Three national priorities

A while ago, a group of economic experts from international organizations and ministries invited me for a talk on Greece’s finances. As was to be expected, the conversation turned to the question of priorities. Given that no country’s funds can cover all costs, it is a government’s task to set priorities for funding. When I was asked my opinion, I said spontaneously that defense and security would be at the top of the list. I thought this was self-evident, but I was wrong. Some of those present reacted as if I was a dinosaur; the more polite ones kept silent. A generation gap. Thirty carefree years have changed much in the soul of modern Greeks, just as in their outward appearance. I hope the young people are right and I am wrong. But there is still the issue of priorities. Many fight over the pie and it is difficult to discern if a cost is for the good of the country or for the re-election of individuals or parties – or even whether it hides selfish financial interests. The pressure that each finance minister comes under is phenomenal, especially when elections are in the air. But there is one category of costs that automatically takes top priority: the servicing of the public debt – both domestic and foreign. Whoever is involved in finance knows that our debt is disproportionate to the size of our economy and that it is set to keep rising. They know also that the prosperity of the past 30 years has been based on borrowing. The debt must be serviced with great care, because the country has to keep going back to the markets to renew or increase its loans. Now the government is asking for Greece to be forgiven for exceeding the Maastricht Treaty’s 3 percent limit on deficits for the next three years. If the European Union agrees to our request, our debt will keep rising in the foreseeable future, leaving less and less money for the country’s other needs – the state machinery, education, health etc. This will lead to a dead end, unless the economy grows faster than the debt. But this is not happening. On the contrary, the economy is expected to remain stagnant for quite a while, unless structural changes are made. For years, we have been hearing high officials talk about the need for structural reforms, but when the time comes for them to explain what these changes must be, they fall silent. It is understandable that officials are loath to explain what they mean. These «measures» translate into specific actions which will harm entrenched interests – entrenched either by law or by the state’s decades-long inability to enforce laws. The longer the state does not act like a state, the more powerful will be its clash with the interests that will be harmed by the structural reforms when and if they are applied at some time of emergency, as when, for example, we are pressured by our foreign creditors. To avoid being accused myself of being short on specifics, here are three directions that our structural reforms should take so that our economy can be revived: 1) Reform our labor laws: Our low productivity, the loss of markets and the drop in competitiveness can all be attributed, to a great extent, to the continual strikes and labor action and the undermining of management’s prerogative. We are not talking about radical steps, just the alignment of our laws with those of most EU countries, such as, for example, a strike being decided by the majority of a union’s members and not by a political clique. 2) Review and eradication of «entrenched» interests, such as life tenure at public utilities that operate in the market economy, such as the huge differences in the pensions of social security funds that are subsidized by the budget, the overall scrapping of the privileges of some groups of workers and professions. These privileges were achieved after pressure, constitute group favoritism, are exceedingly expensive and are an insult to public opinion. 3) Deal dynamically with anarchy, with immediate and strict punishment. The events of last December, the «university asylum» policy and many other things destroy our economy, scare off any foreign investors who are still here and force productive Greeks to move abroad. There are dozens of other things that must be done, but if a government puts them in the right order of priority and has the courage to do what I mentioned above, it will have won the economic game – and more. The economic problem is purely political. (1) Panagis Vourloumis is chairman and CEO of OTE SA.