Ar0ro tns Wall Street Journal
jrou...@ruacad.ac.runet.edu
GREECE: THE WEAKEST LINK IN EC CHAIN
Other Nations Lose Patience With Its Inefficiencies
ATHENS, Greece - At 9 Fidou [sic] St., one of the Greek capital's tax
collection offices, the European dream comes to a bleak dreary end.
Spread over four floors of a poorly maintained building, government
workers plod through unruly stacks of tax declarations and other papers.
Three of the workers spend their 9 to 3 workday stamping the day's date,
unaided by any form of technology. Behind them, huge volumes of bound
records are falling apart, with yellowing papers cascading onto the floor.
Underpaid and unmotivated government workers like these help explain why
Greeks have some of the poorest services, the worst telephones and one of
the most unreliable governments in Europe. Yet, changing the system
requires two things lacking here: money and political courage.
"We're caught in a vicious circle in the public services," says Miranta
Xafa, economic councelor to Prime minister C. Mitsotakis. "We need to
pay people better, but because of the fiscal crisis, we can't do that right
now. And we can't lay them off because that is costly as well."
As the EC readies for its border-free market later this year and for a
single currency by the end of the decade, Greece stands as a constant
reminder of the EC's outer limits. Two years after a new center-right
government promised to reform and privatize Greece out of its stagnation,
Greece still has 18% inflation, a budget deficit equal to 96% of the total
value of all goods and services produced in the nation [Profavws evvoei
public debt] and a discrepit, underperforming industry. So far the
government has privatized only one of the dozens of poorly managed,
state owned enterprises that were to attract new foreign investment here.
With Portugal and Spain moving into the faster lanes of the EC's race to
stability, Greece is unarguably the community's leading liability. If
Greece's problems could be contained within its borders, it wouldn't
matter much. But Greece is no longer one of those strategic outposts
of the cold war, where the West was ready to do almost anything to keep
communism out and democracy alive. As a member of the EC, it can veto
legislation for 340 million Europeans, stymie EC foreign policy initiatives
and use its power to demand more EC funds. Its failure to change
endangers the idea of a unified Europe.
As EC borders fall, if Greek custom services aren't efficient and
reliable, Greece could become the favored EC entry point for illicit drugs,
illegal immigrants and substandard products. If its doctors, scientists,
safety inspectors and teachers don't measure up, people in other parts of the
community won't trust EC standards as a whole. If Greece's budget isn't
brought under control, its deficits will have to be financed by others.
"I think there is finally a realization here that we can't go on like
this," says George Alogoskoufis, a dynamic economic reformer who has been
brought in to try radical surgery on Greece's economic system. But he,
like Ms. Xafa, the prime minister's economic councelor, an ambitious
economist recruited from the IMF, realizes the enormous battle ahead.
Greece, fondly regarded as a cradle of western civilization, has long
been a receipient of European aid. Financial transfers from the EC account
for 6% of Greece's gross domestic product, or some $4 billion a year,
according to the Organization for Economic Cooperation and Development.
Keepint Greece afloat "will be seen as one of the costs of EC integration"
says one Western diplomat. But at a time when other strategically important
countries in eastern europe and the former Soviet union are asking the EC
for help, a growing chorus of influential people in EC capitals are losing
patience.
Signs of Progress
Greek politicians, economists and even some business leaders argue that
Greece shows signs of turning the corner. The government's emergency
program of austerity, tax reform and tight money is designed to reduce
the deficit and lower annual inflation to about 13% by the end of the year.
Central Bank Governor E. Christodoulou says Greece is serious about plans
to join the European Monetary System and to try to meet the minimum
conditions to join the EC's single currency by Jan. 1, 1997, the earliest date
that monetary union could come into force.
"Greeks make very bad civil servants, but very good entrepreneurs," says
Mr. Christidoulou. "And because we need entrepreneurs more than civil servants,
I'd say the situation here isn't that dismal. It is beginning to turn around."
A new economic minister is also giving some people here and in Brussels
hope. Stephanos Manos is spoken of proudly here as being one of the most
uncompromising ministers Greece has ever had. He could also take over the
Finance Ministry in an expected government shake-up soon.
Despite such encouraging signs, Greece is a deeply divided nation where
each step is fought tooth and nail. The government has only a two seat
majority in the 300-seat parliament, and a recent by-election in Athens
saw a surge for the opposition led by ex-Prime Minister A. Papandreou, an
opponent of many of the free market policies. Mr. Papandreou's party,
which ruled in the 80s, is widely held responsible for leading the country
into wild deficit spending and expanding the government payroll.
But the present government hasn't done much better. People here say
that they have been so many fits and starts, so much backtracking, that
they no longer believe Mr. Mitsotakis has the guts to carry through
his proposed reforms.
"Everybody understands there is a crisis, and I think there is a
willingness to suffer through the changes that are necessary to catch up,"
says a bank economist. "But the problem is that the leaders no
longer enjoy the trust of the people."
The privatization program is one of the leading examples of Greek
procrastination. After promising to sell off a long list of inefficient
and poorly managed government companies, Greece has thus far only
sold the cement maker Hercules.
The notoriously backward telephone company (it can take up to 10 years
to get a telephone here), the rickety Olympic Airways, and other
services such as water and transport apparently have a long way to go
before private owners will get the chance to bid for them. But an
international investment banker who has studied the phone company is
convinced that Mr. Manos, the economics minister, will push forward with
the sale of a 20% to 30% stake this year. He estimates the value of the
company at $2.5 billion to $3 billion.
Another erea where Greece hasn't made much progress is in reforming its
civil service. Faced with tough laws against layoffs and strong labor unions
that strike at the first signs of change, Greece is still stuck with
too many, underpaid workers.
"You look at the budget and its all wages," says Mr. Alogoskoufis. "It's
true that civil servants aren't very well paid, but people still want to
do it. They have a lot of job security and benefits."
But to pay people better, Greece needs more money. And its tax
collectors don't seem to collect many taxes.
The country has personal tax rates on income of between 10% and 65%,
but actually collects only about 5% of personal income, according to
the OECD. And though corporate income taxes are supposed to be close to
50% of profits, the country actually takes in less than 5%.
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