Reducing the public debt

Voters tend to see public debt as something purely abstract. According to official data, the cost of servicing Greece’s debt is putting an enormous strain on the national economy. Annually, the cost falls slightly under 10 billion euros, about a quarter of tax revenues. To get an idea of the amount, let it be noted that it is much higher than the budget for the payment of civil servants, more than the health budget, more than the sum of all sorts of subsidies to social security funds, more than the program of public investments and about double the spending on education. And all that notwithstanding the extremely low interest rates which have eased pressure on interest payments. During the period from 1990 to 1995, the Socialist administrations treated the mammoth public debt not as a threat to fiscal stability but as a threat to the country’s future. The notion was to some degree injected into the collective conscience. But after Greece’s entry into the eurozone and the triumphalisms about a «powerful Greece» and a flourishing economy, the mood of self-restraint was put on the back burner to encourage consumption. It took the self-imposed deficit revision and strict warnings by the European Commission to unveil the grim reality. Greece is faced with a colossal debt – the result of constant borrowing. Worse, the money was not invested in a growth-inducing manner but to cover current fiscal needs. There is no doubt that the Athens Olympic Games, the arms procurement program and the big infrastructure projects have put an extra strain on public debt. The problem with all these cases is the final cost went far over the original projections. Sure, every government wants some leeway to give handouts and reap the political rewards. But since economic margins have long been surpassed the goverment has no choice but to strictly implement a gradual public debt reduction policy – not because the Commission says so but because the national interest warrants it.

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