A warning

Greek central banker Lucas Papademos’s 2001 report released yesterday issues a strong warning about the dangers threatening Greece’s economy in the near future. «The process of real convergence is hindered by the limitations set by a large public debt, low productivity, as well as by ineffective operation and inadequate competition in certain markets,» Papademos states in the report, referring to Greece’s position in the EU. He adds that «the unemployment rate and the current account deficit as a ratio of GDP are very high, despite last year’s improvement» and goes on to warn that «monetary stability, which has been consolidated by the adoption of the euro and the protection that (the euro) provides against the current account deficit, should not lead to slackening and a relaxation of efforts for the completion of fiscal reform and the continuous improvement of productivity and the economy’s international competitiveness.» This is where the essence lies. What Greece’s central banker was unable to express due to his position is the widespread concern that, faced with a daunting electoral battle, the government of Prime Minister Costas Simitis may be tempted to exploit the success of Greece’s eurozone entry – not in order to continue with the further restructuring of the Greek economy, but by squandering funds to serve the party’s electoral needs and jeopardizing what has been won through long sacrifice. For this reason, Papademos emphasizes the need to carry out two major reforms, namely social security and tax reform. These are both unpopular projects but should they remain unresolved, the accomplishment of the aforementioned goals of fiscal reform and improved competitiveness will become impossible. In any case, the prime minister should decide whether the remainder of his term will be driven by concerns over the country’s urgent needs and long-term interests – and therefore run for re-election on the basis of his achievements – or by opportunistic, partisan interests, when he knows that this would be a dramatic step backward, considering the present circumstances. There is one thing about economic problems: They are never unclear. Any targets, figures and solutions are definite, and so are the consequences of economic policies. Beyond that, decisions reveal each leader’s true caliber.

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