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Laying foundations
Seventh annual review By Robert McDonald December 2006 -- The New Democracy government has now passed the mid-way point in its first term of office after being out of government for all but three of the past 23 years. It came to power promising to "remake the state" but has so far only laid the foundations for reforms that will require a second term of office to implement. The government, painfully aware of what happened to the last ND government when it tried to bulldoze change, is sticking cautiously to its posture of "mild reform" so as not to antagonise the trade union movement in a manner that might cost it the pending national elections which must be held within the next 15 months. ND did well in the mid-term local elections taking 30 of the 54 contested prefectures. But the opposition Panhellenic Socialist Movement (PASOK) did better than expected taking 24, as opposed to the 19 prefectures it won in the 2002 local elections, albeit two of them in co-operation with the Coalition of the Left (Synaspismos). ND held on to the local councils in the two main cities Athens and Thessaloniki. But it lost the vital port cities of Piraeus and Patras to PASOK. ND has consistently led PΑΣΟΚ in public opinion polls by around two percentage points, a figure which is not sufficient to ensure certainty of re-election. In the wake of the local elections, this lead has climbed to between three to four percentage points. The Prime Minister, Constantine Karamanlis, has consistently led the opposition leader, George Papandreou, by figures in the high teens when the question is posed 'which man is better suited to be prime minister?' In the wake of the local elections this lead has climbed to close to 20 percentage points. The surge in popularity has led many New Democracy backbenchers (and some cabinet ministers) to urge the prime minister to ease up on the budget rigour that his government has applied under its so-called 'fiscal housekeeping' policy and to take advantage of the continuing disarray in PASOK to call an early election. But Mr. Karamanlis, supported by his Minister of Economy and Finance, George Alogoskoufis, has persistently said that he will see out his full term of office. The two men insist that they are intent on breaking the cycle of fiscal laxity ahead of elections that require measures of austerity thereafter in favour of a steady and consistent policy that will put the economy on a healthy path for continuing high rates of growth. Underpinning this determination is the realisation that in the medium term, after the fourth Community Support Framework 2007-2013 (now known as the National Strategic Reference Framework, ESPA ) concludes, Greece must be able to stand on its own two feet as regards the financing of investment for development. Community assistance will be redirected to new enlargement states and Greece will have to have become self-reliant. In order to achieve its goals, the government has undertaken a number of measures. It has
It has negotiated a deal with the Commission which could salvage some EUR 2.7 billion in CSF III assistance from Brussels that might otherwise have been lost, although the terms of the package will mean that the global development programmes that had been foreseen under CSF III and the ESPA will shrink by a comparable amount. To develop private sources of investment funding to replace EU aid in future it has introduced legislation promoting private public partnership (PPP) projects and is pursuing infrastructure development under concession agreements with private sector companies. To try to improve the public sector it has implemented new legislation designed to make public enterprises and entities operate according to principles of profit and to generate their own revenues so as not to have to rely on budget subventions. It is moving, admittedly gradually, to try to end tenure in the broader public sector and to introduce advancement on merit. The government has not, however, tackled major structural issues such as pension reform and the rehabilitation of problematic public enterprises such as Olympic Airlines (OA) and the Hellenic Railways (OSE). Nor has it moved quickly to liberalise key sectors such as energy - particularly gas and electricity. So, while it has laid the groundwork for growth, it has ducked the tough issues, in order to secure re-election with a view to implementing changes later. The real question will be how successfully it will implement the reforms it has made and how fast it will pursue new ones - if it is re-elected. These issues, plus political and foreign affairs developments during 2006, are discussed in detail in the Seventh Annual Business File review of the year, "Laying foundations", that was published on December 8, 2006. It also includes exclusive interviews on monetary policy with the deputy governor of the Bank of Greece, Panayotis Thomopoulos, and on the GDP upgrade with the secretary general of the National Statistical Service, Manolis Kontopyrakis, plus an illuminating transcript of an informal exchange between the Minister of Economy and Finance, George Alogoskoufis, during the course of a working lunch with foreign economic reporters. Copies are available at EUR 8.80 from Kerkyra Publications Limited; subscriptions to the annual series of four issues are available at EUR 35. Contact info@invgr.com.
For further information on subscriptions and/or individual copies of Business File, which is published by Athens-based Kerkyra Publications Ltd., please contact INVgr. "Laying foundations" is available from Kerkyra Publications. Subscribers to INVgr's electronic business information service are entitled to a discount of 20% on the cover price or 20% on the first year's subscription rate. Source: Kerkyra Publications Ltd. Useful links:
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