The social cost of budget overruns

Outrageous reports of exorbitant hikes in the budgeted cost of most public works projects, including work to extend the Athens metro line, raise two different issues. On the one hand is the accumulation of excessive profit in the hands of construction firms who collect more than what was initially agreed to in the contracts by exploiting their preferential ties with the political system. Governments that lay the blame on the ones that came before them, administrations that come and go pleading ignorance about the actions of their predecessors, contractors who have the power and the means to obtain budget restatements and deadline extensions – all these comprise a network that perpetuates this unacceptable situation. The Monastiraki-Aegaleo extension saw an inexplicable hike in its budgeted construction costs from 123 million euros to 217 million (a 75 percent increase) in the course of a few months. The problem, however, is not just the artificial inflation of the costs of public projects. A second major concern is the sum of budget overruns caused by all sorts of public procurements – most importantly funds for the purchase of military equipment. The effect on the country’s economy brings us to the social dimension of the issue. The millions of euros that go to the construction firms directly deprive Greek society, particularly the more vulnerable lower-income groups, as the country relinquishes funds that could be used to raise the lowest pensions or provide benefits for low-wage earners or to build infrastructure in the health and education sectors. The relentless profiteering of a small minority by means of squandering the state coffers fuels a general sense of social injustice and public skepticism about corruption within the political system. An ill climate leaves little room for any reform program – sincere as the government’s efforts may be.

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