Greek premier gets down to business

Date: 24/10/1996

By Rory Watson

FRESH from winning a parliamentary confidence vote, Greece's new socialist government will press ahead next month with a budget designed to ensure the country joins the single currency by the year 2000 at the latest.

Premier Costas Simitis' Pasok government is looking to lower inflation, reduce the budget deficit and raise 1.4 billion ecu over the coming year by abolishing tax breaks and imposing public spending cuts.

“Greece is committed to participating in EMU no later than the year 2000 and that is why it will continue the effort to meet the targets of the convergence plan,” Economy and Finance Minister Yannos Papandoniou told the Greek parliament shortly before the government won a ritual confidence vote earlier this month by 161 votes to 134.

Emphasis on sound economic management has long been a central feature of Simitis' political creed. As minister for national economy, he briefly tried to inject greater rigour into the Greek economy in the mid-Eighties, but the unpopularity of the measures he introduced led him to resign from the government of the then Prime Minister Andreas Papandreou.

Now, as premier and with like-minded lieutenants in key positions, Simitis is determined to enforce a coherent economic strategy on the country.

His government's commitment to a sound macroeconomic programme has already led to a noticeable strengthening of the drachma against other currencies and Papandoniou has warned the business community that strict monetary policy will remain the cornerstone of the fight against inflation.

To meet its objective of embracing the euro within one year of its introduction in 1999, the government is aiming to lower inflation - now running at 8.5&percent; - by 2&percent; and cut the budget deficit from 7.6&percent; to 3.4&percent; of gross domestic product during the coming year. Higher public and private investment is also expected to boost GDP growth to more than 3&percent; in 1997.

The government believes there is enough room for fiscal manoeuvre to enable it to meet its ambitious targets. It is also counting on the change in public opinion which has already begun to secure widespread support for its budget.

Far from considering such tough economic measures unwelcome, many people now judge them to be essential to ensure more equitable tax treatment of the population at large.

Simitis' economic policies also contain wider political messages for the country's EU partners.

“They make clear that Greece sees its future within the Union. It may not be in the first single currency wave, but it will soon win promotion. They also increase the credibility of the country's foreign policy in its widest sense,” said one analyst.