PARIS (MNI) – In order to win public support for its drastic
deficit-reduction measures, the Greek government will first need to take
tougher steps to counter corruption and tax evasion, then create the
conditions for a return to investment and growth, according to EU
Commission counselor Loukas Tsoukalis.
“[It's] the social side now — to get the public to accept a lower
standard of living,” Tsoukalis explained on the sidelines of a
colloquium on the economic crisis here. The public’s perception that the
reforms are “equitable” will be “crucial” to their success, he said.
The university professor and president of the policy think tank
Eliamep dismissed the option of debt default as “unnecessary,
undesirable and unlikely” — citing a recent IMF study of default in the
advanced economies.
“I’m absolutely convinced that default at this stage would be
disastrous for Greece — it would bring the collapse of the banking
sector and would be no solution,” he said. As the government has a
primary deficit, “default would still leave a big deficit. It would also
be disastrous for the euro and European banks.”
“Of course the markets don’t believe it,” Tsoukalis conceded. “But
I have very little respect for the wisdom of the markets,” he said,
reminding how radically their view on Greece changed virtually
overnight. “It’s a typical example of over-exaggeration and
short-termism.”
“The challenge is very difficult, but you can win it,” he argued,
noting that there is a huge gray economy that can be a source of
revenues. Adding around 30% to the overground economy “would make the
debt ratio look very different,” he quipped.
State property assets amount to some E300 billion — roughly
equivalent to the outstanding debt — which could be better exploited
and partly privatized, Tsoukalis noted.
“The majority of Greeks don’t like the measures, but the majority
are not convinced there is a credible alternative,” he said, noting that
public support for the ruling Pasok party is greater than for its
opponents.
However, the political class has lost credibility and is viewed as
corrupt by a majority of the population, he conceded. “That is a danger”
in a country with a “strong protest culture” — but not exclusively in
Greece. “I fear that Greece is almost a test case of things that could
happen in Europe,” he said.
The government is increasingly cracking down on tax evaders —
entrepreneurs and independent professionals — which is important to
create an environment for investment but also for a “cathartic” impact
to counter the impression that the poor are making sacrifices while the
rich are getting off, he explained.
Indeed, the next year and a half, during which the recession is
likely to deepen, will be a litmus test for public support, Tsoukalis
stressed. Until 2012, “the economy is bound to get worse.”
Until the Greeks begin to see the fruits of the structural reforms
under way, the governing Socialists should consider enlarging their
electoral base from a party of “trade unions and apparatchiks” to
include social groups opposed to corruption and supportive of reforms,
he advised.
[TOPICS: M$X$$,MGX$$$]