Focus on growth

It was to be expected that the self-imposed audit of public finances would set off a fiery debate between Greece’s political parties. Despite the fact that some of the government decisions were indeed controversial, it would be hypocritical to attack the conservative administration for conducting a review of the country’s finances. That is even more the case given how former Socialist Prime Minister Costas Simitis overstepped the mark with the use he made of that groundless mantra, Greece’s «powerful economy.» However, the dispute is now history. With their vote in the March election, the people punished the Socialist government – also for that reason. The economic review was among New Democracy’s pre-election pledges and in that sense, its implementation was mandated by the public. The most important issue, however, is the steps that the Karamanlis government will take to restore fiscal balance. The prime minister has adopted a policy of so-called «gentle adaptation.» But this gradualist approach should not be taken to mean diminished determination in carrying out the requisite reforms. Should the effort lose steam and the government start making concessions, the game will be lost. Backing down on its obligations will invite intensified pressure from the European Union, forcing the government into applying shock therapy. Such an approach would shake society and inflict major political cost on the ruling party. At this juncture, any measures to enforce fiscal discipline – whether strict or mild – will not be enough on their own. The most important thing is to put the Greek economy on a growth trajectory. The development bill is a step in the right direction, but it, too, is insufficient. Greece’s development prospects will depend on two factors: consistency and continuity. Steady growth requires fixed rules, the elimination of red tape and, above all, development strategies on a local and sectoral level. This can only take place by setting free the country’s productive forces. The lack of funds is an obstacle but not an insurmountable one. In truth, what is called for is the creation of fertile ground for business initiatives that will exploit Greece’s comparative advantages. This is the only way to create new jobs and produce wealth. Otherwise, the Greek economy will face the specter of stagnation, even crisis. The government has settled past scores and must now fulfill the country’s needs. It is on that level that it will be judged by citizens and it is toward that end its efforts should be directed.