Tough days ahead
The Olympic Games are unfolding smoothly and Greece is living up to the major challenge it has undertaken. The new government, despite the delays in preparations for the Games, feels relieved at having met the demands of such a colossal event – and can now rightfully reap the rewards. Yesterday, Prime Minister Costas Karamanlis and National Economy Minister Giorgos Alogoskoufis discussed «the day after.» They both realize that a tough autumn lies ahead. The economy will be facing a fiscal crisis – which is more serious than what is commonly believed – amid intensified social demands and poor prospects for growth. The new economic policy must address many different and sometimes incompatible goals. Officials will have to work hard and be imaginative in order to come up with a recipe that will serve fiscal, development and social needs all at the same time. They will have to clear a number of hurdles, foremost being the lack of funds. Fiscal pressure is mounting, deficits are yawning, sending shock waves through the economy. The spending spree of the former Socialist administration ahead of the last election coupled with the mammoth sums spent on Olympics-related projects have caused a precipitous rise in public debt and borrowing. The trend must be reversed in order to limit interest payments and release funds for other purposes. At the same time, the government must honor its pre-election pledges and bow to the burgeoning wave of social demands. Furthermore, it must take steps to sustain a high growth rate in a year that is expected to see a drop in public construction projects and a decline in economic activity. Success in finding remedial action for these competing needs will determine the fate of the new administration.