at a Crossroads
in Greece

Greece remains bogged down at the bottom of the
competitiveness league as the business community
pushes to reduce the state's role in economic activity.

By Dimitris Yannopoulos

Athens News

Can business pull the country up from the bottom of the world competitiveness league where it has been mired by decades of state intervention and bureaucracy?

The question has been brought into sharp focus by the release recently of an international survey on competitiveness.

The survey, which was presented by the development ministry at a session of National Competitiveness Council this spring, ranks Greece 51st among 104 countries on the general index of global competitiveness, behind all its EU-15 partners, and also Hungary, Slovakia, the Czech Republic and the Baltic states among the new EU-25 members.

"This is a sad state of affairs which is getting worse every day that goes by without bold moves to roll back the debilitating weight of the state on the economy by promoting private business investment and innovation through market deregulation in strategic sectors," said the chairman of the Federation of Greek Industries (SEV) Odysseas Kyriakopoulos during his monthly press briefing.

"Privatization of state companies and liberalization of key markets such as energy and telecommunications should go hand in hand with greater flexibility in labor relations, wage negotiations and social security provision," Kyriakopoulos told the Athens News.

Ways to overcome the Greek malaise were debated on at a conference in Athens hosted by the top circulation daily Ta Nea and attended by senior government officials, economic experts and business leaders.

Public-private partners

Economy and Finance Minister George Alogoskoufis attributed the country's dismal competitiveness standing to past economic policy, dated labor laws, state bureaucracy, legal ambiguity regarding land use, corruption and the lack of long-term planning. Against this backdrop, he called for a "complete U-turn towards quality, entrepreneurship, competitiveness and outward-looking growth."

These are the principles that already guide most of the government's new policies and legislation in the fields of direct taxation, investment incentives, denationalization of public companies and properties or the utilization of EU funds, Alogoskoufis told the Ta Nea forum.

But these measures will be complemented with fresh initiatives in the area of private-public partnerships (PPPs), the minister said. Alogoskoufis is due to unveil a draft bill on PPPs, envisaging the joint participation of both public and private sectors in finance, construction and management of infrastructure projects and other state assets "which the public sector can neither fund nor manage by itself: including motorways, airports, harbors, hospitals and schools.

According to the draft bill, private investors will be expected to undertake all of most of the business risk in every project, while that state be obliged to fast-track procedures for issuing permits before the concession is assigned.

Public Works Minister George Souflias recently announced an ambitious plan to expand the country's highway network by 50 percent through partnerships with the private sector. According to Souflias, the self-financing system would mean the state contributing only 2 million euros--half from EU funds--to the projected 7 billion euro budget of the works, involving 750km of new highways being built over the next five years.

Spring of entrepreneurship

Development Minister Dimitris Sioufas acknowledged that Greek firms are facing serious difficulties in the era of globalization, especially due to rising fuel prices and red tape. "We are all used to living on borrowed money" Siofas said. He noted that the economic model of state-run public utilities and investment in public works, which is responsible for this situation, has collapsed.

"The government is now trying to enhance competitiveness by fostering a 'spring of entrepreneurship' in the country," Sioufas told the Ta Nea conference. "This entails an active support for fresh entrepreneurship initiatives and more extrovert orientation of existing business enterprises," he added.

Costly remedies

Bank of Greece governor Nikos Garganas noted that the present situation could not be maintained by buoyant domestic demand fuelled by public works, a trend that was not sustainable in the long-term." The central banker predicted that economic growth rate would slow down in 2005 and noted that the growth prospects were uncertain in the medium term.

Garganas warned that the cost of living was rising faster in Greece, compared with other countries in the EU, and said that countries with high price levels could face low employment and growth levels in the foreseeable future. The Greek central banker urged for "socially-costly" structural reforms in the country's social security system and the labor market, saying these reforms were necessary to protect large sections of the society. "It is wrong to term such measures as 'austerity' when the aim is to boost investment, productivity and sustainable employment," Garganas said.

HCS readers can view other excellent articles by Dimitris Yannopoulos in the News & Issues and business sections of our extensive, permanent archives at the URL http://www.helleniccomserve.com./contents.html
. He is a journalist and writer for the English-language Athens News. Readers enjoying his articles may wish to view other fine selections or to subscribe to this publication by visiting the website http://www.athensnews.gr.

All articles of
Athens News appearing on HCS have been reprinted with permission.

2000 © Hellenic Communication Service, L.L.C. All Rights Reserved.