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International finance agencies: Corruption in the state administration is Greece's biggest problem

21 September 2009 / 12:09:38  GRReporter
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International finance analyzers are carefully following the pre-election campaign in Greece and believe that a strong government will of best interest for the country. Experts from international finance think-tanks forecast for Katemerini newspaper that even at the price of a second election the Greek citizens need to elect a strong government. Meanwhile credit rating agencies explicitly define corruption in the state administration as the biggest problem of the Greek economy. And forecasts about the economy itself are not good at all. It is expected that the national debt will form at about 109% from the GDP and the budget deficit will reach 7% from the GDP.

Financial experts are promising to be strict towards the new government from the very beginning and stress that its most important task is to lower the national debt and to eventually erase it. Analyzers also fear the hidden debt of the public sector towards the private one, which has the power to shake the trust in Greek economy and to lower its credit rating once again. Chris Price, director of Fitch agency, claims that the agency will wait for about 2 months before confirming or changing the credit rating of Greece and said that a strong government will be better for the Greek economy than a weak one.

Chris Price defines corruption as the biggest reason for Greece’s national debt. “Greek politicians cannot realize how much corruption ruins their authority abroad,” says Fitch director. He also claims that none of the two biggest parties, neither New Democracy nor PASOK, has a successful corruption fighting strategy. Chris Price believes that the reason for the big expenditures in the budget is the many unnecessary public employees in all sectors, including education. Also, not paying taxes has become an Olympic sport for Greeks.

Towards the same direction is also the opinion of Megan green from Economist Intelligence Unit, who believes that lowering the national debt and the fight against not paying taxes, are the biggest challenges of the new Greek government. She also explains that national debt is a symptom but corruption is the illness, which is the biggest problem of the country.

“The thing, which would lower the credit rating of Greece is the long-lasting deterioration of public finances,” says analyzer Marco Mrsnik from Standard&Poor’s. On the other hand, lowering the national debt and undertaking long-term measures for strengthening budget inflation, will increase the credit rating of the country. The analyzer does not expect a quick change in the credit rating, because Standard&Poor’s has set is for 2 years period of time. Marco Mrsnik is expecting a small development growth in Greek economy due to its dependence on the weak local market demand, the weak competitive power and the higher value of labor power in comparison to other EU countries.

Standard&Poor’s forecasts a negative development growth from -1.8% for 2009 and a budget deficit of 7% from the GDP. Fitch agency has different forecasts and evaluates that up to 2-3 years from now the growth can reach 4% of the GDP, if the tourism and shipping sectors are stabilized and if the country gets closer the EU standards. Economist Intelligence Unit forecasts growth shrinkage of up to 2.5% from the GDP, budget deficit of 6.8% for 2009 and 7.3% of the GDP for 2010. The national debt, according to Standard&Poor’s will reach 109.1% of the GDP and according to Economist Intelligence Unit – 105% of the GDP for 2009.


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