The vicious cycle of borrowing

The conservative promise-makers seem to forget that unchecked handouts in the past pushed the country to the brink of bankruptcy. For their part, low-income, high-tax workers were the first to suffer the consequences of the demagogues’ social policy. The 2007 budget has been slammed as an austerity budget – a false claim, as real wages will rise by 3 percent and wages by a greater margin. Some said it’s socially insensitive but over 20 percent will go toward boosting incomes of the less well-off. Growth will remain at high levels, mainly thanks to private investment, while unemployment will, for the first time, drop to 8.2 percent. But it’s highly unlikely that those who criticize the budget for being too tight-fisted on handouts have actually looked at the budget. The same people, of course, keep mum on the catastrophic repercussions of the populist economics of the 1980s. According to the draft, 24.3 billion euros will go toward paying off government debt, while 9.7 billion will go toward interest – which makes a total 34 billion euros. To get an idea of the size, paying for the wages and pensions of civil servants, the wages of doctors and medical staff, hospital needs and insurance funds will next year absorb more than 30.4 billion euros – that is less than what we pay to serve Greece’s mammoth public debt. Deputy Economy Minister Petros Doukas underscored the deadlock: Tax revenues in 2007 will be 48 billion euros. Of that, 25 billion will go to debt and 21 to wages and pensions. That means we’re left with 2 billion when we need another 10 to pay back interest. Regrettably, additional state spending will be covered with new loans (34 billion euros) and EU subsidies (4.3 billion euros). This vicious cycle is keeping the economy hostage and forces taxpayers to make sacrifices. Instead of hiding, the culprits dare come out as censors.

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