sector. First, in the face of early forecasts of a precipitous rise in tourism sparked by the Summer Olympic Games, Greece’s tourism sector is in for a bad year. Arrivals and revenues have so far plummeted. Up to now, prospective visitors seem to be more put off by the obsession with security measures and the notorious price hikes across the country – a trend that has severely undermined Greece’s competitiveness in the tourism sector, also in light of the quality of services on offer – than they are attracted by the Games themselves. And, as if this was not enough, there are worrying signs that a new generation of problematic firms is emerging as big industrial units – which employ a large number of workers and on which many local economies have great dependence – are facing financial difficulties and are seeking debt restructuring with banks. Prime Minister Costas Karamanlis’s regular consultations with National Economy and Finance Minister Giorgos Alogoskoufis are evidence that the government is mapping out a new economic course for fall and beyond. Rather than allowing developments to dictate inflexible economic remedies, the conservative administration should make brave decisions and take coordinated steps.