Difficult days
There is no doubt that Greece is heading for difficult days, as a result of the international crisis and the chronic weaknesses of the domestic economic and political system. Our disproportionate reliance on oil, our few exports and many imports ensure that deficits keep widening. Last Thursday, more negative figures were published: Half-year revenues increased by just 5.7 percent (less than half the 12.1 percent rate that is the year’s target), while in May industrial production fell by 6.6 percent from May 2007. Construction is down and June inflation was steady at 4.9 percent. The state will have to borrow 37 billion euros in 2008, and with a half-point increase in bond rates, which we noted last week, this will mean that Greece will be paying up to an additional 350 million euros for this year’s loan. As if this were not enough, the European Union just ordered us to pay back 400 million euros for agricultural subsidies over the last 18 months that were not sufficiently distributed. From January 1, the EU will withhold close to 17 million euros each day as a fine for 492 illegal landfills that are expected to still be in operation at that time. (As 2,047 illegal dumps are now operating, the fine may turn out to be higher.) Given all this, with such a shortfall in revenues in every sphere, it looks very unlikely that the government will be able to take any meaningful measures to help the weaker members of society weather the storm. Also, what public investments can one expect which could give the economy a push in the right direction? Private investment, too, looks hopeless, when investors are up against an obstructive bureaucracy, there is no register regarding land use and there is a prevalent anti-development attitude. Just last week, four Spanish companies said that their plans to invest about 4 billion euros in the energy sector in Greece were languishing because of these reasons. The consumer orgy of the last few years is in its last throes. Loans that were extremely cheap have become much more expensive, at the same time that fuel, food and just about all goods and services demand an ever greater portion of a family’s income. With less investment and less consumer spending, how will the government achieve even the 3.4 percent of the (adjusted) growth rate that it is now expecting? The end of the holidays in September will show whether Economy and Finance Minister Giorgos Alogoskoufis has anything up his sleeve, seeing as the government is very worried about the political consequences of the growing malaise. Greece’s problems will grow worse because of the difficulties that other economies are facing. America’s woes seem to have no end, bearing dangers for the world economy. Closer to home, industrial production in the eurozone has fallen. The figure for May is to be made public today, and, if it confirms the expected drop of 3 percent, it will be the biggest monthly drop since June 1984, as a Barclays Capital analyst commented in Friday’s Financial Times. The consequences of a slowdown in Europe may be even more dangerous for Greece than its own problems – especially these days that the EU is drifting listlessly. If powerhouses such as Germany, France, Britain and Italy find themselves with serious economic problems, a way out of the EU’s political impasse will appear even more unlikely. A weakened EU will deprive Greece of its strongest ally in the difficulties ahead. But Greece’s challenges are not only economic. The Siemens bribery scandal has shaken the political system and the people’s confidence in it, confirming as it does all of our worst fears of how the country is run. But with the problems that are mounting both inside and beyond our borders, wallowing in this pessimism will not do. All of our politicians will have to unite to deal with the breakdown in trust. But reaching beyond their petty preoccupations appears to be something that they cannot even imagine, let alone attempt.
