Boosting productivity

Yiannis Costopoulos, chairman of the Alpha Bank group, was describing his thoughts on the ongoing renovation of the Athens Hilton. The staff, he said, are doing excellent work, always meeting the specified deadlines, but nearly all the materials come from Italy. «Only the coconut-fiber mattresses are homemade,» Costopoulos said, using this simple example to underscore Greece’s low productivity and its competitiveness deficit, which needs to be tackled soon before the country is plunged into poverty and unemployment. PASOK MP Gerasimos Arsenis made similar remarks yesterday, noting that imports have risen sharply in recent years, as imported goods now account for 47 percent of domestic demand, up from 25 percent 10 years ago. Greek producers are gradually turning into importers/retailers as the economy grows increasingly dependent on outside factors. These qualitative changes in the structure of the Greek economy are being offset today by the growth tonic offered by the large inflow of EU funds and ongoing public works. However, their consequences will become more evident in coming years when, after 2004, external aid drops as EU subsidies are slashed and the bloc’s focus turns to the new members. Greece’s production deficit should mobilize economic officials into action. Greece should take advantage of its current high growth rate and make the requisite qualitative changes in economic policy that will boost productivity, breathe fresh air into the Greek economy, encourage new and modern forms of investment, and reinforce the education system – crucial for bringing about the needed leap in production. As war clouds gather over Iraq, prompting fears of a new oil crisis and deeper recession across the world’s main economies, a change in economic policy seems even more pressing.

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