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Election Fever
Fourth Annual Business File Review of the Greek Economy December 2003 -- The Panhellenic Socialist Movement (PASOK) government is determinedly trying to capitalise on the benefits of membership of the Economic and Monetary Union (EMU) to promote what it calls "real convergence" in Greece. The government met the criteria on deficits, debt and inflation to become the twelfth member of the Euro-zone in 2001. It did so with difficulty and, since, there has been considerable slippage on the fiscal and inflation fronts. The problems are compounded by the fact that the country has embarked upon a prolonged pre-electoral campaign which will drag into the Spring of 2004. Greece conducted a highly successful presidency of the European Union during the first half of 2003, which included the signing of the Treaty of Athens to embrace 10-new member states and the presentation of the first draft of a new constitution for the Union. The government was particularly skilful in preventing open rifts between member states that supported the US invasion of Iraq (the UK and Spain) and those who opposed it (France and Germany). It was generally thought that the government would capitalise on this - particularly the fact that after a seven-year diplomatic campaign it had secured accession for Cyprus -- in order to hold early elections this Autumn. But opinion polls show that the electorate is more interested in matters such as rising prices and unemployment and think that the conservative opposition New Democracy party is better able to deal with such bread and butter issues. The socialists consistently trail the conservatives in opinion polls by between six to eight percentage points, a seemingly insurmountable deficit. The incumbent's only consolation is that the polls suggest, more often than not, that the electorate thinks PASOK leader Costas Simitis is the better man to be prime minister than his rival New Democracy head, Costas Karamanlis, a man who has never held a public office. The government is thus playing a long game and will call the election close to the end of its term in April 2004. It has already announced the major elements of its economic programme, including a package of social benefits worth €1.7bn for 2004 and an integrated programme of social and development measures known as the Convergence Charter that will cost €7.7bn between 2004 and 2008. Its main targets are to increase the Greek standard of living to 80% of the EU norm and wages to 90% through a combination of policies that will promote high GDP growth and increased productivity. Defence spending will be cut to provide funds for extra spending on health and education. The conservatives say the Charter is nothing more than old promises that PASOK has failed to keep in the past but they have been parsimonious with details about their alternatives. They do say though that they will concentrate on reform of the administration, improvement in education to make it more relevant to work, liberalisation of closed markets, the promotion of competitiveness to improve the country's export potential and the introduction of measures to attract foreign direct investment. The 2003 Update of the Hellenic Stability and Growth Programme shows budget deficits rising and debt falling more slowly than in the past with inflation regularly outstripping that in the Euro-zone by 1.5 percentage points. That said, it forecasts domestic product growing at an annual average rate of 4% a year to 2006, based on strong private consumption and gross fixed investments, with unemployment falling from 9% to 7%. The conservatives accuse the socialists of creative accounting and say they fear that the debt levels could be higher than officially recorded. They say that structural aid funds from the European Commission under the third Community Support Framework have not been wisely used and that they will have to be taken up far faster if the growth and new jobs are to be achieved. These and related issues are discussed in "Election Fever," No. 50 in the Business File Special Survey.
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