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Victoria Mindova

The government programme presented by Prime Minister Antonis Samaras along with the arrangements under the bailout agreement is expected to become a guide for the reforms in Greece. Not only do the three ruling parties rely on it but also the majority of Greek people who trust the political coalition to save the country from complete financial collapse. GRReporter sought the opinion of Marina Papanastassiou, professor at the Copenhagen Business School, to comment on the feasibility and efficiency of Samaras’ programme for emergence from the economic crisis.

The government has presented its action plan during this term and it includes mainly privatisations, infrastructure projects and mergers. Do you think these measures are sufficient to take Greece on the road to economic growth?

It depends on how this will be implemented. The government has done the most logical thing it could – it has reintroduced in the government programme things that had been forgotten during the last two years due to the two bailout agreements. The main points in the programme of the new government are in the right direction, because talks cannot recommence regarding the issues of wage cuts and civil servants' dismissals. The new proposals set out in the contracts with creditors (privatisation and infrastructure projects), which are a major pillar of economic growth, should be on the table too. Privatisation itself is not sufficient. The state must ensure that public property will go into the right hands through sale. Privatisation should ensure that the company will receive new know-how, create skilled jobs and have secondary positive effects on the economy (spin over).

Currently, the government is putting on the table privatisations of state enterprises following the model of privatisation in the world, but the issue of the recovery of the ailing tax system must be considered as well. The tax system in Greece should be simplified and stabilised.

Changes in the tax system are present in every government programme. There are some suggestions on the topic at present, but the tripartite government has not yet clarified what it intends to do as far as tax reform is concerned. What do you think are the immediate measures that should be taken in order for the tax system to support the economic recovery of Greece?

To help economic growth, the tax system must be simple, clear and fair. This is very easy to say but very difficult to achieve. And I do not mean that it is difficult anywhere in the world but mainly in our country. I'd like to believe that we are moving towards these goals. We do not have many alternatives. If the tax law is not concrete, clear and stable, if it is changed every other day as has happened recently, it creates instability in the market, which does not involve only companies but also households and consumers in general. In my opinion, we are now trying to finally establish a solid tax base for the country. First, we need to ensure that we are on the road to macroeconomic stability and then, we can talk about development.

The government programme includes mergers and closures of public organisations to reduce budget spending but it is clearly against the dismissal of civil servants. Do you think this is a sustainable way of reducing government spending?

The public sector is one of the pressing problems of the Greek economy. I am familiar with the list of the first organisations that the government intends to close and I can tell you that these are small institutions, which will not change the financial balance substantially. I think the government and prime minister have decided to try to gradually introduce the reforms. Dismissals are a very sensitive topic. If the prime minister had begun to dismiss people from the start, he would inevitably face the strong resistance of both the opposition party and his collaborators in the government.

At some point, however, something will certainly need to be done in this direction, as there will be no actual reduction in the budget spending without dismissals. So far, the government has relied on the retirement of employees but reforms in public administration will not happen without a reduction in staff. Nevertheless, the state cannot dismiss people just as it pleases because this will only increase the already high unemployment. Conditions must be created for the dismissed state employees, including the good professionals among them, to be absorbed by the private sector in order for the crisis not to deepen.

Aren't we entering into a vicious circle? On the one hand, the public sector lives on the toil of the private sector, which cannot rise before public finances have been strengthened. The private sector cannot absorb the redundant employees in the public sector yet because Greece is in its fifth year of recession and unemployment affects almost a quarter of the workforce of the country. That is why there have been no real redundancies in the burdened public administration. Where does the answer lie?

Here we return to our initial topic, which was how efficient the presented government programme is and I said that it depends on how it will be implemented. The first measures presented do not provide anything for small and medium enterprises, nor do they contain something real to promote entrepreneurship. It is always possible that these things could happen alone if the country achieved relative stability. Unfortunately, we are still lacking the entrepreneur culture in Greece. It must be supported and not with subsidies. Instead it should be restored as a healthy way to success. The private sector can play its role in these changes by creating new fields of action beyond the traditional sectors in Greece. Redundant staff from the public sector can be helpful in this situation, as small and medium enterprises will play the main role in this type of development.

What are the preconditions for Greece in order for the country to emerge from the current crisis in the long term?

The first and foremost requirement is to achieve domestic stability with a sense of cooperation and trust. Infrastructure projects are important, although from the latest report of the UN Conference on Trade and Development it appears that Greece is coping well in this area, but improvements could also be made. If we are to see the country prospering in the long term, we need to give further impetus to entrepreneurship, outward orientation, to create conditions for investment (both large- and small-scale) and to emphasize the quality of education. Greece has an extremely high human potential and this is proven by the fact that we can see many good specialists in various fields, who are Greeks or of Greek origin.

What do you think are Greece's chances of managing to renegotiate the terms of the bailout agreement and what are the possible concessions?

I think the Ministry of Finance has established a very good strategy so far and appointing Yiannis Stournaras as Minister of Finance was a very wise choice. Creditors must give the government a chance to prove that its promises will correspond to its actions. It will not be easy to renegotiate the terms, mainly because our present actions have only made creditors sceptic, but I am optimistic. We will be given a last chance to prove that we can do things as they should be done, for our own sake, not because someone else tells us what to do.