Management or manipulation?

Managing public opinion falls squarely in the framework of a government’s duties. This usually entails systematic public updates on the state of the country, on the goals being set, the efforts that will be made to accomplish them and the conditions under which this can be achieved. This is something the Kostas Simitis government did when it set the goal of getting Greece into the eurozone and succeeded (in contrast to New Democracy, which banked on a failure) but failed to do when it came to the issue of social security reform, which flopped. However, management is often nothing more than manipulation, overwhelmingly in the form of half-truths – a deluge of them.

The slowdown in developed economies should give us pause: if these economies are faltering, what will happen to a weaker economy like Greece’s when the European “money tree” stops bearing fruit?

The government says it is reducing taxes. Indeed, some rates have been lowered – e.g., on dividends, large parental gifts and expenditures made in Greece by shipowners, which are taxed at 10%, while value-added tax on agricultural supplies has also been reduced. However, overall taxation is increasing: the income tax brackets are not indexed to inflation, ensuring that taxes rise even when real income does not. Meanwhile, VAT rates remain unchanged, so when prices double, revenue doubles as well. It’s simple arithmetic: tax burdens are increasing.

The truth is that what is referred to as “fiscal balance” has largely been achieved by the “magic” of inflation. Instead of raising tax rates – which would provoke significant backlash – we have a phenomenon with an equivalent effect: prices go up and, with them, so do tax revenues. Similarly, certain social expenditures are quietly being gnawed at. Such “magic tricks” with inflation are also responsible for part of the containment of debt as a percentage of gross domestic product – even though the debt is higher both in absolute terms and as a percentage than it was when the country hit rock bottom.

Sure, Greece’s economic growth exceeds that of other developed European countries, but this does not mean we are on a path to convergence. As analyses by Eurobank and National Bank have shown, our growth is driven by inventory levels and private consumption, not by increased investments.

The slowdown in developed economies should give us pause: if these economies are faltering, what will happen to a weaker economy like Greece’s when the European “money tree” stops bearing fruit? And how can we act now to prevent the worst?

Some private investments are, of course, being made, though these, too, are largely fueled by public and European funds. Despite the €60 billion distributed to offset the impact of the pandemic, another €10 billion in response to the energy crisis and approximately €100 billion from the usual “money trees” (RRF, NSRF, and the new CAP), investments remain critically low. The most concerning aspect is that most of these investments do not enhance the country’s productive capacity; they tend to concern acquisitions, costly road projects, real estate and tourism.

And the truth is that salaried employment remains caught in the vise of deflationary pressure: much like during the years of the bailouts, its value continues to decline relative to prices. Meanwhile, the value of businesses, real estate (and rent) has skyrocketed. It’s true that the government repeatedly says that wages need to increase. But it is equally true that what it is doing has the exact opposite effect.