Economy Feathers Unruffled

Emboldened by the premier's confidence, Alogoskoufis sticks to his reform agenda, ruling out privatisation of auxiliary pensions schemes

By Dimitris Yannopoulos

Basking in the glory of his cabinet team remaining intact after the February 14 Government reshuffle, Economy and Finance Minister George Alogoskoufis used the occasion of a scheduled ECOFIN meeting with his 24 EU counterparts on the same, day to reassert his economic policy goals.

"The European economy will achieve better performance this year to the benefit of all EU member states including Greece, which faces a double challenge: to promote fiscal restructuring, while maintaining and boosting its strong growth rates," Alogoskouifis told reporters in Brussels.

Addressing the media at the end of the ECOFIN session in the Belgian capital, minutes after the reshuffle was announced in Athens, Alogoskoufis said 2005 was a year of "significant reforms" in the economy, the state and domestic markets.

Comeback: European Central Bank president Jean-Claude
Trichet (L) welcomes Economy and Finance Minister
George Alogoskoufis at the Eurogroup meeting of
eurozone finance ministers in Brussels on February 14

These reforms are already starting to bear fruit, which leaves no room for a change of course," Alogoskoufis stressed, in response to questions about the reshuffle that left his cabinet seat as well as those of his deputies unchanged. "The results of our team effort will soon be felt in high growth rates, employment and social cohesion," he said.

He said he expected the European Commission to approve Greece's 2006-08 stability programme before the next ECOFIN meeting in March. Prime Minister Costas Karamanlis kept the economy ministry intact, signalling that economic policy would not be tampered with. Greece must reduce its budget deficit this year to below the 3 percent of gross domestic product (GDP) limit set by the EU or face sanctions.

Also at stake are major privatization and labour reforms in the banking sector and public utilities, sure to prompt strong reactions from the unions. Voters consistently name unemployment and inflation as their main economic worries.

Pension reform urgency

But once again, a European Commission report sought to alert finance ministers in Brussels that the fiscal burden of social security in most of their countries requires urgent attention. The report, submitted to ECOFIN meeting, provides projections on the economic and budgetary costs for all member states up to 2050.

Life expectancy is projected to increase over the coming decades in Greece and in the majority of EU member states, the report said, making it imperative for measures to be taken swiftly since "Europe will go from having four to only two people working age for every elderly citizen... With pension policies unchanged, EU potential growth rates will be almost halved by 2030."

Greece's population is expected to decline from a current 11 million to 10.7 million by 2050, while life expectancy is expected to increase from a current 76.4 years for men to 81.1 years by 2050, and from 81.4 years for women to 85.9 years. At the same time, Greece's working age population (15-64 years) is expected to decrease from a current 67.7 percent of the total population to 54.7 percent by 2050, while the elderly (over the age of 65) are expected to represent 33.1 percent of the total population compared with 17.9 percent today.

"Public finances will come under severe strain due to increased spending on pensions, health care and longterm care," the report said.

Commenting on the report, Alogoskoufis reiterated that a reform of the pension system in Greece would be done gradually over the next two years. "Reshaping the social insurance system will happen after an in-depth, frank dialogue among the parties involved," Alogoskoufis said.

On February 15, he told Greek insurance firms that income tax breaks for Greek seeking private insurance will be increased in 2007.

However, he also rejected the commission's indirect push for the privatization of the system with individual or occupational retirement schemes. "This is something that simply cannot be done, not just politically but also practically, for it implies that the state must find the money for an entire generation of insured Greeks outside the public fund contributions."

Crossing EU paths with Pasok?

Alogoskoufis refuse to comment on the presence of Pasok chief George Papandreou in Brussels on the eve of the ECOFIN talks, following a strongly-worded clash with the main opposition leader in parliament last week. The minister had accused the socialists of trying to "undermine" the Greek economy through private consultations with senior European officials. "Why is Pasok... conducting its opposition abroad, at a time when the European Commission is preparing its evaluation of the Greek economy?" said Alogoskoufis.

In response, Papandreou told MPs that "Alogoskoufis' outburst shows that the ruling conservatives can't get over their old rightwing habits of dividing the Greeks into 'national-minded' citizens and 'unpatriotic scourges' that caused so many woes in the past".

Papandreou held talks with European Commission President Jose Manuel Barroso on February 13. Earlier, Papandreou participated in a meeting of the Barroso Committee on "The Future of Europe in the world". He participated in the meeting following an invitation by the committee's president to explain his positions on the effectiveness of the European Union's foreign policy.

Speaking to reporters in Brussels, Papandreou said that in his address he stressed the need for the implementation of decisions taken at the Halkidiki summit during the Greek EU presidency over the enhancement of European prospects for western Balkan countries. He refrained from saying whether they also discussed issues of Greek economic policy.

Referring to her own trip to Brussels last week, Pasok economic policy coordinator Vasso Papandreou said Alogoskoufis' reaction shows that he was in "panic" as there was nothing wrong with opposition parties talking to EU Officials. ''There is no more damage that we can do, after the minister has managed so disastrously to undermine the economy on his own with his audit and revision to Greek public finances for the 1997 - 2003 period," she said.

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