Economic credibility

National Economy and Finance Minister Giorgos Alogoskoufis has embarked on a campaign to restore the credibility of the economy. Today he is speaking to entrepreneurs and investors in Frankfurt, tomorrow he will meet the Dutch president of Ecofin (the council of European Union finance ministers), and on Friday the European Commission will be given a letter from the Greek government presenting in detail exactly in what ways and by which measures it will attempt to reduce the deficit to 3 percent by the end of 2005. The pillars of the government’s attempt to tidy up the economy are full payment of the Olympic Games expenses, which absorbed about 1 percent of GDP this year, coupled with brave cutbacks in defense expenditures, containment of public sector wages, and encouragement of wide participation in the public investment program. The objective of this initiative is to persuade European partners, foreign financial institutions and individual investors that the 2005 budget is credible and can realistically be implemented. The economic audit which the government rightly decided to conduct has definitively and irrevocably settled accounts with PASOK’s management of the economy in the past, and put economic indicators back in touch with reality. These had been distorted in order to serve the propaganda goal of a «powerful Greece.» That phase has now reached its end and mention of it serves no useful purpose. Of necessity, the government must deal with the consequences of its predecessors’ slippery management. It must first reverse the climate of justifiable caution among foreign governments and investors, and then convince them by a transparent and responsible policy that matters really have changed sufficiently to convince them that their capital can be entrusted to the positive prospects of the Greek economy. This is a duty which demands persistent, long-term, coordinated efforts on many fronts including governments, international organizations, investors and international credit rating agencies. There is no other option. In this highly globalized and competitive world that we live in, successful economic diplomacy is now a factor for survival, not a luxury – all the more so at a time when Greece must throw off the stigma of low credibility reinforced by artificial indicators of prosperity.