The Hellenic Foundation for European and Foreign Policy (ELIAMEP) on Saturday, 19 December 2009 organised a public discussion on
Fiscal Deficits & Europe: Why Mr. Almunia is making a fuss about it?
The ascertainment of the Greek problem:
• Low level of competitiveness that is reflected in a negative current account balance. Today Greece has the largest current account deficit, as a percentage of GDP, in the world.
• Fiscal deficit and unprecedented public debt in a country of the euro zone. A country with a non-viable insurance system and also on the verge of breakdown.
• Global financial crisis and recession with very few possibilities of recovery. The consequences of the crisis appeared in Greece with delay and now are in their full formation.
The framework of the problem:
• As a member of the euro zone Greece is taking part in a historical attempt to harmonize monetary and economic policies. In consequence, its domestic public policies cannot include anymore currency devaluation or re-flatting the economy by increasing the money supply in domestic currency.
• Inflated and counterproductive public sector with extended corruption.
• Weak private sector dependent-directly or indirectly-on the public sector either through subsidies or through tax evasion.
Why Mr. Almunia is making a fuss about it?
• Mr. Almunia is not elected by the Greek citizens, but he is an appointed official, as the rest of the Commissioners, by the EU’s governments.
• His orders, as these described in the EU’s agreements, is to make a fuss when countries of the EU and in particular countries of the euro zone have large deficits.
• All these are described in detail in article 126 of the Lisbon Treaty-former article 104 of the Maastricht Treaty, which provide the means that EU governments have, in order to persuade their partner countries to take actions to reduce their deficits and public debts. One of the means is to impose penalties.
What can be done today?
• Targeted fiscal interventions in the revenues and costs in order to deal with the imbalances and to enhance the country’s credit worthiness. The horizontal fiscal interventions in this case run the risk of aggravating the recession. In these interventions are also included the treatment of the insurance system deadlock.
• Integrated direct intervention in order to improve competitiveness of the function of markets, including the labour market, of education in the mid-term, of training and of lifelong learning.
• Integrated and direct intervention in the reform of the function of the institutions on the treatment of corruption and the social-economic partners’ financial dependence on the State.
Speakers:
Nikos Christodoulakis, Professor, Athens University of Economics and Business; former Minister of National Economy and Finance
George Pagoulatos, Associate Professor, Athens University of Economics and Business
Christos Staikouras, Member of Parliament, New Democracy; Assistant Professor, Athens University of Economics and Business
Mr. George Glynos, “Stavros Kostopoulos” Fellow ELIAMEP; former European Commission’s Official coordinated the discussion.
See the presentation of Prof. Nikos Christodoulakis (in Greek)
See the presentation of Dr. Christos Staikouras (in Greek)
The event was organized as part of the Money Show Athens, at the Athens Hilton Hotel.