While listening to the speech and the press-conference given by Prime Minister Karamanlis in Thessaloniki on 7 and 8 September, this columnist had a distinct sense of not just deja vu but also of deja entendu and deja debattu. The Premier was clear, direct and decisive but hardly original. He even admitted that his Government’s record was poor in certain areas without, however, dwelling on the causes of such failures.

The articulate, outspoken party of young hopefuls who make up the ‘Liberal Alliance’ (Filelephtheri Symmachia) hit the nail on the head in commenting on Karamanlis’ performance. Why is it, they ask, that the expenses of the state will reach 49.55 billion euros in 2008, thus marking an increase of 10.5% on the year 2007? The average annual increase of these expenses since 2002 has been 10.91%. So why is it that continuity of governance that is lacking in so many areas in Greece should be so consistent especially in the field of government waste? The sad truth is that under Karamanlis, the state never had it so good and never spent so much. The Liberal Alliance are not alone in worrying about this issue. ‘The Government has made little progress in the area of overspending’ said Brian Coulton a ‘Fitch’ analyst. Similar concerns were voiced by Marko Mrsink, a ‘Standard & Poor’ analyst who pointed out that ‘The budget drafting strategy has repeatedly missed out on measures to contain expenditures’.

The evidence is indeed overwhelming. From 2004 to 2008 the number of civil servants grew by 55,650 from 447, 520 in the ‘socialist era’ to 503,170 today. Consequently, the expenditure on civil servants’ remuneration and pensions grew by 31.3 % to reach 5, 4 billion euros. Given that the state could not possibly cover all these new expenses from tax revenue, it had to borrow its way out of this self-made conundrum. Result: An increase of the general public debt by 21.1% to reach 223,3 billion euros. No wonder the Economy Minister Mr Alogoskoufis uses his inventive mind to find new ways of collecting more taxes. He even introduced a new tax on stock exchange transactions which stipulates that losses cannot be offset against gains. So if a trader loses 1 million euros on the Greek Stock Exchange and gains 100,000 he will still be taxed on his gains. How many will persist trading under such circumstances is Mr Alogoskoufis’ guess.

The Premier reiterated in Thessaloniki his promise to deal with the loss-making ‘Olympic Airways’ and OSE (the Greek Railways) costing – he said – 2,7 million euros a day This then had better happen soon, after years of pointless tergiversations.. Greeks are nonetheless entitled to know why there is such an extraordinary delay in implementing any measure that will curtail state expenses. The issue is of some urgency, especially concerning foreign investors. FDI (Foreign Direct Investment) shrank from $ 5.4 billion in 2006 to just $ 1.9 billion in 2007, according to data by the OECD. The situation on the Greek ground mixing bureaucracy with corruption, inflexibilities of the labour market with frequent changes in the taxation system proved too much to ignore even by those who were originally attracted by the promise of reforms and ‘re-founding of the state’. As a result FDI flows are smaller every year in Greece as compared to Bulgaria.

This columnist would expect to hear one day from someone responsible to explain how it is that any good intention to curtail the state expenses is being frustrated right from the start. This is achieved by the fact that the changes are made subject to such an elaborate and lengthy process of contestation that months and even years of challenges in the courts go by without any implementation. Sometimes ‘experienced’ civil servants make sure that there are flaws to start with in the legislation that are subsequently used to generate lengthy legal battles in order to prevent any change in the status quo. On the political level, when it comes to abolish a useless state body – however small or unimportant – all hell breaks loose. If the present Government tried to get rid of some of the more cumbersome and useless structures built by PASOK – and staffed by PASOK members – it would be accused of persecuting its political opponents. So it simply lets them wither (in terms of job description, not in terms of remuneration) and… creates its own.

The trouble with ‘New Democracy’ is that it has to face not just its socialist and unionist opposition but its own unionists too. The ruling party’s union organisation known by its Greek acronym as DAKE and its verbose parliamentary representative named Manolis will vehemently oppose any reduction in the numbers of civil servants for whatever reason. The only way for the Government to get rid of these useless people is to pay them to go. This is what Vourloumis did at OTE (Greek Telecoms) with considerable success. In other words the Greek taxpayer will have to pay through the nose for the state to get rid of all party hacks that Greek politicians appoint not for their competence but for the votes they bring.

Can something be done to remedy the situation not as a palliative but in a structural way to address this systemic evil? Yes it can, this columnist believes. Those interested are invited to read his next column.

Mark Dragoumis

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Published in Athens News, 11/9/2008