A tonic for growth

The tax system reforms that were announced yesterday by Prime Minister Costas Simitis after a long Cabinet meeting clearly favor the lower-income strata of society. In this respect, they enhance a sense of social fairness. Although the prime minister refrained from drawing a connection between the government’s pledges and the approaching local and municipal elections, the move doubtless had an air of political expediency. Political objectives unavoidably exist in a parliamentary democracy, but they should be tolerated only to the extent that they do not put fiscal balance in jeopardy. The premier’s pledges left a bitter taste, not because the proposed measures are wrong, but because another opportunity to bring about a genuine transformation of the tax system has been wasted. Such a transformation would turn the system from a factor of obstruction into a mechanism for economic growth. It is an open secret that the Greek economy is bedeviled by serious structural shortcomings. The production deficit is becoming increasingly clear. Eurozone membership cannot sustain a false picture for much longer. Managerial tricks have also reached their limits. The strain created by fiscal obligations has become heavy. The government’s economic experts have been at pains to strike a balance, but this is not really what is at stake here. The government must break the vicious circle in which the Greek economy has been entrapped. The economy calls for radical, growth-oriented solutions with a clearly defined time frame. The existing economic policy framework has come full circle. It has become bureaucratic and, in effect, counter-productive. Greek society has changed, and so have its needs. The crucial political issue is to hammer out an economic policy that will infuse a breath of fresh air in the country by opening the path for productive forces and eliminating bureaucratic obstacles that put the breaks on growth. These comments are self-evident. No one would object to them in public. In practice, however, the picture is quite different. State-dependent businessmen and various vested interests are all trying to maintain their privileges. The government has to shoulder the cost of a political clash and overcome this counter-productive situation.