The future is here

Data released by the General Accounting Office on the application of the budget during the first five months of 2005 indicate that Greece is under strong fiscal pressure. Public revenues have increased by a mere 4.1 percent against a target of 11.4 percent. Data on spending is not much better, as its growth rate is hovering at 6.8 percent against the 4.6 percent target. At the same time, public debt now exceeds 110 percent of gross domestic product and payments to cover it are crippling public finances. Any margin for increasing public spending is negligible. Public debt is proving a hot potato for economic policy-makers, giving credence to critics who for years had warned that Greece’s unchecked borrowing was jeopardizing future prospects. Greece now owes about 202 billion euros. By the end of 2005 it will have paid 22 billion toward its debt, which is more than the total expenditure forecast for salaries and pensions – even if we include hospital staff duty payments. For interest alone, Greece will have to pay some 10 billion euros, more than all medical expenses and contributions to social security funds, and higher than the amount to be spent on all public investments. Greece’s thoughtless borrowing to cover budget deficits in past years is now taking its toll. Room for independent fiscal policy is very limited. The country has to spend about 23 percent of its tax revenues on paying interest, and the only way to reduce the burden is to create primary surpluses: Cutting spending is thus unavoidable and the need comes at the time of a widely expected post-Olympic economic slowdown. Anticipated as it was, previous governments failed to brace for it. The mammoth task of serving the public debt should teach politicians and the public a lesson. Borrowing is a precious tool, while loan funds are used for growth-inducing investments that yield more than the interest on the loans. It is not a precious tool when it is used to cover counterproductive expenses and clientele payments. A loan is a loan, not a grant. By living beyond our means we made things worse for our future. That future is now here. Any further borrowing would be catastrophic. The government must put the fiscal house in order as soon as possible.

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