Last chance

In the face of a relatively high growth rate – which was mainly a result of the big infrastructure projects – financial analysts have been at pains to emphasize that the economy is actually in poor shape and will remain so as long as investments are stuck at the currently low levels. The size of investment is not only a defining factor in the creation of new jobs. It is also a prime competitiveness enhancer. The influx of European Union funds cannot disguise Greece’s poor performance on that index. The amount of investment is negligible. High labor costs have definitely taken their toll on labor-intensive sectors, and Greece finds itself unable to compete against Eastern European markets, let alone those in the Third World, where labor costs are only a small fraction of Greece’s. In the global division of labor, the country must seek a place among the developed states. For that to happen, new incentives are needed. The new development law is a welcome step in that respect. It reduces investors’ share in investment schemes. It subsidizes investments in all sectors (note that the previous stipulations excluded the biggest part of the services sector). Furthermore, it subsidizes investment schemes across the country – even in the saturated Attica basin – under the condition that they aim at protecting the environment or preserving resources. Finally, it also subsidizes labor costs. Without doubt, the government’s steps are in the right direction, particularly if we take into account the paltry level of domestic investment. One of the reasons for this was that the European Commission had reacted negatively to the previous development law, which further undermined its effectiveness. The present development bill constitutes Greece’s last major opportunity to attract investment that will create a new generation of modern businesses capable of dealing with the outside competition. That is because in two years, the national legislation of every EU member state will have been harmonized. In other words, Greece will no longer have the power to use subsidies in order to lure foreign and domestic investment. Businessmen are now being presented with a great, and possibly unique, opportunity. Their response is a necessary, albeit insufficient, condition. For their part, officials in the Economy Ministry must rise to meet their own responsibilities. Besides, it is common knowledge that huge bureaucratic obstacles and extensive corruption present major roadblocks to investment and the creation of new and dynamic businesses. An uphill battle awaits the government in this area. But it is a battle that has to be waged. Unless drastic measures are taken, the new law will remain unfinished business.