Economy matters

The recent remarks by Joaquin Almunia, the EU commissioner for economic and monetary affairs, caught few people by surprise. Most had a clear picture of what was happening, despite PASOK’s efforts to muddy the waters. To be sure, one can understand the embarrassment of the former ministers of Simitis’s Socialist government following revelations about their impressive performance in creative accounting. However, PASOK’s rather brazen attempt to turn things round by using the audit issue as a spearhead of their attack against the government was going too far. Even if we exempt defense spending from the deficit data, the numbers that the Socialist administration gave to the European Commission were bogus. Without doubt, Greece was not the only country to cook the books in its attempt to meet the Maastricht criteria. But no other country fudged the data like we did. This is why the economy review decided by the conservative administration met with such a fierce reaction. EU officials first raised an eyebrow at Athens’s data back in 2002. The deficit drop at a time when public debt was skyrocketing was strong evidence. But no one could really imagine the true discrepancy between the figures. The Socialists’ furor is nothing but a diversionary tactic. And it has not been without success. For reasons of national interest, Karamanlis cannot insist too much on this matter or make it his government’s top priority. Karamanlis ordered the audit so that his government and the European Commission could form an accurate picture of the distance that has to be covered, but keeping it in the headlines would not be in his interest. It is this unavoidable contradiction that PASOK has tried to exploit for reasons of political expediency, despite the fact that it should be held accountable for the huge deficit and mammoth public debt. All this, however, is history. With their vote last March, the Greek people punished the Simitis administration for this reason, among others. The economy review was on the list of New Democracy’s policy declarations, so it is also dictated by public mandate. Still, the most urgent matter is the measures that the conservative administration will take to remedy the country’s finances. Bringing back fiscal discipline is not enough. The top priority should be to reinvigorate growth. Note that the gradual restoration of fiscal discipline should not undercut determination in realizing pre-election pledges. Any backtracking would bring strong EU pressure, forcing the government to opt for shock therapy. That would entail drastic repercussions on society and immense political cost for the ruling party.