Not in our interest

Those who believe that the audit of public finances conducted by National Economy Minister Giorgos Alogoskoufis exposed the true proportions of the country’s economic gloom are deluding themselves. Development Minister Dimitris Sioufas’s painstaking analysis of Greece’s competitiveness deficit also failed to fully disclose the economy’s shortcomings in that sector. So far, the government has refrained from revealing the actual efforts made to tackle the problems threatening to derail our economy. Greece’s most serious concern right now is the mass of obligations weighing down the state. Consider the landmark agreement between the Hellenic Telecommunications Organization (OTE) and labor unions on the terms of future staff hirings. Bringing the hiring terms of a giant state corporation in line with private standards will put a heavy strain on Greek taxpayers, polarize the political climate and upset competition. The proposed solution to the problem of the Emporiki and Agricultural banks’ unfunded pension liabilities will have a similar effect. OTE will probably see its activities shrink or be sold to a new owner if private industry standards are used to tackle its problems. Since the state remains the main stakeholder and guarantor, the cost will be passed on to taxpayers. And given that we cannot afford to raise state expenditure – that would violate the rules of the two-year fiscal stabilization program imposed by the European Union – the cost will further strain our public debt. No one inside the administration really knows the actual extent of the country’s liabilities. They seem endless. For example, state revenues from the sale of listed companies are paid into the social security funds of the same companies. At the same time, many of the debts generated by the new adjustments will in the long term increase the strain on the Social Security Foundation (IKA), which is already dependent on state subsidies. OTE was a monopoly in the past, and consumers paid these costs in the form of higher prices. Since there is now competition, consumers will be paying as close to the fair price as possible and no longer shouldering the high cost of paying for early retirement schemes. All these factors result in higher borrowing. Every year 30 billion euros goes toward public liabilities. That translates roughly into 400 euros per month for each person who voted in the last general election. Yet this is not the only reason the country is in debt. Bank customers’ loans are funded to a significant degree by capital the banks borrow from the single European money market. As a result, most of the installments that pay back mainly mortgage loans go to international credit institutions. The same applies for Athens Stock Exchange blue chips, as more than a third of their shares belong to foreign institutions’ portfolios, which of course collect their profits from their dividends. The worse Greece’s position becomes in the global division of labor – what we used to call globalization – the larger our debt and the greater our dependence on the international economic community. In other words, we work to pay off interest.