A rosy picture
Prime Minister Costas Simitis seemed to be well satisfied with the government’s economic performance during his meeting yesterday with the board of the Federation of Greek Industries (SEV). The growth rate of Greece’s economy in 2002 will be three times the EU average. The current account deficit is in decline. Productivity is on the rise. Debt as a ratio to GDP is falling. The IMF and OECD are full of praise for the government’s fiscal policy. Spending has been contained. There is no problem with funds from the EU’s Community Support Framework. Indeed, the EU has congratulated the government on the mechanisms monitoring the allocation of these funds. These striking remarks were made by Simitis. It would be absurd, of course, to expect a premier not to back his government’s accomplishments. Presenting such a rosy picture of the Greek economy, however, raises concerns whether these are a mere advertisement of government feats – an exaggeration, albeit a legitimate one – or whether they really reflect Simitis’s idea of the country’s economic state. If the latter is the case, then there is indeed cause for concern. It’s less than a month since the outgoing Bank of Greece governor, Lucas Papademos, presented a considerably different picture in his annual report. The current account deficit will remain at a high level. Public debt as a ratio to GDP is still high, hence putting the brakes on growth. Genuine convergence with other EU states is hindered by low productivity. The uncompetitiveness of Greek products could lead to a slowdown in exports. These were some of Papademos’s conclusions. It takes no specialized economic knowledge to see that they are a far cry from the premier’s claims. We are not trying here to undervalue the government’s performance – even less so in the economic sector. But Simitis’s attempt to present an idealized picture is alarming for two reasons: First, it may be concealing a tendency to relax, driven by a belief that we’ve more or less accomplished what we had to, while in truth, huge efforts are needed and much remains to be done if Greece is to converge with its EU partners. Second, in light of the coming elections, the premier’s attempt to gloss over the economic situation may signal the beginning of a period of pre-election handouts that will undo what has been achieved until now.
