Tonic for growth

As 2004 came to an end, so did the government’s justification that it was forced to implement a budget drawn up by its predecessors. From now on, the conservative administration will be fully accountable for the shape of fiscal finances. Nevertheless, it cannot be denied that Prime Minister Costas Karamanlis and his ministers have inherited a difficult chore. The myth of a «strong economy» had already been tarnished after successive revelations, but the grim picture was fully exposed only after the self-imposed audit of public finances. The great fiscal imbalances had in the previous period been disguised with extensive book-cooking that allowed former Socialist Prime Minister Costas Simitis to conjure up virtual reality. Even those who questioned the benefits of the deficit revision admitted that the PASOK administration overstepped the mark in tampering with the data. All that is history, however. PASOK took its beating in the last election and what the public now expects of the new government is to restore the fiscal balance and find solutions to the outstanding problems. Faced with this challenge, the Karamanlis administration has chosen a policy of «mild adaptation» over «shock therapy,» so as to protect social cohesion. It is common knowledge that a considerable sector of society has been seriously affected by the protracted economic slowdown. A growing share of households are finding it hard to make ends meet. Incomes have stayed the same or fallen, while economic obligations have increased. Any corrective adjustments must be gradual so as to avoid dangerous social repercussions, but at the same time they must be decisive. Should a soft approach be adopted as a pretext to avoiding stricter measures, it will invite pressure from the European Union and lead to the enforcement of tough measures that will mostly hit the lower-income brackets. To be sure, good intentions and wishful thinking are not enough. Reversing the climate and pushing the economy toward an upward trend demands discipline, hard work and productive initiatives. Greece is in dire need of a growth-inducing strategy. We should not delude ourselves; there is no magical solution to public debt and faltering productivity. On the other hand, Greece enjoys some significant comparative advantages, such as tourism and a rich cultural legacy. Greece would have a lot to gain if the government followed the recipe of the late Constantine Karamanlis, who bolstered growth by putting emphasis on these two sectors. Such a remedy demands consistency and continuity. The administration must impose a solid framework of rules and principles, do away with bureaucratic obstacles and forge changes on the regional and sectoral level. That is the only way to exploit existing possibilities and free productive forces.

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